Tyro (ASX:TYR) - CEO, Robbie Cooke
CEO, Robbie Cooke
Source: Startup Daily
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  • Business banking giant Tyro (TYR) has teamed up with Bendigo Bank (BEN) in a new merchant acquiring alliance
  • Through the partnership, Bendigo’s business customers will gain access to Tyro’s “best-in-class” payment solutions and merchant acquiring capabilities
  • Merchant acquirers handle transactions on behalf of businesses, authorising transactions and taking a portion of the proceeds as payment
  • Under the agreement, Bendigo will send all current and existing merchant acquirer customers Tyro’s way, in a move which could bring the company $19 million in gross profit in FY22
  • The alliance should set Tyro back nearly $29 million upfront, with a further $6.7 million in ongoing personnel costs every year
  • Ultimately, the new contract covers an initial ten-year term but can be extended for extra five-year periods if the partnership proves successful
  • Today’s Tyro shares jumped 5.74 per cent, trading for $4.15 in midday trade
  • Shares in Bendigo also rose, trading up 3.21 per cent for $6.91

Business banking giant Tyro (TYR) has teamed up with Bendigo Bank (BEN) in a new merchant acquiring alliance.

The major agreement, which could see Tyro work with Australia’s fifth-largest retail bank for the next 15 years, was announced to the ASX today.

Through the partnership, Bendigo’s business customers will gain access to Tyro’s “best-in-class” payment solutions and merchant acquiring capabilities.

What is merchant acquiring?

Tyro specialises in providing payment platforms for businesses, a service which has cemented its position as Australia’s fifth-largest retail bank.

Essentially, merchant acquirers act as a go-between for businesses and card associations. They process payments on behalf of merchants, ensuring the funds from consumer transactions reach their accounts — while taking a small cut for themselves, usually around two per cent of the sale proceeds.

Generally, acquirers land in the middle of transactions: a consumer initiates a purchase, sending transaction information via the merchant to an acquirer. Then, the acquirer verifies and authorises the transaction, passing the info to a card association like Mastercard or Visa, which then gets in touch with the bank which issued the card to complete the transaction.

The transaction cycle.
Source: Capgemini

As a result, Bendigo’s business customers will now work with Tyro to make sure payments are verified and reach their bank accounts.

Partnership details

Under the alliance, Bendigo will sell its merchant acquirer assets to Tyro, effectively transitioning its entire merchant card transaction branch to the business. At this stage, that’s slated to take place in the first half of 2021.

That also means Bendigo will transfer all existing and merchant acquirer customers to Tyro — a move which could boost TYR’s gross profit by $19 million in FY22.

In exchange, Tyro will pay $9 million upfront to buy the Bendigo portfolio. The alliance should also incur around $19.9 million in one-off costs, along with an ongoing $6.7 million yearly stipend to cover personnel expenses.

To support Bendigo customers, Tyro will deploy 26,000 extra merchant terminals, increasing the acquirer’s total units to 89,000.

Ultimately, the new contract covers an initial ten-year term but can be extended for extra five-year periods if the partnership proves successful.

Today’s news was welcomed by Tyro investors: the billion dollar stock added 5.74 per cent to its share price on Friday, with shares trading for $4.15 in midday trade. Shares in Bendigo also rose, trading up 3.21 per cent for $6.91 at 1:57 pm AEDT.

TYR by the numbers
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