It may be as close to a David versus Goliath story that the payments industry can muster in the United Kingdom.
When taking into account Reston, Va.-based Phoenix Managed Networks LLC has targeted a payments-network application market dominated in the UK by Transaction Network Services Inc., it stirs images of the little guy trying to slay the giant.
Phoenix Managed Networks LLC grew from a planned joint venture Hypercom Corp. (now called Equinox Payments LLC) announced late in 2009 with The McDonnell Group LLC. As part of that deal, Phoenix in early 2010 acquired and began operating Hypercom’s Highland Business Networks Ltd. transaction-transport business, known as HBNet (see story). It provides payment processors, financial institutions and retailers globally with data-communication services for transaction-based applications.
Several former TNS executives who now work for Phoenix are behind the company’s push into the UK, a region in which TNS has developed an estimated 90% of the payment data-communication services business over the past 12 years, Alan Stephenson-Brown, Phoenix Managed Networks director of UK operation, tells PaymentsSource.
By comparison, Phoenix has operated a network-operations center in Sheffield, England, the past two years but intends to get a stronger foothold in the coming months with new headquarters in Barnsley, England.
Plus the Phoenix executive team boasts of plenty of industry experience. Stephenson-Brown was among those who worked for John McDonnell Jr. at TNS in the UK and United States in 1997. Stephenson-Brown switched to Phoenix when McDonnell left his role as CEO at TNS and formed Phoenix in early 2010 to acquire and operate HBNet.
Phoenix targets its products to banks, acquirers, processors and retailers–anyone who needs secure data-communication connectivity in a payments network, Stephenson-Brown says.
But most of those key players in that market in the UK likely use TNS to provide network communication, so Phoenix will have to take a different marketing posture, Stephenson-Brown says.
“Most of them have a single provider now, and we are looking to attach their host to our infrastructure so as to configure terminals to one network,” he adds. “We would like to be an option for them to switch to, or as a backup, but our approach is to offer dual transaction-sourcing capabilities because terminals can handle both systems.”
Phoenix eventually wants to be the primary provider for 40% of its clients and the secondary provider for 60%, Stephenson-Brown notes. “The customer would not have to rely on one provider and, over time, they may see the financial benefits and service our company provides when comparing network services,” he adds.
As more payments networks turn to cloud-based systems, clients will require more consultation to grasp the concepts of physical hardware devices and virtual concepts working together, Stephenson-Brown says.
Essentially, Phoenix provides the communication software needed along each stage of the payment process, ensuring data flow securely and within PCI compliance from the merchant to the banks, acquirers or processors. Phoenix provides “data centers around the world” to connect client payment data with the Phoenix network and keep data moving to its designated location, Stephenson-Brown adds.
“We do not store any data,” he notes. Software at the data center monitors the client networks to reroute data if any problems are occurring within those networks, he says.
Phoenix provides payment applications related to international payment processing, fraud screening, authorization and settlement capability, Stephenson-Brown notes. The applications also ensure advanced data encryption during each step of the process so the merchant conforms to Payment Card Industry data security standards, he added.
Phoenix plans to introduce new software and PCI compliance-related features for clients in the coming weeks, Stephenson-Brown says.
“We are bringing new services into the market so that clients would have an option to do something different from what they are doing now,” he adds. Stephenson-Brown did not provide service cost comparisons between Phoenix and TNS.
One industry analyst in London suggests Phoenix has a large task at hand, much like David facing his giant nemesis.
“It’s a mature, well-developed market,” Gareth Lodge, an industry analyst with Celent, tells PaymentsSource. “It will be interesting to see how [Phoenix] will break into the market, even though they have done some business in the UK in the past.”
The key question remains, what makes TNS so dominant in the market? Lodge reasons.
“It is such a commodity business. To make the margins sufficient, you likely have to have a large business base,” he suggests.
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