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Why Vantiv Loves Pizza

JJ HornblassbyJJ Hornblass
September 13, 2016
in Banking, Payments
Reading Time: 2 mins read
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canstockphoto39247488Last week, Vantiv Inc. secured a significant card processing deal. And the payments industry barely noticed.

It should have.

Vantiv, based in Cincinnati, scored the processing business of Papa John’s International Inc., the fourth-largest pizza store chain in the nation. But Vantiv didn’t just secure the payments volume in its 3,300 stores. It also is the sole processor of Papa John’s payments online and via mobile.

Papa John’s generated about $1.56 billion of revenue in the 12 months ending June 30. It is likely that at least half of that revenue comes via credit or debit card.

The deal puts Vantiv in the position to affect payments innovation across the entirety of Papa John’s retail endeavors, which is a major win and opportunity. Just think of the data, people.

The Papa John’s account was one of the key contracts to be won in 2016. Such expansive payments contracts don’t come about often, and the fact that Vantiv won it says something about the advancement of the company’s sales operation, which Vantiv says it will continue to expand.

These big-time payments contracts represent the ultimate barrier to entry for any payments startup. In closing this deal, Vantiv has locked up a corner of the payments market, part of a concerted effort to secure large-scale payments agreements. In fact, Vantiv has largely migrated to big-volume processing, leaving smaller-volume accounts to other companies. Last week, Stephanie Ferris, Vantiv’s CFO, essentially dismissed Square as playing in the minor leagues of payments compared with Vantiv. She said Vantiv has never been able to find a profitable business model for focusing its sales on small businesses.

“We haven’t served the micromerchant, because we haven’t been able to serve them profitably,” she said.

The implication was, if Vantiv can’t find a profitable model, it is fair to wonder how Square can do so.

In the year ended June 30, Square generated $1.5 billion of revenue, consistently losing money each quarter. Vantiv, meanwhile, produced $3.4 billion of revenue during that time period, and consistently earned money each quarter.

So far this year, Vantiv stock [NYSE: VNTV] is up 12.5%. The company has a market capitalization of about $10.5 billion.

Yes, Vantiv has competition — JPMorgan Chase’s ChaseNet, for example — but it is locked in on big-volume payments. While there are few such contracts coming up for bid in 2016, there are more in 2017, and that’s Vantiv’s focus right now. It is currently expanding its sales team to secure the 2017 business, and whether or not it is successful in doing so, one thing appears true: Vantiv means business.

To learn more about payments, join us at Bank Innovation Israel in Tel Aviv, November 1-3. Register here. 

Tags: card processingSquareVantiv
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