As vice-president of payment strategy at First Data,
Paul Stanley has played an instrumental role in growing the
processor’s market share. He speaks to CI’s John Hill about the
increasing importance of debit, the company’s evolving acquisition
strategy and its eye on new initiatives.
CI: How is First Data proceeding in emerging and developing
countries?
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PS: Debit is often the primary product in developing markets. There
is enormous growth in debit globally, with forecasts predicting up
to 15 percent growth in most markets. In China, for example, there
are 1.4 billion debit cards in issue and the market is still
growing. In Brazil and India we are also seeing a similar
story.
On the ATM side of the business, in mature markets such as the US
and UK we see high degrees of penetration, with approximately 1,000
ATMs or more per million people.
However, in developing economies there are enormous growth
opportunities when deploying new ATM networks because these
countries are starting from a low base of maybe 50 to 100 ATMs per
million people.
Assuming the ATM market in these countries is going to grow to be
as large as that in the US and UK, the market could increase
tenfold or more over the next five years or so.
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By GlobalDataWe believe we are at the start of a very exciting growth curve
around debit and ATM globally. There is certainly an interesting
opportunity to interconnect debit switches worldwide, and provide
effective coverage over the global transaction highway.
Typically when consumers go to an ATM overseas they can get cash,
but may not be able to check their balance, change their PIN or
move cash. If there were an interconnected debit system linking
First Data with partner organisations such as domestic switches,
and organisations such as Trionis (First Data’s joint venture with
EUFISERV), then we could offer a broader range of transactions at
the ATM.
CI: Are there any similar companies attempting to provide a
global transaction network?
PS: I think there are a lot of interoperability and interconnection
plays. Where appropriate we will connect our own existing
infrastructure to deliver better value to our clients. We are also
very open about letting others connect to us, for example we have
already connected China UnionPay (CUP) with our CashCard ATM
business in Australia and also connected CUP with Trionis.
CI: Are there any markets First Data has found it hard to
adapt to?
PS: All markets are different. Sometimes you face infrastructure
challenges where you have to be creative with technology. In other
markets, you face different regulatory or legislative requirements
and you have to work closely with the national authorities to
understand their aspirations. In some markets where the issue of
domestic interoperability hasn’t even surfaced, we have a unique
opportunity to provide a solution to enable domestic reciprocity
around the ATM and POS infrastructure.
CI: How is First Data currently positioned among its
competitors?
PS: Given that we are a cash-generative private company with access
to additional funds if necessary, I think we are uniquely
positioned to make some longer-term decisions that perhaps a public
company would not be in a position to do. The integration and
re-development of our core issuing platform to create FirstVision
as well as the integration of our global network are good examples
of this type of investment.
CI: How has First Data’s acquisition strategy changed in
recent years?
PS: Historically we competed for attractive assets that came to
market because we were in a good position to do that. Since we took
the business private under KKR’s majority ownership, we decided
that one of the real opportunities was the integration potential of
the acquisitions that we had made. That said, we still make
acquisitions when the opportunity fits with our business
objectives.
I think there is latent potential within our business to
consolidate processing onto the best available platforms we have in
any geographic region and to export the services that we deliver in
one or two markets to a broader range of markets based on that
strategic processing architecture.
CI: Are the recent transfers of credit and debit portfolios
in the US mainly because of the large bank consolidations, or are a
lot of institutions re-evaluating their providers?
PS: I think the forced consolidation of some large players in the
US creates consolidation opportunities for suppliers. I think First
Data is positioned to be a strong competitor in those situations.
When we partner with a financial institution, we recognise it is
their brand that is the priority in the transaction, not
ours.
CI: Which markets have weathered the economic conditions
the best from what you’ve seen?
PS: In some markets credit card transaction volumes have
deteriorated quite considerably, but, as a consequence,
opportunities in debit have grown significantly. The best thing
about the First Data portfolio is that it is hedged against every
area of the market, so when credit does badly then debit does well.
Also, when people move from cards to cash then our ATM businesses
do well. When there is a general decline then prepaid does
well.
We have a strong range of plays in the market. In our merchant
portfolio you can see that some key segments have had significant
growth because of the change in spending habits. For example, our
merchant business in the US has seen a shift away from high-end
restaurants into quick service restaurants.
In this segment we have got customers like McDonald’s so there has
been no major impact on our business. Similarly with retail, our
biggest customer is Wal-Mart, and people are shopping at Wal-Mart
because it represents good value. We are seeing increases in these
key segments as a result of the change in consumer habits that
comes from the credit crunch.
When you look at a global level, the UK and US are having a
difficult time, while other countries like France are not actually
very exposed. Some of the high-growth transition economies are
still growing and represent massive opportunities. In the
Asia-Pacific and other Far East markets, there are more positive
factors to mitigate against the negative financial conditions in
Europe and the US.
This is also the case in some closely associated but geographically
distant markets like Australia, where there has been some impact
from the credit crunch but not as large as in other countries.
First Data has an extensive ATM network in Australia which is still
reporting consistently high volumes, so there has been virtually no
change.
CI: Is being a private company an advantage?
PS: Absolutely, I wouldn’t want to be a public company in the
current market. Being a private company at the moment allows us to
make some fairly long-term decisions. It allows us to make some big
investments and to consolidate and restructure. We are managing the
business in many ways like it is a public company, but we don’t
have to be quarterly-driven in the same way as public companies
do.
I think we will emerge from this downturn leaner, but extremely
well positioned; having made the right strategic infrastructure
choices, and taking the right market position.
CI: Any upcoming developments?
PS: We are developing a wide range of new investments and
initiatives. One of the exciting things we are now doing is
deploying contactless terminals in our merchant base in the US.
Ultimately there are more mobile handsets in the world than there
are wallets and cards. Mobile phones are fairly natural and trusted
devices for consumers to conduct a range of activities, including
making payments.
It is taking a while to get to a stage where mobile operators,
payments networks and issuing banks are in a position to co-operate
in placing the technology inside the phone. First Data’s Go-Tag
solution is an RFID-enabled strip, encoded with payments data, that
is put on the back of a phone so it can then be used as a
contactless payment device.
It is generating a lot of excitement in the market. We are pushing
Go-Tag very hard in the US and we are planning to make it available
internationally. It started as a closed-loop solution, enabling
payment for example at quick-service restaurants. Value is loaded
on to the Go-Tag, which can then be spent within that retailer’s
chain of outlets. Now we are enabling Go-Tag for open-loop usage
with major card scheme brands.
We think this move will get consumers used to the idea of using
their phones to pay for items. Hopefully after that it is only a
matter of time, because a number of phone manufacturers are already
producing phones that have the NFC chip inside.
This will get the market used to the idea that it’s very easy to
put software on the phone and use it. We think it is a particularly
good way to drive the debit market and it could also be used for
credit card transactions.
