The U.S. merchant acquirer-processor arena is so mature that the only dramatic gains typically come from consolidation, leading to even more formidable combinations that make the next phase of growth even tougher. But there are also opportunities for companies that know how to specialize.
U.S Bancorp.’s Elavon ranks among the top half-dozen of U.S. merchant acquirers in terms of volume, and under new CEO Jamie Walker, the company is ready to wield several advantages that rivals may find tough to counter.
Its competitors are as formidable as ever. Just in the past few years, Vantiv purchased Moneris, TSYS purchased TransFirst, and Global Payments acquired Heartland in an industry where two deep-pocketed powerhouses—JPMorgan Chase & Co.’s Chase Commerce Solutions and First Data—continue to dominate the pack.
“It’s tough to show market share growth in such a crowded market, but I see opportunity shifting in our favor in several ways in the current marketplace,” Walker said.
Walker, a longtime Elavon executive whose tenure dates back to 2001, was appointed to the CEO role last month after serving in various capacities over the years, including chief financial officer. Walker replaced Simon Haslam, who left last year.
The key elements to Elavon's growth strategy are partnership and specialization, he said.
“We’re really going to keep emphasizing strategic partnerships, because we have a lot of assets that give us access to pretty broad distribution channels, not just with U.S. Bank or with other large banks, and our very large ISO portfolio,” Walker said.
That's important because payment terminal technology is evolving to deliver more mobile and integrated services, but getting new solutions out to the marketplace is one of the biggest challenges, and an area where Elavon has an edge over competitors, Walker says.
“We show up as a really strong partner to help companies distribute some of these new payment solutions, not just with our reach but with our technology and platform,” Walker said.
For example, U.S. Bank and Elavon in recent years have invested millions in a technology innovation hub in Atlanta, called The Grove, which is the site of ongoing tests of emerging new mobile and next-generation payments, he said.
“We’re making bets on certain types of technology, and because of assets we have that others don’t, we can pick and choose about which products and partnerships make the best sense to bring to market,” Walker said.
Elavon's strength is its deep specialization in a few key niches, including airlines and hotels. Elavon is the No. 1 payment processor for airlines in the world and processes payments for several major international hotel chains; and it's poised to double down in both areas with new initiatives this year, according to Walker.
“We have a fairly huge presence already in health care payments, but we see a big long-term growth trend emerging there, as more consumers shoulder a share of direct payments to doctors and hospitals,” he said.
For Elavon to achieve measureable growth, playing up its differentiated services will be key, says Rick Oglesby, president of AZ Payments Group. "The big challenge for Elavon is to focus on large segments that are sufficiently sizable to move the needle, and to do so by enabling small companies that are more niche-centric."
While competitors may be eyeing the same trends, Walker isn’t worried about immediate challengers yet.
“The advantage to specializing in some of these niche channels where we operate is that there’s a fairly high barrier to entry, and some of these industries require very complicated approaches for taking payments where we’ve already built up deep expertise. Nobody can easily get into many of these areas,” Walker said.
Elavon also serves a vast network of smaller merchants, which helped the company move quickly to complete the EMV migration for many of those clients last year. Elavon also closely guards some of its most reliable partnerships including its 20-year relationship with Costco, where it serves as exclusive provider of small-business payment processing services for customers of the warehouse giant, and is currently promoting Poynt’s mobile POS devices.
In addition to expanding on these specialized areas, and leveraging partnerships to drive distribution of new payment innovations throughout its overall client base, Elavon also isn’t averse to further expansion through acquisition, Walker suggested.
“Whether it’s partnerships, strategic relationships or acquisitions, I feel we are really well-positioned for the next phase of growth for the company,” he said.