Wednesday, July 02, 2003

When credit met debit Not all important mergers and acquisitions involve well-known brands. Take First Data and Concord EFS. These two companies are planning to merge, and though most people have never heard of them, the merger is very significant. Actually First Data will pay a whopping $7 billion for Concord. Both companies specialize in handling point-of-sale transactions, serving as middlemen between retailers and banks. First Data expedites over 40% of all credit card transactions. Concord owns of 50% of the debit card (using PINs) market, as well as 7% of the credit card transaction market. These companies verify that the cards are valid and that they accounts have enough money left to close the transaction. What Visa and MasterCard do is actually handle the transfer of funds as well as handle disputes. If First Data and Concord merge, the result will be a powerhouse that has to have the credit-card companies worried. If the merger takes place, the new company will be well situated to handle its own financial transactions, and more directly. Banks could issue cards that are neither Visa nor MasterCard. And it seems the industry is moving more and more to PINs or electronic signatures for verifying transactions and cutting down on fraud, even on credit cards. Concord now has a big head start in verification technology. PIN-based cards are an advantage to retailers, in that they allow for very fast money transactions. Thus a relatively quiet merger may add a rival to the credit card leaders, if antitrust officials give their approval. (Source Business Week) 7:11:11 PM

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