TSYS completes NetSpend acquisition

On July 1, 2013, card processor Total System Services Inc. (TSYS) finalized its $1.4 billion acquisition of NetSpend Holdings Inc., the second largest prepaid card company in the United States. NetSpend became TSYS' fourth subsidiary, with NetSpend's Chief Executive Officer Dan Henry tapped to continue in that position. Both TSYS and NetSpend executives characterized the acquisition as transformational for both companies.

NetSpend specializes in providing general purpose reloadable (GPR) prepaid cards to U.S. consumers with limited or no access to traditional financial services; the underbanked is a consumer segment estimated at 68 million individuals in the United States. Philip W. Tomlinson, chairman and CEO of TSYS, said the move brings the processor "closer to the consumer than we have ever been before."

In a Feb. 2013 conference call to announce the acquisition, TSYS stated that the prepaid card industry is a $4 billion market, which is expected to double over the next four or five years. As a program manager, NetSpend services approximately 2.4 million active prepaid accountholders with a distribution network of 500 retailers and more than 130,000 reload locations in the United States.

TSYS is not new to prepaid. The Columbus, Ga.-based processor has been processing prepaid card transactions since around 2003. However, the acquisition of Austin, Texas-based NetSpend provides TSYS with program management capabilities, which allows TSYS deeper penetration into the retail, business-to-business, payroll and cash advance segments. NetSpend's largest business is in its distribution of GPR cards through cash advance stores and insurance lenders.

"Our strategy has been, and continues to be, to further expand our role in the payments value chain and bring more innovative solutions to market," Tomlinson said. "The acquisition of NetSpend is further evidence that we are moving forward in that direction, and have strengthened our foothold in the rapidly growing prepaid industry."

As for how the acquisition will affect NetSpend, Henry said TSYS will allow the program manager to leverage TSYS' size and scope. "Being able to tap into the strength and resources of TSYS and combine them with the unique product set and fast growing business of NetSpend will enable us to better serve the underbanked market, which is our focus and our passion," he said.

NetSpend, formerly a publicly traded company, will be delisted from the NASDAQ, where it stopped trading on July 1, 2013. NetSpend's stockholders will receive $16 per share in cash.

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