Paya Makes Another Integrated-Payments Play With a Deal for First Billing Services

Paya Inc. said on Tuesday is has acquired First Billing Services, a Dayton, Ohio-based billing processor for municipalities, utilities, and multifamily housing units. The $57.5 million deal, which Paya chief executive Jeff Hack says was consummated minutes before midnight on New Year’s Eve, represents the Reston, Va.-based payments provider’s second in as many months and continues what Hack says is the company’s mission to fill in “white spaces’ in its portfolio of services.

Formed in 2011, First Billing brings to Paya a base of more than 600 municipal and other government clients serving more than 2.5 million consumers. The potential for expansion in this market is attractive, Hack tells Digital Transactions News. “The penetration rate is low but rising at a high rate,” he says. “Municipalities are a less-penetrated segment. There’s not hundreds and hundreds of people tripping over each other to serve them, so it’s very attractive.”

The acquisition also furthers a strategy at Paya to recruit resources that can integrate software and payment processing in markets not typically served by rival merchant acquirers, says Hack, who took over at the company in November after a career that has included long stretches at JPMorgan Chase & Co. and First Data Corp. “We have merchant agreements today that don’t have the word ‘merchant’ in them,” he says. “We believe it’s a competitive advantage going to market with partners and offering a deeply integrated software solution.”

In this sense, Tuesday’s deal follows the same logic that undergirded Paya’s acquisition Nov. 1 of another Ohio-based company, Stewardship Technology Inc. That deal brought to Paya a processor with strengths in nonprofits, particularly houses of worship.

First Billing, whose services include processing for automated clearing house and check transactions as well as credit and debit cards, has benefited from a trend among local governments toward electronic billing and payment. In this market, “electronic payment adoption is growing rapidly,” Hack says, but he adds that “staying out of PCI scope” is also critical to these clients. “This is why it makes sense to be partnering with someone like FBS.” PCI refers to the Payment Card Industry data-security rules for card transactions.

With backing from Chicago-based private-equity giant GTCR LLC, Paya is far from finished in its effort to build out its capability to fill those white spaces with acquisitions that can merge software and processing capabilities in underserved markets. “A payments-centric space that has low penetration of cards creates opportunity for us,” Hack says. GTCR paid $260 million in 2017 to acquire the company, formerly known as Sage Payment Solutions, from the United Kingdom-based accounting-software firm Sage Group plc. Sage Payment rebranded as Paya a year ago.

But potential deals are not all equal. In fact, very few that Paya evaluates are likely to come to fruition. “We see lots and lots of inbound interest,” says Hack. “The funnel is incredibly wide. What makes it through the funnel is incredibly rare.”