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Ingenico/Debitek: A longtime manufacturer rises to become a key provider of total campus card systems

In 1985 Joe Capers was tinkering with vending machines, coin mechanisms, and card readers in his garage in Brentwood, Tennessee. He figured out how to make a card reader speak to a vending machine and immediately saw a need for his product. He found a client in the North Georgia Food Service Company, a group providing dining services to manufacturing companies. Now all he needed was investors. And if there is one thing that Debitek has always had it was an interesting history of investors. Mr. Capers called upon Stan and Steve Ledbetter, two brothers who provided the initial startup capital. The brothers brought in a team of Chattanooga, Tennessee-based investors and the company quickly moved from Brentwood to Chattanooga.

Among these early investors was a man named Summerfield Johnston. At that time, Mr. Johnston owned Johnston Coca-Cola, a bottling company in Chattanooga. His grandfather had actually been awarded the first Coca-Cola bottling franchise in 1899. The grandson’s company was later acquired by Coca-Cola Enterprises (CCE) and he served as CCE’s CEO. According to Forbes Magazine, his net worth was $880 million in 2000.

Mr. Johnston also brought the Coca-Cola Company in as an early Debitek investor. But when his company, Johnston Coca-Cola, was purchased by CCE he was forced to divest of his interest in Debitek. The interest was transferred to Gyrovend, a U.K.-based provider of cashless payment systems.

In 1998, IVI Checkmate (then the third largest supplier of credit/debit POS devices in North America) became interested in the unattended point-of-sale market as a compliment to its attended point-of-sale line. They acquired 100% of Debitek that year. Just two years later, IVI Checkmate was purchased by another point-of-sale manufacturer, Ingenico. Ingenico is the largest supplier of electronic transaction based POS systems in the world, both in number of terminals sold and revenue. Today, Debitek is a wholly owned subsidiary of Ingenico.

The company continues to operate out of its manufacturing facility in Chattanooga. The Ingenico U.S. headquarters is a short trip away in Atlanta, Georgia. Thirty employees work for the company bringing in an estimated $8-10 million in annual revenues. Ingenico’s worldwide revenues exceed $460 million, annually. Debitek estimates its customer base to be in excess of 1500 individual installations, in over 9 countries. Their client base is divided approximately in thirds into each of the three major target markets: Colleges and universities, Correctional facilities, and corporate locations (including corporate facilities, cruise lines, gaming locations, etc.).

Products
Debitek has long been known for vending readers. This was the company’s foundation but they quickly incorporated laundry, POS units, reprographics, and video game controllers. Until 1995, the company focused exclusively on magnetic stripe systems. They produced offline magnetic stripe readers under the Debitek name as well as online magnetic stripe readers branded for other companies including CBORD.

In 1995, a company called National CacheCard (NCC) contracted withDebitek to build unattended point of sale devices for its smart card stored value system. NCC installed its pioneering smart card system at Washington University in St. Louis using the Debitek hardware. NCC closed its doors a few years later but Debitek had seen a new future in smart card technology. Shortly after the initial NCC project, Debitek built smart card readers for another platform called SmartCity/SmartWorld marketed in the U.S. by now-defunct CyberMark (the technology continues to be marketed and supported worldwide by Fujitsu).

Where its partners have stumbled, Debitek has picked up the ball and developed its MoneyClip™ smart card system. The program is the only widely marketed and widely utilized smart card offering on U.S. campuses today. It offers a robust payment environment and easy-to-use, campus-controlled card issuance and transaction processing. More than a dozen campuses installed MoneyClip last year. Additionally, the MoneyClip system was fielded in many other locations in other markets. The company sees significant interest and continued success of this system for the coming year.

While Debitek is solidly focused on the smart card side of the industry, their magnetic stripe product line continues to be utilized in nearly all facets of their business. Sources within Debitek state that, while MoneyClip (and natural evolutions of it) is the vehicle that is destined to take them into the future, magnetic stripe is hard to beat for certain applications.


CR80News spoke with Debitek’s CEO, Larry Hauser, to gain insight into the company’s products and visions. The interview is presented below.

CR80News: What makes Debitek unique in the campus card market?

Mr. Hauser: Today we are the only company actively marketing a smart card offering on campus. We are in a whole new world in terms of smart cards however. Our MoneyClip cards are extremely affordable and the campus is in full control of all aspects of its system. We think we combine the best of all worlds with our MoneyClip offering, easy installation, maintenance, and operation without the need to run wire. In addition we continue to market the magnetic solution for those campuses that require an off-line stored value solution or would like to add functionality to their existing systems. We also have strategic partnerships to offer a full compliment of on-line and off-line technologies to configure a system that best suits the needs of the campuses today.

CR80News: What are your plans for the Debitek product line in 2003?

Mr. Hauser: We are continuing our process of developing and releasing our new generation of unattended point-of-sale controllers that will increase performance and reduce costs to our clients. We’re planning on rolling-out some new features in the very near future that we think are exciting. New Palm based applications, and Internet revaluing abilities are just two items that are on the near horizon. Additionally, we plan to improve the process of integration of our systems into a campus environment. Thereby, increasing the ease at which a campus may acquire and use our MoneyClip technology for their card based programs.

CR80News: You sell both directly via your own sales force and through a network of resellers. What does this mean to apotential client interested in your products?

Mr. Hauser: We have set up this sales structure in an effort to best serve our clients. Our direct sales force operates with two main objectives; to provide our direct clients with the best possible service and support that we can, and to support our network of professional resellers. Our resellers are extremely experienced in our industry, which isn’t as common as some might think. We feel that their level of expertise and quality is a distinct advantage for both our customers and ourselves. This enables us to provide the highest degree of ongoing customer support, service, and maintenance that is possible. Any interested party can contact our Debitek offices at any time to learn more about our products, services, and selling agents. We have people ready and willing to help you through the decision process.

CR80News: Several things happened in 2002 that must have had significant impacts on your strategic efforts. What did the CyberMark closure mean to Debitek?

Mr. Hauser: It was difficult for us as our history with both the CyberMark staff and the client base was long and positive. We had been involved since the company’s early days as the provider of the SmartCity unattended POS hardware, integration support, and project management. The company’s demise forced us to become a more pervasive partner for many of the clients and I am very proud of the effort our team put forth to help these customers through a difficult situation. Looking back, it forced us to become an even stronger company—and forced us to round out our product offerings.

CR80News: And the sale of Schlumberger’s campus card unit to ESD?

Mr. Hauser: We have seen very little impact from the deal, so far. For the past couple of years, Schlumberger has been fairly silent in the campus card market. Most of the news we were hearing wasn’t positive, in any event. As to how ESD plans to make up for all that lost ground; time will tell. . Our efforts and continued development of our products has allowed us to gain market share in the campus card market. We continue to actively market the magnetic stored value solution commonly referred to as junk stripe technology. This allows us to sell directly to some of the older Schlumberger/Danyl sites. As far as viewing them as a competitive force, we welcome the challenge, and are convinced that we will be more than able hold our own.

CR80News: What has the Ingenico acquisition meant for Debitek?

Mr. Hauser: Being part of Ingenico is extremely beneficial to us. Ingenico is the world’s largest supplier of POS systems, and they have achieved this by consistently being the best in the business. The best way to describe the company’s overall philosophy is ‘continuos innovation’. They were the first POS firm to really charge forward with the smart card concept. A little known fact is that every single POS terminal Ingenico manufactures is equipped with a smart card reader. They were the first and only terminal manufacture to achieve EMV Level 1 and 2 compliance with their Unicapt OS architecture. It is widely recognized that they are the unquestioned leaders of smart card technology in the attended POS industry.

We feel, strongly, that Debitek is the leader in the unattended POS industry. By combining the expertise of both sides, we have more experience and ability to capitalize on the future of smart cards than anyoneelse in the industry. Debitek isn’t the largest division of Ingenico, by any means, but we take great pride in the fact that our senior leadership is keenly aware and interested in our business. We are in regular contact with marketing and developmental resources within Ingenico, and we’re continually working toward a unified product base.

As our technologies grow closer, this will provide us with incredible opportunities to leverage our products and services around the world. After all, Ingenico has offices in over 70 countries. We now have a worldwide sales force for our products and some of the world’s best attended point-of-sale technology in our suite. That kind of presence is a huge force multiplier. Closer to home, full integration of Ingenico’s POS products into our MoneyClip line is affording our clients with a whole range of services that were previously unavailable. In short, we have been able to leverage the strengths of a global technology leader to help us build a superior product for our campus clients.

CR80News: In the past, I would have categorized Debitek as a component supplier rather than a full-blown campus card system provider. But that seems to have changed in the last 18 months. You seem to be “the” provider at more and more of your client sites. Is that a position you worked to be in or has it just happened?

Mr. Hauser: I think that a number of things came together to make it happen. Competitive influences, major product improvements, our acquisition by Ingenico, and several key partnerships we signed with companies such as Identicard. As you say, we can be an end-to-end system provider and we like our new position.

CR80News: So are you actively responding to RFPs as a full system?

Mr. Hauser: Every one that we can get our hands on! And even better than that we are winning them. Last year we won St. Joseph’s, numerous other clients, and we have a good number of others that look promising.

CR80News: One of your former CEOs used to joke with me that Debitek was the only company in the smart card market that was making a profit. Are you still profitable?

Mr. Hauser: Absolutely. Long ago, even before the IVI Checkmate acquisition, we decided that the best way to ‘call our own shots’ was to ‘pay our own bills’. Far too many companies completely lost sight of this basic business principal, and we all know what has happened to most of them. The main reasons for any business to exist are: to provide a quality product, sell it at a reasonable price, and produce a return for the company’s shareholders. We are very proud of the fact that we have, do, and will continue to meet these requirements. Profitability has always been a major focus. Our management and board have always recognized that to serve your clients you have to be around for the long haul. We keep our costs down and make a reasonable profit. We spend on development but we don’t chase windmills. We may not be flashy, but we will be there to support our clients.

CR80News: What’s on the horizon for Debitek?

Mr. Hauser: Great things. Ask me again next year!

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