Saturday, November 18, 2006

$3.25 Billion and Counting

Pay By Touch, San Francisco, Calif., was on the acquisition trail at the end of 2005 and emerged as a significant player in the acquiring business, according to Les Riedl, President of Speer & Associates, Atlanta, Ga. This week they purchased the portfolio of Paynet, including 50 NCAA sporting venues. They also announced a major strategic relationship with Citibank, which will issue "cardless" cards in Singapore.

Pay By Touch's has a valuation of approximately $3.25 Billion dollars. $3,250,000,000

Pay By Touch’s specialty is biometrics, and they have over 3.3 milion enrollees, but with the recent acquisitions and others that could be made, Riedl expects the payments portion of the business to become an ever-larger portion of the total enterprise. They currently process over $20 billion dollars worth of transactions (checks, ACH and debit/credit) annually.

Riedl sees that as good for Pay By Touch’s long-term prospects because although the growth prospects for biometrics are tremendous, revenue streams from payment processing will harbor profitability until biometrics becomes mainstream. They've established some momentum in terms of being an full service payment processor. Will they hit the acquistion trail again, at the end of this year?

A quick look at Pay By Touch’s recent acquisitions:

The assets of CardSystems Solutions, Inc., a payment processing provider, for $47 million in cash and stock. Under the terms of the deal, Pay By Touch assumed responsibility for all CardSystems Solutions, Inc. assets and for payment relationships with reportedly 120,000 small and medium-sized merchants. The deal was completed primarily for stock and some cash. CardSystems provides integrated payment solutions to associations, financial institutions and independent sales organizations and retail merchants. Through these payment solutions, CardSystems processes more than $18 billion in Visa, Mastercard, American Express, Discover, online debit and EBT transactions annually.

BioPay LLC for $82 million in stock and cash. BioPay is a biometric services provider with two million enrolled consumers, 1,600 retail implementations, and more than $7 billion in transactions processed. BioPay specialized in biometrically authenticated check cashing, with more than 2 million consumers in retailers across 42 states. The deal was closed in the first quarter of 2006. This acquistion eliminated a potentially long drawn out legal battle that was brewing before the buyout which would have resulted in potential clientele, sitting back and waiting for the outcome, before investing in one or the other. Therefore, Pay By Touch virtually eliminated the competition, and emerged as the dominant player.

ATM Direct, delivers a complete, patent-pending, software-only solution for the secure entry of a PIN number through personal computers over the Internet. Backed by a suite of security, monitoring and control processes, our service enables the secure multi-factor authentication of online users enabling, for the first time, the use of PIN-debit payments on the Internet with a low cost, easy to deploy and use, software-only solution. This could be their cash cow, as PIN debit for the internet would save Internet Retailers signifcant amounts on their card processing costs. Pay By Touch recently announced their TrueMe application, which incorporates biometric sign-on, eliminating the need for passwords and usernames. If they combine the TrueMe application with their ATM Direct application, they could give Paypal and Google Payments a run for their money.

7th Street Software, Inc. and Convena, LLC, two loyalty technology providers that Pay By Touch officials expect to significantly bolster the company’s loyalty offerings. 7th Street Software, Inc. is the developer of LoyaltySuite, a patent-pending technology that helps retailers automatically give shoppers personalized offers on the products they purchase most. The Convena, LLC assets add another layer to Pay By Touch’s loyalty offerings.

Capture Resource, a supplier of integrated reward programs and business process outsourcing solutions, further enhancing the company’s loyalty offerings. This acquisition enables Pay By Touch to offer customers interactive gift and reward programs, customized reporting, design, production, and Web access services. In addition, the company will offer retailers advanced information capture technology and database management. Pay By Touch assumes responsibility for all of Capture Resource, Inc. assets and will manage the company’s 120 million-plus consumer loyalty enrollment profiles, including more than 12,000 supermarkets and retail institutions.

The acquistion of Covena, 7th Street and Capture Resource has empowered Pay By Touch to put together and introduce, Smart Shop, a personalized marketing program that allows shoppers to receive personalized coupons either at the store, at home or via e-mail Shoppers can view offers online or by email, as well as at an in-store Pay By Touch kiosk. Their targeting engine tracks each individual shopper's purchase history and serves up "perosnalized" relevant coupons from a finger-accessed kiosk right inside the merchant's store. No need for coupons, mass mailings, loyalty card...just your finger. At checkout, discounts are automatically rewarded without the need for cards or key fobs.

These acquisitions build on a trend the company, founded in 2003, started when it acquired InterCept Payment Solutions, a merchant processing platform with approximately 18,000 customers. At the time of the acquisition, company officials said the deal reflected Pay By Touch’s ongoing evolution from a single payment solution to a provider of end-to-end biometric authentication and payment processing services.

“It’s an intriguing company, they have a lot of momentum,” Abbey adds. “Ever since they acquired InterCept, they’ve been building out their capabilities. With these acquistions they’re a lot further along than I thought they would be at this point.”

Part of the reason for the company’s success so far is the financial wherewithal of the firm’s owners Riedel says. “They have a ton of money behind it." So far, it looks like they've spent money on acquistions for growth and have built great value. Their current valuation is over $3 Billion. That's pretty a pretty darn good return on their acquistion investments.

Pay By Touch

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