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More on NetSpend and TSYS

Adam Rust's picture

Posted February 20, 2013

Will the cultures of NetSpend and TSYS find a fit? TSYS CEO says "We also believe that their culture and mission makes them a great fit for TSYS." But does a company where accents seem reminiscent of Augusta National really mix with a company based in Austin and led

by a CEO that made a fortune in Eastern Europe? Save for its work as a payroll card provider, NetSpend has always been a company that dealt directly with consumers.  The end client at TSYS ("people centered payments") is a corporation.

Analyst Greg Smith seemed to have a handle on another aspect of that issue, which is that TSYS has customers that are engaged in their own prepaid programs already: "What about potential conflicts now that TSYS is going direct to the consumer and historically you haven't done that. Your bank customers are doing that, you can see that your bank customers are doing that. How do you feel about managing conflict?"

NetSpend is going to be an important segment within TSYS: In the investor presentation, TSYS suggested that NetSpend would now constitute 18 percent of the revenues and approximately 16 percent of future EBITDA. NetSpend increases the rate of growth at TSYS.

The future could be bright: Dan Henry made an interesting point: NetSpend has 1.1 million direct deposit accounts and approximately 2.4 million active card accounts. But this is really only a small share of the possible audience for their products. "Our target market is the 68 million unbanked and underbanked consumers in the North America market," says Henry.

The top management at NetSpend says they will stay, but will they go? Both Chuck Harris and Dan Henry are "employees at will." That is another way of saying that they don't have a non-compete clause. "We are employees at will, so the length of the contract is kind of irrelevant. But there are performance metrics in there that are going to keep, let's just to say it this way, even if Chuck and I weren't personally committed to the growth and success of this business, TSYS made sure that we are financially committed to the growth and success of this business." But Henry is already a rich man. He sold $10 million in shares and options in Euronet when he left the company at the end of 2006.