Fifth Third flexes acquiring muscles

Fifth Third Processing Solutions LLC's acquisition of National Processing Co. in September 2010 is one of three acquisitions arranged since July that are designed to significantly broaden Fifth Third's reach within the payments industry.

The NPC takeover, which Fifth Third officials said would be finalized in November 2010, gives the company the processing rights to approximately 350 NPC ISOs that provide services to over 242,000 merchants. Fifth Third will retain all NPC ISO contracts and will be open to signing new ISO agreements as opportunities arise, according to Adam Coyle, Executive Officer, Mergers and Acquisitions for Fifth Third.

"The NPC acquisition is taking us into totally new channels that we've never played in before, and that's primarily the ISO market," Coyle said. "We're looking at how we can bring our many relationships on our [electronic funds transfer] side of the business to bear on the NPC business model, which was largely driven through very strong ISO relationships and third-party agent banks."

Small and midsize merchants

Fifth Third's primary focus has long been large retailers, and Coyle said its acquisition of NPC would produce services for smaller, regional merchants that are normally available only to national retail chains.

"Part of the message we want to deliver to the market is that we can deliver the same, high quality processing platform utilized by some of the largest, best known merchant names in the country to the [small and midsize merchant] market," Coyle said. He said such offerings would include things like more sophisticated gift and loyalty programs.

Fifth Third stated it currently processes about $315 billion annually and that NPC's processing platform will add another $28 billion.

The NPC purchase is one of several noteworthy acquisitions in a very active year for the Louisville, Ky.-based subsidiary. In July, 2010, the processor bought TNB Card Services from Dallas-based Town North Bank.

Credit and prepaid power

TNB provided card processing to over 360 credit unions when it was acquired, and its focus was on credit card processing, Coyle said. He said Fifth Third has historically done more debit than credit card processing, and the TNB acquisition was largely intended to give it a greater stake in the credit card market through partnerships with small scale issuers.

On Sept. 21, 2010, less than a week after announcing the NPC buy, Fifth Third acquired certain assets of prepaid card processor Springbok Services Inc., as part of that company's bankruptcy proceedings. Coyle said that move added open-loop, reloadable prepaid card processing to the company's closed-loop program.

"The Springbok deal was a relatively small deal; we were just buying assets," Coyle said. "That was an opportunistic decision, where the NPC deal was the result of a very conscious, very well thought out, very well debated strategic plan."

The Advent effect

Fifth Third's surge in activity can be traced back to when a stake of the company was sold to global private equity firm Advent International. In March 2009, Advent indicated it would acquire a 51 percent share of Fifth Third Processing, with Fifth Third Bankcorp retaining 49 percent.

"Fifth Third has always been a solid tier one merchant player, and they were always really good at that, but they were just a regional player when it came to the mom-and-pop stuff," said Paul Martaus, President of payments consultancy Martaus & Associates. "All of a sudden, under the tutelage of Advent, they have a huge presence in that industry as well. They have really amassed a tremendous amount of scale."

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

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