The last six months have been rather busy for EVO Payments International, as it’s been leveraging strategic alliances with giant bank players like the Bank of Ireland and Raiffeisen Bank, and taking on M&A opportunities to quickly expand across the European market. MPD CEO Karen Webster caught up with EVO Payments International’s CEO Jim Kelly to get the inside scoop on these major moves, and how EVO is rolling these new relationships with FIs into its existing platform while also broadening the scope of its global vision.
KW: First, I thought this would be a great opportunity to get the inside scoop on all of the activity that’s been occupying your team over the last six months. Give us some insight.
JK: It has been a very active time for all of us here, particularly on the M&A front. We’ve been fortunate to announce two transactions over the last six months. The first of those two was the Bank of Ireland. This one was a strategic alliance with the bank that had already sold its business, had been through the M&A process, and was looking for a fresh start.
Of the transactions we’ve been able to accomplish over the last three years of international fore, this is one where we were probably most proud. It wasn’t about the dollars spent to form the relationship, but rather based on the capabilities of the Bank of Ireland and their products and services anticipated by them that we could bring to bear.
Today, we’re signing over 100 new relationships a week for us and for the bank. A member of the bank’s team actually joined us as the General Manager to run this alliance, who helped pull together the capabilities of EVO globally. We have a telesales capability in the U.S., and we took boarding systems out of the U.S. to plug them into our European platform for the Bank of Ireland. Their new system could therefore be paperless – that was something we showed as a differentiator, we’re an entirely paperless process and speed for the merchant to be up and activated was cut substantially.
Lastly, we used the processing capabilities of our European platform in Warsaw to deliver products and back office capabilities.
KW: That sounds like a pretty significant project in a compressed time frame. But yet you’ve done other things – what and how?
JK: Beyond Bank of Ireland, we announced a long-term relationship last week with Raiffeisen Bank. That’s a pan-European bank based out of Austria, but this relationship is out of Poland. In forming a relationship with one, it gives up an opportunity to do a good job and eventually expand to their other markets. This is an acquisition of an existing portfolio – but more importantly it’s about the relationship we form with the bank. That enables us to leverage what we’ve already accomplished in Ireland and other areas in Poland.
KW: How do these two initiatives complement your overall strategy, and fit with the vision of where EVO Payments International is going?
JK: For the first 20 or so years of EVO’s existing, starting with two guys in the office to a large dominant acquirer here in the U.S., taking the capabilities of the founders and of the team, we’ve been able to form relationships with financial institutions. That’s part of our core strategy. We have a lot of capability as a company especially from a processing standpoint, and financial institutions I believe are the best partners, especially in new markets where we don’t have resources or core expertise. Over the last three years, whether it be Poland, Germany or Spain, we’ve sought out these relationships.
The strategy is not simply an M&A strategy, but rather one to bring value to our merchants. Our focus is providing high quality service and leading products at a competitive price.
KW: Let’s talk about the value to the merchants that you bring as part of these two transactions. What additional value are they getting?
JK: Some of it includes the capabilities that we have in-house. One of the ways EVO has differentiated itself was through speed to market – the ability to have a sales representative in front of a customer complete a transaction, agree on terms and sign up for those terms. Here in the U.S., we can activate in front of the merchant. We can download the terminal, and off we go. That type of capability doesn’t exist in Europe. We see ourselves as changing the market. Merchants can activate in days rather than weeks, and we are entirely paperless.
For larger merchants specifically, we have two platforms (in the U.S. and Europe) to allow them to connect to our Snap* system one time to give them access to processing across North America and Europe with common reporting.
KW: You talk about these two platforms for the U.S. and Europe, and two partnerships or acquisitions you’ve made. How does all of that fit into these platforms? Are they now part of your existing platform? How do you think about rolling these relationships into your existing infrastructure?
JK: As it relates to the processing side, it’s about owning as much of the cost structure as possible. Therefore, each time a merchant or transaction is added, the cost is not variably increasing. That’s the leverage model that draws investors into the marketplace. On the cost side, to use Raiffeisen as an example, it has its own platform and uses third-party services. Our strategy will be to move the processing of the merchants that are in the portfolio today on to our existing European platform out of Warsaw, just like for Poland. The Polish platform is already up and running for our existing PKO business as well as for Ireland, also on the Polish platform.
Over the next 12-18 months, I would see the bulk of what we’ve acquired to date up and running on a common platform. In terms of front office brand, etc., in each of the markets, many brands are already established in a consumer’s mind. It’s not something we can replicate, so while we’d like EVO Payments to be the name in each of our markets, we’ve found that banks appreciate the opportunity to partner under their name, which allows us to leverage the relationship established long ago with merchants. We don’t just want to look like a vendor providing a service, but rather show that we are hand and glove with our bank partners. It’s been a successful model.
KW: You talk about standing up the Bank of Ireland business in a relatively short time, and I know you have been able to leverage a lot of your existing assets, processes and people. Is that fairly unusual in the business, to do that so quickly?
JK: It’s hard to speak to my competitors, but after being in the business for 15 years, having gotten the coordination of five different nationalities on a common language with a common objective is something to be proud of. I don’t see a lot of competition among other players – we feel good about our position in the marketplace and when we’ve gotten the next opportunity for a new relationship, we’ll point to our success with the Bank of Ireland.
For only being around in Europe for three years, some describe EVO as a company that has gone from unknown to the “it” company.
KW: What’s the next thing on the EVO Payments International roadmap as the “it” company in Europe?
JK: I think Europe is going through a change right now, due to regulation, competition and a number of other factors. We will continue to be active in Europe – we love the market, have a great team there and are well positioned to compete.
Later on we’d like to see ourselves in Mexico and Latin America, a natural extension of our U.S. presence. Then, eventually in the Asia Pacific market – perhaps that could mean China, especially with MasterCard and Visa acceptance. But we’re still a young company, but we’re moving and growing quickly and effectively.
KW: It sounds like in Europe in particular, given a lot of the regulatory change, there’s opportunity for a little bit of consolidation. You alluded to the high-fix cost, low marginal cost – it sounds like you’re in a good position to capitalize on some of that interest on the part of financial institutions. Is that what you’re seeing?
JK: I am seeing it initially with the larger financial institutions, and as they validate that this is OK to do, we are starting to see it more. It’s been accelerating from three years ago as the crisis lessened. We’re talking to some of the biggest banks across Europe – including the largest in Ireland, Poland, Germany and the fourth largest in Spain. There’s enough validation of this model that will keep it going, and there’s a challenge for each of the banks about their own merchants and the line of demarcation. That’s why we ensure that it will be better, not worse, after taking on a partner.
To listen to the full podcast, click here.
CEO, EVO Payments International
Mr. Kelly is responsible for developing and executing EVO’s strategic growth plan. Prior to joining EVO, Mr. Kelly served as President and Chief Operating Officer of Global Payments Inc. and held various positions at Alvarez & Marsal. Mr. Kelly is a graduate of the University of Massachusetts, Amherst.