Article
Growth by ATM numbers
PAI buys ATM Express and takes spot as a top U.S. ATM operator.
April 16, 2008 by Tracy Kitten — Editor, AMC
Last month's acquisition of Billings, Montana-based ATM Express Inc.by Louisville, Ky.-based Payment Alliance International Inc. makes PAI the largest privately held operator in the United States.
The acquisition marks PAI's second ATM buy in less than a year. In May 2007, the company bought NetBank Payment Systems, the ATM portfolio of NetBank Inc., for $18 million — a sale that included 8,500 ATMs and about 100 NPS employees.
ATM Express, which sold for an undisclosed amount, was a markedly larger deal from a terminal perspective — including some 17,000 ATMs. But only 45 former ATM Express Inc. employees, including former ATM Express Inc. owner Neil Clark, now work for PAI.
PAI now has 800 distributors and a customer base that includes more than 26,000 ATM locations and more than 35,000 credit and debit merchants.
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Donna Embry, PAI's senior vice president of product development, says the two acquisitions have given PAI a leg up in the ATM business, and helped to round out the company's payment-systems offerings.
"As a result of NetBank and ATM Express, our mix of revenue from payment transactions is literally 50/50 — 50 percent card, 50 percent ATM," Embry said. "We want to capitalize on payment processing, which has been our focus for a long time."
Embry also says the deal allows PAI to offer its distributors, independent sales organizations in their own right, a chance to diversify their merchant offerings in an ever-increasingly competitive ATM environment.
"We are cross-training our distributors to allow them to diversify and sell more things like check cards and other corporate payments opportunities, in their portfolio," she said. "Where a lot of them had only been focused on ATM deployments, now they have a wider base of options."
PAI, which was founded by a group of bankcard executives in fall 2005, has been on an aggressive acquisition path since its inception. The company kick-started its business after acquiring Palm Beach, Fla.-based card company Electronic Data Resources. During the company's first year of operation, the executive closed no less than one acquisition deal per quarter, and they were acquiring companies with long-time payments experience.
The ultimate goal, Embry says, is to make PAI a one-stop payments shop.
The growth strategy is an interesting one, says Sam Ditzion, chief executive of Boston-based Tremont Capital Group, a strategic planning, merger-and-acquisition advisory firm that specializes in the ATM industry.
Though not a growth route for all ISOs, for some, like PAI, it makes sense. "Growing organically is typically the cheapest, but slowest, way to grow," Ditzion said. "Acquiring an existing portfolio allows a buyer overnight to add a large number of relationships that already have a proven track record."
Other acquisitions on the way
For PAI, the acquisition train isn't expected to slow anytime soon. Embry says the company is now looking to specialists in check processing and check transactions. And in the self-service space, including the ATM space, PAI sees a great business model.
"I see a tremendous opportunity to expand the reach of ATMs," Embry said. "Because we are a full-service payments company with the issuance of payments cards, for some of our corporate customers, we are able to partner and offer the additional functionality of ATMs. For us, it's an opportunity to serve a significant portion of the population that is unbanked. So we also see opportunity with self-service kiosks, because for us, they are a logical extension of the traditional ATM."
Embry says PAI is just "hitting the iceberg," where financial self-service related acquisitions are concerned.
Ditzion says PAI's perspective is one that is likely to permeate the ATM ISO industry — in an age where the big portfolios will continue to grow and the smaller guys will sell.
"Now that the dust from Triple-DES and other compliance items has finally settled, ISOs have finally gotten a chance to get back to business and pursue deals that make sense," he said. "I suspect that we'll see many deals of this nature over the next two years."
Banking Executive SummaryTrends / StatisticsDistributors / ISO / IADRetail / Off-PremisesKiosks/Self-ServiceUnderbanked / UnbankedDebit / CreditOtherNorth AmericaBank / Credit UnionATM Express, Inc.PAI
