How TransFirst’s New Boss Sizes up the Processor’s Opportunities

Former First Data Corp. executive John Shlonsky, who took over this week as president and chief executive of TransFirst LLC, says he plans to lead the Dallas-based transaction processor into a wide array of new markets with backing from the company's new owner, private-equity firm Welsh, Carson, Anderson & Stowe. Via acquisitions and internal growth, he says, the 12-year-old company will expand in health-care payments and gift and loyalty cards. It has also signed its first bank in an ambitious new program aimed at providing both processing and sales support to financial institutions that want to expand their deposit-taking with business clients. Although Welsh, Carson has not set aside a definite war chest to fund acquisitions, Shlonsky says he plans to expand TransFirst's market value to between $2 billion and $3 billion over the next four to five years. Welsh, Carson agreed to buy TransFirst from GTCR Golder Rauner last month for $683 million (Digital Transactions News, May 17). “Welsh isn't here for the one-hit wonder,” Shlonsky says, adding the firm will back “anything that makes sense to drive the growth of the company.” Shlonsky, who came to TransFirst in October from First Data, where he ran the Denver-based processing giant's merchant-services unit, succeeds Thomas Rouse as chief executive. Rouse has retired after leading TransFirst since its founding. Shlonksy says he has identified potential acquisition targets in the loyalty card market, which is high on his priority list. “It's important to our small-business customer, so we're making it a priority,” he says. “I want to be able to say this will be a huge part of our [earnings] growth.” The big challenges include figuring out how to register customers for loyalty programs in ways that don't distract them during their visits to the store, and how to demonstrate net incremental sales to merchants. “We need to build a model and demonstrate we can drive sales up in your stores 25%,” Shlonsky says by way of example. “If I can bring you a new cardholder who never shopped in your store, that's compelling.” Similarly, he's eyeing the rapidly expanding gift card market. “Gift cards have started to come down-market,” he says. “You're starting to see them at dry cleaners now.” Here, Shlonsky wants to offer a package that would bundle together processing with new, higher-powered terminals capable of supporting programs like gift cards. “It's a huge opportunity that hasn't really been focused on here at TransFirst,” he says. “I want to make it an opt-out rather than an option for restaurants and retail.” In both the loyalty and gift card segments, Shlonky says, a key feature will be a single statement reflecting all card traffic, whether credit, debit, or prepaid. “Getting six [different] statements and trying to reconcile those things is very difficult for the merchant,” he notes. To help support that goal, TransFirst is also looking to acquire a company that would allow it to bring in-house the settlement and statement-processing services commonly known as back-end processing. Currently, the company relies on Global Payments Inc., TSYS Inc., and First Data for back-end services. Other priorities include expanding TransFirst's position in the health-care business, where Shlonsky sees an opportunity to move beyond credit and debit card processing for medical offices into claims adjudication and support for debit cards linked to flexible-spending accounts (FSAs). “Right now we're not the full 31 flavors I'd like to have in health care,” he says. The company has also embarked on a program to offer banks not just processing for card, automated clearing house, and check transactions but also street-level marketing and sales support to help sign up new business clients. An unnamed bank has just signed on for the program, and Shlonsky expects more to come. “It's going to be a huge portion of our growth,” he says, noting the new program goes well beyond the company's conventional agent-bank program, which claims 950 clients. Overall, Shlonsky says the key to achieving his valuation goal is moving TransFirst into a consultative role with merchants. “We are their small-business consultant,” he notes. “This is not just a credit card processing business any more.”