Euronet Worldwide, Inc
Euronet Worldwide, Inc.
Founded: 1994 as Bank Access 24
Sales: $531.2 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: EEFT
NAIC: 522320 Financial Transactions Processing, Reserve, and Clearinghouse Activities
Based in the Kansas City area, Euronet Worldwide, Inc., provides secure electronic financial transaction solutions to banks, retailers, and mobile telephone companies, offering network gateways, integrated electronic funds transfer software, outsourcing and consulting services, and electronic top-up services. The company also offers money transfer and bill payment services to consumers. Euronet does business in the United States and more than 80 European, Asia Pacific, African, and Middle Eastern countries. It operates the largest network of ATMs in the pan-European market and India's largest shared ATM network.
Moreover, Euronet is the world's largest processor of prepaid services, maintaining more than 259,000 point-of-sale (POS) terminals that allow consumers to replenish ("top-up") long distance calling cards and mobile airtime plans. The company also provides bill payment services in the United States and consumer electronic money transfer services from the United States to Latin American countries. In addition to its corporate headquarters in Leawood, Kansas, Euronet maintains major offices in Budapest, Munich, and London, and more than 20 regional offices around the world. Euronet is a public company listed on the NASDAQ.
COMPANY FOUNDED: 1994
Euronet was cofounded in 1994 by its chairman and chief executive officer, Michael J. Brown, and president and chief operating officer, Daniel R. Henry. The two men were related through their wives, who were sisters. A graduate of the University of Missouri-Columbia in 1979, earning a degree in electrical engineering, Brown had enjoyed a successful career in the computer software business. Just out of college he founded Innovative Software, which in 1988 merged with a major database software technology company, Infomix. Brown became the president and chief operating officer of Infomix, and when he left in 1990 the company had more than doubled its annual revenues, from $70 million to $170 million.
Brown enjoyed success with some of his other endeavors as well, including his role as a founding investor of Visual Tool, Inc., a company that developed software for Visual Basic and Visual C + + developers and was ultimately acquired by Sybase Software. Brown was also an investor and board member at Pencel Corp., a developer of handheld software. Henry graduated from the University of Missouri-Columbia in 1988 with a degree in business administration and became a commercial real estate broker before teaming up with his brother-in-law in 1994 to establish an ATM network in Hungary. He would then establish their first office in Budapest and oversee European operations from there for the next five years.
Euronet's predecessor, Bank Access 24, was established in Hungary by Brown and Henry in June 1994, with Brown receiving a 90 percent interest for a $9,000 investment and Henry a 10 percent stake for his $1,000 investment. The following month a joint venture agreement was reached with a number of private investors and venture capitalists to provide $14 million in seed money through debt and equity. The goal of Bank 24 was to create the first independent ATM network in Central and Eastern Europe, a region that was just beginning to offer electronic-payment services. It was not easy convincing bankers, let alone everyday people who often endured waiting in long lines at the local post office to pay their bills in cash, to embrace the idea of doing business at an ATM. According to Fortune Small Business, one banker expressed misgivings about Bank 24's proposed ATM network that communicated via satellite: "Helicopters hovering above us could intercept the financial information and defraud us," he decided. Henry had four bank contracts in hand when he came to Budapest only to have each of them back out of the deals.
Bank 24 achieved a breakthrough in November 1994 when Henry engineered an agreement with Visa International to process ATM transactions in Hungary. In June 1995 the company began installing ATMs throughout the country, the first located in a Budapest McDonald's. In that same month, Bank 24 also landed its first major bank customer in Hungary. A month later, American Express approved Bank 24 to process ATM transactions in the country, and in November 1995 the Euronet network began accepting Citibank cards. Gaining the trust of consumers was another matter, however. According to Fortune Small Business, "Most consumers had never owned a checkbook—never mind an ATM card. So Euronet hired locals who could explain their product and attract new business."
ENTERING POLAND: 1996
By the end of 1995 Bank 24 had installed 53 ATMs and generated sales of $62,000, resulting in a net loss of $228,000, but more importantly the company had secured a toehold in Hungary, which it expanded in 1996 while also entering neighboring Poland. In August 1995 a Polish corporate entity, Bankomat 24 Sp. z.o.o. was established, with Brown contributing $2,000 to become the sole interest holder. The first ATMs were installed in the country in January 1996, and after an agreement was reached with the Polish bank BRE, the units began processing American Express transactions. Visa transactions followed in May when an agreement was reached with another bank, WBK. In the meantime, Bank 24 continued to roll out ATMs in Hungary, and in June 1996 the network began accepting transactions from MasterCard's Europay system.
At the close of 1996, Bank Access, Bankomat, and other related entities were consolidated into Euronet Services Inc. in preparation for taking the company public. An initial public offering of stock was completed in March 1997, netting nearly $48 million, money that was earmarked for expanding the company's ATM network. On the heels of an agreement with Service Bank, Euronet entered the German market in May 1997 and by the end of the year Croatia was added as well. Euronet also opened a sales office in Romania. All told, Euronet added 527 ATMs in 1997, about half of which were installed in Poland, 40 percent in Hungary, 7 percent in Germany, and 3 percent in Croatia. Another important development was the signing of the first outsourcing contract, when Budapest Bank turned over the operation of its 45 ATMs to Euronet. The company's expanded business resulted in revenues increasing threefold, from $1.26 million to $5.3 million.
Euronet's Mission: To bring electronic financial payment convenience to millions of people who have not had it before.
Euronet raised another $81 million through an international bond offering in May 1998, providing additional funds to fuel growth. The company entered the Czech Republic market through an alliance with Bank Austria-Creditanstalt in February 1998 and a short time later began installing ATMs to process Visa transactions in the country. Euronet also expanded its ATM network into Western Europe in 1998, entering the United Kingdom and France. By July of that year Euronet topped the 1,000 mark in ATMs owned or operated. In December Euronet completed an important acquisition, paying $17.9 million for Arkansas Systems, Inc. (ARKSYS), the industry's leading developer of ATM network software for the IBM AS/400 platform, one of the most common computer systems used by banks. Because it already relied on ARKSYS software, Euronet was in effect bringing this key technology in-house and, as a result, establishing itself as a full-range, global supplier of electronic banking solutions.
ARKSYS also brought with it a one-third interest in EFT Network Services LLC, which owned and operated the Dash Network, a U.S. network of more than 100 ATMs owned by 24 banks. In August 1999 ARKSYS acquired the remaining shares of the company and Euronet soon took advantage of the new asset by forging a deal with Dillard's department stores, installing 334 ATMs in Dillard's locations in 29 states. While Dillard's owned the ATMs, Euronet operated them under the Dash Network label. By the close of 1999, the Dash Network totaled 459 ATMs in the United States.
In Europe, in the meantime, Euronet passed the 2,000 mark in ATMs owned or operated. Euronet also began selling ATM management software to a bank in Turkey, credit card support software to Cayman Bank in the Cayman Islands, and ATM switch and interface software to the Egyptian American Bank in Egypt. In addition, Euronet made progress in expanding what its ATMs had to offer beyond the mere dispensing of cash. The company began offering mobile telephone and utility bill payment capabilities, as well as the ability to sell vouchers for prepaid minutes on mobile telephones. Although the company continued to post losses, due to its commitment to investing money in further expansion, revenues increased to nearly $41.5 million in 1999, a major improvement over the $11.9 million generated the year before. The net loss also increased, from $28.4 million to $30.9 million.
NAME CHANGE: 2000
Euronet entered Greece in March 2000, opening an office in Athens to begin providing ATM management services on an outsourcing basis. A month later, the company landed a deal with Citibank-Greece to deploy and operate 250 ATMs. Euronet also began doing business on a third continent, Asia, when in March 2000 it began offering ATM transaction switching services to a consortium of three banks in Indonesia operating a network of 400 ATMs. To reflect the changing scope of its business, the company in October 2000 changed its name from Euronet Services to Euronet Worldwide.
Euronet continued to acquire new partners in 2001, such as Saks Incorporated, which chose to outsource the management of its ATMs to Dash, and the U.K. convenience store chain Alldays, which chose Euronet to provide ATMs as well as a new breed of value-added ATM services. Euronet also showed marked improvement in its balance sheet in 2001. Revenues increased to $64.2 million, and the company cut its net loss to $670,000.
The greatest opportunities for growth lay overseas, leading Euronet to sell the Dash network for $6.8 million in cash to Alltel Information Services in early 2002. In addition, Alltel signed a $5 million licensing deal to use Euronet's financial transaction software. With the cash it received, Euronet was well stocked to pursue further foreign growth. The Dash sale also reflected a shift in strategy, as Euronet looked to de-emphasize ATM ownership in favor of increasing its role as a transaction processor in its primary market. This change became even more apparent in January 2003 when Euronet sold its 745 ATMs in the United Kingdom to the European investment firm of Bridgepoint Capital Ltd. for $29.6 million. Considering the $9 million investment Euronet had made in building the network over the course of three years, the sale price represented an excellent return. Moreover, Euronet signed a five-year agreement to service the ATMs for the new owners as well as any new machines added to the network. In addition, the cash received from Bridgepoint was used to acquire e-pay Ltd., the United Kingdom's largest mobile phone top-up company.
- Company is founded to establish ATM network in Central and Eastern Europe.
- First ATMs are installed in Hungary.
- Euronet Services Inc. is taken public.
- Name is changed to Euronet Worldwide Inc.
- United Kingdom ATMs are sold.
- Prepaid Concepts, Inc. is acquired.
- Euronet China is established.
Euronet won further outsourcing contracts in its core markets in 2002 and continued to add new services. For example, in the United States Euronet introduced PaySpot, a prepaid recharge services program for purchasing wireless airtime and long distance calling plans, available through ATMs and POS devices. Perhaps the most significant development in 2002 was the August opening of an office and operations center in India, coupled with an outsourcing agreement with one of India's top private banks to operate 450 ATMs. Because of its large population, more than one billion, and a vast, expanding middle class, India became a major growth vehicle for Euronet. In May 2003 Euronet enhanced its position in the country by receiving permission from the Reserve Bank of India to operate Cashnet, the first nationwide shared ATM network, with its partner, Industrial Development Bank of India. Four major banks in India became the charter members of the new network, supported by Euronet's processing center.
Due to the sale of prepaid processing services, which accounted for $136 million, Euronet increased its revenues from $71 million in 2002 to $204.4 million in 2003. Moreover, after losing $5.7 million in 2002, the company realized a net profit of nearly $14.7 million in 2003. Business continued to thrive in 2004, driven by a continued expansion of prepaid services. The company completed several acquisitions in 2004 that resulted in Euronet emerging as the world's largest prepaid provider. In January 2004, the PaySpot subsidiary acquired Prepaid Concepts, Inc. (Precept), a U.S. provider of prepaid services through 4,500 POS terminals under the Telebuck$ brand name, especially strong in independent wireless stores and check cashing outlets. In May 2004, PaySpot acquired Houston-based Electronic Payment Solutions, an electronic POS company that mostly operated in southern states.
PaySpot expanded further with the purchase of Call Processing Inc., which sold prepaid wireless and other services to 30 U.S. convenience store chains. Finally, in November 2004, Euronet acquired the Movilcarga Division of Spanish telecommunications distribution company Grupo Meflut Corporation, a unit that sold electronic prepaid vouchers in Spain and had a distribution agreement with the company's largest mobile operator, Telefonica. Furthermore, in 2004, Euronet continued to land major ATM outsourcing contracts around the world. As a result, revenues soared to $381 million for the year and the company recorded net income of $18.5 million.
Euronet continued to build up its prepaid services business in 2005. It purchased a second Spanish company, TeleRecarga, and acquired a controlling interest in ATX Software Ltd., a U.K.-based prepaid company. Euronet also expanded into the money transfer and bill payment business in 2005 when it acquired TelecommUSA, a Charlotte, North Carolina company that provided electronic money transfer services between the United States and Latin America. It formed the core of a new unit, Euronet Payments and Remittance, Inc. Other 2005 acquisitions included Instreamline S.A., provider of credit card and point-of-service outsourcing in Greece and the Balkans, and Europlanet a.d., a Serbian company that managed ATMs and POS terminals.
After posting sales of $531.3 million in 2005, Euronet continued its strong growth in 2006. Early in the year it established a footprint in another market with enormous potential: China. The company joined forces with Ray Holdings to form Euronet China, in which Euronet owned a 75 percent stake. The new unit had an agreement in hand with China's fifth largest state-owned financial institution, Postal Savings and Remittance Bureau, to manage its ATM system on an outsourcing basis. With this new venture, added to a strong presence in India and a growing prepaid services business around the world, Euronet appeared well positioned to enjoy long-term prosperity.
Euronet USA Inc.; PaySpot, Inc.; Prepaid Concepts, Inc.
American Express Company; Barclays PLC; Electronic Data Systems Corporation.
Gertzen, Jason, "Euronet's ATMs in India Help Crank Out Profits," Kansas City Star, April 28, 2005.
Keeney, Jennifer, and Andrew Rafalaf, "Ready to Run," Fortune Small Business, May 2002, p. 32.
King, Suzanne, "Euronet Worldwide to Sell Its U.K. Network of ATMs," Kansas City Star, January 18, 2003.
——, "Kansas City, Mo.–Area Firm Sells ATM Network, Licenses Its Software," Kansas City Star, January 8, 2002.
"2001 Entrepreneur of the Year Award Winners," Business Journal Serving Metropolitan Kansas City, June 29, 2001, p. 2.