more research on monoco, page-5

card technology
Slightly related from todays AFR. Referance to large retailers etc interesting - would be a potential market for Monoco if the venture gets fully up and running.

"New players take swipe at card fees
Joyce Moullakis
2005/09/06

British banking giant HBOS is joining forces with the world's largest credit card processor, First Data Corp, to target the $250 billion Australian Eftpos and credit market, providing a new threat to the big banks' dominance of the sector.

The HBOS-controlled BankWest and First Data will offer transaction processing to retailers and other merchants in a deal that is expected to lead to more competition on fees and services.

The major banks have a dominant position in transaction processing and earn fees from retailers and other merchants every time a credit card or Eftpos purchase is made.

But new players have looked to enter the sector after the Reserve Bank of Australia formulated an access regime two years ago that made it easier for companies to join the market either as processors or credit card issuers.

The RBA was concerned about the level of competition in the credit card market and forced banks to cut the hidden fees they charged each other by $580 million annually, which prompted many to raise charges and dilute their rewards programs.

The banks also face competition from niche processing players such as MoneySwitch, and the threat that large merchants such as Coles Myer and Cabcharge may look to process more transactions internally.

First Data's managing director for Australia, New Zealand and South Asia, Greg Nash, confirmed that the new venture had received regulatory approval after six months of due diligence on BankWest's portfolio of about 10,000 retail and merchant customers.

"We are confident that First Data in partnership with BankWest can be more than competitive at the local, regional and the operational level," he told The Australian Financial Review.

"The establishment of this merchant alliance is a considered response to the review and then the reforms that have been established by the Reserve Bank."

Mr Nash believes the new alliance, BWA Merchant Services, can capture up to 15 per cent of the processing market in the next 2 years.

Commonwealth Bank of Australia and National Australia Bank are the top two players in the local Eftpos processing market. CBA has more than 30 per cent of the market or 140,000 customers.

Analysts said the venture would compete directly with the big banks but was also likely to prompt other regional players to assess whether it was efficient to maintain a presence in the Eftpos processing market.

US-based First Data said the venture with BankWest was not exclusive and it had held "preliminary discussions" with other players.

The head of BankWest's corporate and business banking, Paul Clark, said the alliance would deliver the bank better access to the national card transaction market.

"The big advantage of this agreement is that we actually get national coverage straight away," he said. "One of the capabilities we need to develop on the east coast is the transactional banking capability and this actually allows us to start to target larger merchants on the east coast.

"It will be aggressive and the reason why the alliance will work is both organisations are very competitive and both want to grow their market share in Australia."

First Data is believed to have paid less than $50 million to BankWest for its merchant portfolio. It is expected to take eight months to transfer merchants to First Data's back-office systems, even though the terminals will be continue to carry BankWest branding.

Both First Data and BankWest said they would differentiate their offer to merchants on more than price.

BWA Merchant Services will try to differentiate by having 24-hour internet access for larger merchants, terminals that offer currency conversion, a loyalty program, prepaid debit and mobile services, and risk management and profitability analysis.

Macquarie Securities analyst William Ammentorp said, however, that the venture might find it difficult to compete with the major banks, which bundle their offerings to businesses. He said other regional banks might seek to join First Data.

"It is a good play for the low end of the market," he said.

"First Data would have a good opportunity to mop up the smaller merchant acquirers as increasing costs and security costs are raising concerns about their sustainability."

BWA Merchant Services will be headed by Tim Oneacre, who was previously First Data's vice-president of operations. HBOS and First Data have a similar alliance in Britain.

In other global markets such as the US, it is common for large companies to operate solely in transaction processing without actually issuing cards.

First Data cemented its presence in the local payments market last year after it bought the nation's largest independent ATM company, Cashcard, for $255 million. First Data admitted paying a premium for Cashcard.

There is also increasing global debate about the role of retailers in the payments arena, following moves by US retail giant Wal-Mart to operate as a financial institution to reduce its payment processing costs."