Calpian, Inc. (CLPI) is a publicly traded company with two separate business units. The company’s U.S. business division, Calpian Commerce, focuses on the 10,000 Independent Sales Organizations (ISOs) that serve approximately 2 million small merchants across all industries in the U.S. who process an estimated $1 billion in annual card-based payments. Additionally, Calpian publishes the leading industry trade magazine, Transaction World, which has more than 15,000 subscribers.
Calpian Commerce provides the merchant community with an integrated suite of payment processing services and related software enabling products. The company offers credit and debit card processing, ACH, mobile acceptance, and gateway payment solutions to merchants in the U.S. operating in a physical “brick and mortar” business environment and/or over the Internet, and in settings requiring wired as well as wireless/portable payment solutions.
Calpian’s Indian business division Money-on-Mobile, a pre-paid mobile payment solution, has been accessed by approximately 49 million unique telephone number customers at more than 134,200 Indian retail locations. MoneyOnMobile is authorized by The Reserve Bank of India (RBI) to set up a semi-closed payment system in India which enables registered users to buy good products and services from registered merchants.
Corporate Website: www.Caplain.com
Key Investment Highlights
- Targeting the Highly Populated India Marketplace
- Powerful Pipeline of Deals Expected to Generate Strong Residual Revenue Growth
- Well Respected Management with Strong Merchant Portfolio Knowledge
- Estimated to Generate $100,000-$1.0M in Monthly Revenue Streams
- Leveraging Sophisticated, Proprietary Methodology
- Management has Completed Over 200 Acquisitions
- Positioned to Capture 25% of Total ISOs Operating in United States
- Operating in Niche Oriented Market, No Direct Comparable Competitors
Leveraging three delivery chains to provide quality payment processing
Calpian Commerce is the U.S.-based payment processing division of Calpian, operating to provide the merchant community with an integrated suite of payment services and related software-enabling products. The payment processing subsidiary delivers its products and services to merchants via three delivery chains: a direct sales force, ISOs, and Agent Banks.
The Calpian Commerce product family includes well-known and trusted product brands such as Northern Merchant Services, SecurePay™, AirCharge™, and others.
Calpian is a buyer of revenue streams - not the buyer of Independent Sales Organizations (ISOs) actual operations. The company acquires merchant customers from ISOs who sell payment-processing services and point-of-sale equipment to those retailer/merchants.
ISOs serve approximately 2 million small merchants in the U.S., generating approximately $1 billion in annual residuals for companies like Calpian.
The company acquires recurring monthly revenue streams from credit card processing fees. Major credit card processing firms or third party-processors handle the processing details of credit card transactions that are executed between the merchants/retailers who sell goods and services to the consumer. These retailers/proprietors are ultimately paid by the banks that issue the credit cards. ISOs or merchant account providers are the "go between" for these two parties in the case of smaller merchants who are generally not served by the large credit card companies.
In April 2012, Calpian acquired significant ownership of Mumbai, India-based My Mobile Payments Limited (“MMPL”) through a newly formed company, Digital Payments Processing Limited (“DPPL”), both organized under the laws of India and headquartered in Mumbai. Working with MMPL, DPPL is the customer face of Money-on-Mobile (MoM), a stored-value mobile payments service that gives consumers the ability to use their mobile phones to pay for goods and services or transfer funds from one cell phone to another using simple SMS text functionality.
MoM’s solutions permit Indian mobile phone subscriber to purchase a variety of goods and services using the mobile phone instead of paying by cash, check, debit, or credit cards. The feature can even be used to pay postpaid mobile bills, utility bills such as electricity and gas bills, and purchase airline, bus, and movie tickets.
To load money into this virtual bank account, a consumer visits a MOM-approved retail store partner, giving cash to the retailer who credits the users for the amount of cash provided. The consumer is then able to send money to any other owner of a cellular phone within India, whether it is a friend, family member, or even a business operator who sells a good to the customer.
The Money-on-Mobile service is vital to Indian consumers - many of whom do not have bank accounts or access to traditional forms of credit. According to a 2012 study by MasterCard Worldwide, less than 50% of India’s population has a bank account and yet mobile penetration is over 50%, is rapidly growing, and is significantly higher than Internet penetration which MasterCard counts at 15-25%.
The bankcard association goes on to state that mobile payment provides a potential long-term solution to India’s problem of Financial Inclusion by giving the unbanked access to the funds they need to conduct the regular business of their lives.
According to the Telecom Regulatory Authority of India, there are 903.7 million cell phone subscribers in India, and the country is adding 9.9 million new subscribers per month.
The Calpian management team has extensive experience in acquiring ISOs merchant portfolio revenue streams. Over the past 10 years, they have completed over 200 acquisitions and have established strict criteria and proprietary underwriting and monitoring capabilities. Additionally, the company has access to several sources of deal flow.
The first source of deal flow is management’s direct relationships with the ISOs themselves, given the Calpian team members’ extensive industry experience and that they have “been in the business” for a long time.
The second source of potential transaction opportunities comes from advertisements the company places in its industry-leading magazine, Transaction World, which Calpian publishes and distributes to 15,500 readers, including most of the ISOs and brokers/agents in the industry.
Finally, the Company also receives meaningful deal flow opportunities through word of mouth and referrals.
Calpian’s acquisition targets usually fall into one of two categories:
- Small ISOs with a portfolio of less than 2,000 merchants. In this case, the ISO owner is typically interested in selling the ISO’s residuals due to reasons related to personal finances.
- Larger ISOs with more than 2,000 merchants in their portfolio. In this case, the ISO’s residuals are likely sold because of a partnership change or because an exit strategy is being sought.
In general, the company seeks to avoid certain risks and will not acquire a portfolio if it is perceived there could be potential merchant fraud or unfulfilled transactions, among others. Also, based on their experience, the Calpian management team has learned that it is important to assume the conservative stance that most potential acquisition targets lack the proper accounting and financial skills to put together a complete set of financial statements, including an income statement, balance sheet and cash flow statement, which typically enable a thorough picture of the company’s financial position and future prospects.
For this reason, management always performs a detailed analysis of an ISO’s processor reports prior to engaging in an acquisition agreement. Processor reports typically include critical operating and financial data such as monthly merchant attrition trends, processing volume trends, residual payment trends, merchant concentration statistics, merchant geographic dispersion, individual merchant sales growth or decline levels, and other specific data of the residual portfolio that could indicate future attrition or acceleration in overall performance.
Calpian, Inc. Management
Harold Montgomery, Chairman and Chief Executive Officer
Harold Montgomery is the chairman and CEO of Calpian. He has been in the payment processing business since 1987. Before leading the formation of Calpian, he was the CEO of A.R.T. Holdings, Inc. (dba Calpian from 2002 to 2009), a company that underwrote and acquired hundreds of merchant portfolios totaling approximately 35,000 merchants. He brings the same leadership team from A.R.T. to Calpian.
Montgomery has 23 years of payments industry experience, which includes work in the ISO, merchant payment processing, and mobile payments vertical markets, as well as the sourcing of capital. He’s a widely known industry authority, a speaker at regional and national trade shows, and writes a regular monthly column for Transaction World Magazine. He has been a resource for the Federal Reserve Bank Card Payment Center in Philadelphia, and has served the U.S. Congress as an expert witness on credit card legislation.
Montgomery attended Stanford University where he earned BA and MBA degrees. He currently serves on the Board of Trustees for the Communities Foundation of Texas, a $750 million community trust organization, and the Board of St. Mark’s School of Texas. He has served as President of the Dallas Committee on Foreign Relations and Young Audiences of Greater Dallas.
Craig Jessen, President
Craig Jessen is the president of Calpian. He has been in the payment processing industry since 1991. He was the president of A.R.T. Holdings, Inc. (dba Calpian from 2002 to 2009,) a company that underwrote and acquired hundreds of merchant portfolios totaling approximately 35,000 merchants. His primary responsibilities at A.R.T. were the sourcing, underwriting, negotiation, and funding of these acquisitions. Jessen has 23 years of experience in the payments industry including with the ISO space, merchant payment processing, sales training, business development, and sourcing capital. Jessen resides in Dallas, Texas, and holds a BBA from the University of Texas at Arlington and an MBA from Southern Methodist University.
Cynthia Bailey, Chief Marketing Officer
Cynthia Bailey is the chief marketing officer of Calpian. She served in this position at A.R.T. Holdings Inc. (dba Calpian from 2002 to 2009) and brings over 20 years of experience in the payments industry. In addition to developing and executing marketing and public relations strategies for the company, Bailey is the founder, current editor-in-chief, and managing publisher for Transaction World Magazine (founded in 1999), a leading trade publication in the payments industry. Bailey resides in Atlanta, Ga., and holds a BA from The College of William and Mary in Virginia and an MBA/Master of Science in Marketing from Georgia State University. She currently serves on the Mobile Payments Committee for the Electronic Transactions Association.
David Pilotte, Chief Financial Officer
David Pilotte is the chief financial officer of Calpian. Pilotte has a broad-base of experience across many industries, and brings to Calpian more than 22 years of experience leading middle-market public companies including roles as CFO, COO, corporate controller, treasurer, and independent advisor. During that time he has led 10 M&A transactions totaling $1.2 billion in value, raised and managed more than $550 million in financing, and led public companies ranging from startups to those with over $700 million in revenues. Pilotte holds a BS in Finance from the University of Florida, an MBA from the University of Houston, and has been a CPA in Texas since 1986.
Laird Cagan, Director
Laird Cagan is Managing Director and co-founder of Cagan McAfee Capital Partners, LLC (“CMCP”) (successor to Cagan Capital), a private investment firm and merchant bank established in 1990. Since 2000, CMCP has founded and/or funded and taken public ten companies in a variety of industries, including energy, alternate energy, health care, and information technologies. CMCP portfolio companies have raised more than $600 million.
Cagan was the founding Chairman of Evolution Petroleum Corporation (AMEX: EPM), a company he founded to develop mature oil & gas fields with advanced technologies. He is also a Managing Director and Principal of Colorado Financial Services, Inc. (“CFSC”), a NASD-licensed Broker-Dealer, a former director of AE BioFuels (AEBF.PK), and Camac Energy, Inc. (AMEX: CAK.) Cagan is licensed by the SEC under Series 24, 7 and 63. CFSC is not affiliated with CMCP.
Shashank Joshi, Director
Shashank Joshi is the managing director of Mumbai, India-based Money-on-Mobile and has more than 18 years of professional experience in the areas of IT and ITES, outsourcing, transition, and management consulting. He has been a pioneer in the successful execution of merchant cash advance and merchant processing businesses through the offshore route. Joshi has cross-border global experience of more than six years in “Simplifying Payments.” His vision is that of “Simplifying Payments” while his goal is to bring the convenience of Simplified Mobile Payments to every mobile subscriber in India. Joshi holds a degree in Mechanical Engineering from Maharashtra Institute of Technology.