Raring to invest
US-listed banking technology company looks to expand in SA
FORTUNE 500 COMPANY First Data, a $7,1bn/year (R50bn) supplier of banking technology services, is looking to aggressively expand its presence in South Africa and use the country as a springboard for the rest of the continent.
This could include as significant-as-possible an acquisition, but so far two attempts to find the right deal have not panned out.
George Zafirakis, MD and regional vice president of the SEEMEA (South-eastern Europe, Middle East and Africa) region at First Data International (one of three subsidiaries of the US group), says if it can’t find the right acquisition in South Africa, it will grow organically: “It’s not a question of if, but when.”
Zafirakis says First Data considers South Africa to be a mature market with lots of skilled people.
But he said there was no one company that did everything it needed in the South African market and smaller deals could prove costly and slow to integrate. The transaction would also need to include an element of black economic empowerment.
The last deal First Data looked at – worth around $35m, or roughly R250m – had fallen apart partly on price, but also as it was not 100% fit, he said. An acquisition it investigated a year ago would have been worth of the order of $80m, or R565m.
Africa director Estevao Tokata says though there are companies doing elements of what First Data does, there’s no single company that offers the range of outsourced services on the scale that it does.
First Data has had clients in South Africa since 1994, after acquiring the company that owned one of its software products, VisionPlus. But it opened offices here in 2003 and having looked closely at the local market, believes there’s an opportunity to greatly broaden its product and services offering here.
The company’s clients are mostly merchants (4,9m of them globally) and card issuers (around 1 900 globally), and its range of offerings include facilitating merchants’ ability to accept credit, debit and other loyalty cards, point-ofsale (PoS) devices, ATMs, the processing of cards for financial institutions and other merchants, processing electronic transactions, ensuring transactions are secure at the PoS terminal and at the ATM. It also verifies and guarantees cheques.
First Data International is the newest of the group’s three subsidiaries and has embarked on a global expansion drive over the past three years, which included acquisitions in countries ranging from Australia to Korea and joint ventures in China and Singapore, among others.
South Africa is so far the only office that it has in Africa – so the continent is an open book for the company.
Tokata said South African banks were increasingly looking to the rest of Africa, and First Data could go with them on to the continent.
First National Bank is already a client. First Data hopes to add more banks to the mix, leveraging on its existing relationships with international banks. It also has existing relationships with a number of local retailers and services a bank in Mauritius.
First Data concedes that the South African ATM market is almost saturated, with around 15 000 machines and the market predicted to grow to 18 000. So, it would concentrate on other products and related services.
Tokata says South African retailers and other service providers are increasingly offering financial services in partnership with the banks. This makes it increasingly important for them to know more about their customers.
Also driving the evolution of the environment were regulatory changes like the new National Credit Act, Basle 2 and EMV (the Europay, MasterCard and Visa standard).
First Data doesn’t only service the large financial institutions. Tokata said for years there had been a view that small banks didn’t need complex systems and solutions. Now, there was an understanding that being small, they had a smaller budget on which to compete with the major institutions, and so it was crucial to have complex systems in place.
The business derives annuity revenue from companies that use its software and pay maintenance fees, but it prefers to establish outsourcing relationships and would willingly invest in the necessary infrastructure where there are long-term partnerships in place, Zafirakis says.
Broadcasting services. Estevao Tokata
Not found the right deal. George Zafirakis