The Dallas, Texas-headquartered CLPI thus captures substantial recurring revenue streams on credit card processing in the form of fees paid by the retail merchant. Such “residual portfolios” are the primary acquisition target of CLPI and the company does a good job of also picking up associated servicing rights on portfolios acquired from the credit card processor subcontractors, or Independent Sales Organizations (ISOs). ISOs help merchants navigate the complex regulatory front-end (like approvals, credit checks, and guarantees) required to get set up for retail credit card payments, essentially acting as sales agents for the credit card processing companies.
By going directly through the ISO which originated the processing contracts with the merchants, CLPI is able to strike across a wide range of portfolio acquisitions, from simple one-time events with a single merchant, all the way up to entire ISO portfolios that span a considerable duration (from immediate requirements of sub 2k merchant ISOs like medical and educational to those of ISOs exceeding 2k merchants, where the financial problems arising from partnership splits, exit plans, and expansion funding present their own unique challenges). The company has a proven track record of working closely with all interested parties on the ISO and processor side of the equation, with many successful closings and a reputation for helping both sides achieve improved results for their customers.
Calpian also has rapidly emerging mobile payment operations in Mumbai, tapping directly into the heart of the massive Indian economy via their Money-on-Mobile (MoM) product, a prepaid mobile payments service that has quickly captivated Indian consumers who love their mobiles (903.7M subscribers as of January 2012, adding 9.9M new subscribers per month according to the Telecom Regulatory Authority of India). The March 28 investment of $1.3M and issuance of some 1.845M shares of common stock which allowed CLPI to gain an equity interest in the newly formed Indian subsidiary, Digital Payments Processing Ltd. (DPPL is in a service agreement with My Mobile Payments Ltd., who owns the MoM service), has also generated synergistic feedback. Mr. Shailesh Mehta, Managing General Partner at Granite Hill Capital Ventures, LLC, who also manages the Granite Hill India Opportunity Fund, was certainly influential in helping CLPI achieve funding recently to expand their U.S. operations (reported Nov 16). CLPI entered a $5M, 43-month term loan facility with Silicon Valley-based Granite Hill, who sees Calpian’s U.S. credit card residual business as a “terrific cash flow generator with solid returns,” according to CEO of CLPI, Harold Montgomery.
MoM lets consumers simply use their cell phone to make routine payments, as well as allows them to move money using an intuitive SMS-based text messaging framework that is readily familiar and thus very engaging/attractive to target markets. CLPI’s strategy is to work the optimal margins presented by a key group of preferred processors like Elavon and Chase Paymentech (among select others), both of which CLPI has contracts with, in this way putting together an extremely stable merchant base foundation of only the most reliable, credit-worthy processors.
The MoM service is showing really nice traction, with some 110k or more retail locations and over 17.8M unique users reported since the start of April. Despite the rupee getting hammered, October processed transaction volume was roughly $9.8M, climbing 3.4% from September, pulling good metrics from a relatively quiet Diwali season (or festival of lights, a time when many marriages occur, along with the customary gift giving, especially of gold).
CLPI is really making a name for itself among investors, with a risk-limitation strategy that is heavily focused on the revenue streams alone and an extensive market presence established via a razor-sharp marketing game plan continually honed in leading industry trade journals, including CLPI-affiliated Transaction World Magazine (March 2012 issue went out to 14k readers), which assists the community by educating ISOs on the company’s immensely beneficial acquisition capabilities. Calpian will continue to emphasize targets under $1M in annual processing volume in the small merchant space, while going head-to-head with less efficient ISOs in the broader payment processing services industry, capitalizing on being able to deliver superior rates and other advantages.
For more information on Calpian, visit www.Calpian.com
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