Monday, August 17, 1998
By Michael O’D. Moore
Transaction processing companies are unanimous about their opportunities to serve the gambling market — so much so that three companies want to join forces to go after them.
The companies — First Data Corp., BankAmerica Corp.’s BA Merchant Services Inc., and USA Processing — often compete in this and other contexts.
Together they are seeking regulatory approval for a new joint venture that would offer credit card, debit card, automated teller machine, check cashing, and Western Union money transfer services at 1,200 gambling properties in the United States.
These services had been provided individually by the three companies.
Their working together “was something actually suggested by our customers,” said Kirk Sanford, a spokesman for USA Processing, Sunnyvale, Calif. “There was a lot of synergy.”
The idea is not surprising because these companies cross paths and work together regularly behind the scenes, said Paul Martaus, an expert on the merchant processing industry who is president of Martaus Consulting, Clearwater, Fla.
“When you look at the somewhat incestuous nature of this industry, politics and business do indeed make strange bedfellows,” Mr. Martaus said. “These folks saw an opportunity to work together for their mutual good.”
The name and other contractual terms of the venture were not disclosed, and the three principals are playing it close to the vest pending regulatory approval. For now, a management committee with equal representation from each partner is overseeing development, Mr. Sanford said.
In a prepared statement, First Data executive vice president Charles Fote said, “By combining the resources of our three companies, we are creating a true leader in the gaming funds transfer industry.”
He said it would “deliver an enhanced spectrum of services to gaming properties and their patrons” and called it “a very positive development for each organization and its customers.”
Hackensack, N.J.-based First Data, the leader in credit card and other payment processing and the parent of Western Union, serves the gambling market through its First Data Financial Services unit. Company officials were not available for further comment.
BA Merchant Services of San Francisco also declined to comment. It is the largest processor of debit card transactions and the fourth-largest of credit card transactions.
USA Processing is an independent payment system company with customers in gaming, banking, and retailing. When asked what role the company would play in the new venture, Mr. Sanford said, “We’re still in the process of putting that together.”
The gambling industry has been growing by 11% a year and had 1997 revenues of $50.9 billion, according to the American Gaming Association, Washington. The group represents 109 commercial casinos and related businesses.
Of the 1997 revenues, $15.5 billion was in state lotteries.
The proliferation of lottery terminals means there is a lot of processing to be done, Mr. Martaus said. Lottery operations are technically “not far removed from the main-line core competencies” of point of sale transactions, he said.
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