CoreCard, a US-based credit card processing and management solutions provider, is weighing a sale amid growing industry shifts, with a global payments infrastructure provider emerging as a frontrunner in the race, sources say.

According to the sources, the company is currently in talks with Euronet Worldwide, a global provider of electronic payment and transaction processing solutions.

“There has been strong internal chatter that CoreCard is in discussions with multiple parties regarding a potential acquisition. Euronet has been mentioned as a possible suitor,” a person aware of the matter told The Head and Tale.

The deal hasn’t been finalized yet, according to an indirect source.

While Euronet is the frontrunner, Morocco-based digital payments company HPS has also emerged as a contender, according to another source. 

The deal size could be between $150 million and $180 million.

“Both CoreCard and Euronet are US-based publicly listed companies. However, Euronet's primary focus has been on debit card processing and ATM offerings, while CoreCard specializes in credit card solutions, making it a potentially strategic fit for Euronet,” the person added.

HPS, on the other hand, is looking to enter the US market, making CoreCard an attractive target. “However, there could be regulatory hurdles,” the source noted.

Questions sent to CoreCard, Euronet, and HPS earlier this week did not elicit a response by the time of publishing.

India business

CoreCard established its India operations in 2006. The company currently employs around 900-1,000 people in India, with nearly 600–700 based in Bhopal, which serves as a hub for software development, testing, and product lifecycle management for its global operations. Additionally, close to 200 employees work out of Mumbai.

During FY24, CoreCard’s India entity reported Rs 179 crore in operating revenues, as compared to Rs 160 crore (in FY23) and Rs 101 crore (in FY22). The entity’s profit for FY24 stood at Rs 11.7 crore against Rs 10.9 crore in FY23, according to the company’s filings with Registrar of Companies.

It was only after the COVID-19 pandemic in 2020 that CoreCard began exploring the Indian market for its issuing business. “Earlier, they never really focused on India as a market,” a person familiar with the matter said.

This “shift was largely driven by the collapse of Wirecard in 2020,” the person added. CoreCard acquired some of Wirecard’s assets for around $1 million.

“Although the issuing business set up started in 2022, the company isn’t truly ready yet. Only last month, it received NPCI certification for RuPay credit card issuance. There is a tie-up with Visa. However, several processes remain incomplete,” he added. 

In India, CoreCard is currently in discussions with a few banks regarding the issuing business, but no agreements have been finalized yet, another source said.

“The India story could just be part of CoreCard’s efforts to boost valuation,” the person believed.

Previously, the credit card processing domain in India was dominated by just two major players – Fiserv and TSys. However, the market has since become more competitive, with both traditional and new-age companies such as M2P and Intellect Design Arena entering the space.

“Euronet has been steadily growing in India, and this acquisition could give them a much stronger foothold in the credit side of the business,” said a person tracking the payments sector.

“Employees at the Bhopal office were informally informed about a possible acquisition. At least two months ago, rumors were so strong that the global management sent an email acknowledging ongoing talks, but clarifying that nothing was definite,” an employee shared.

CoreCard’s shrinking business

While CoreCard is trying to strengthen its India play, its core business in the US faces mounting challenges. One of its biggest challenges is its reliance on a limited number of major clients, particularly Goldman Sachs. The Apple Card partnership with Goldman Sachs accounts for a significant portion of CoreCard’s revenue. Additionally, CoreCard powered General Motors’ credit card business through Goldman Sachs.

According to sources, approximately 60–70% of CoreCard’s business is linked to the Goldman Sachs-Apple partnership.

However, Goldman Sachs is looking to exit the retail banking space, which could jeopardize its partnership with Apple Card and, consequently, its relationship with CoreCard. Meanwhile, Goldman Sachs is selling General Motors’ (GM) credit card portfolio to Barclays.

“CoreCard is still processing GM’s business, but its involvement has significantly reduced. The transition is not yet complete,” one source added.

In 2022, Goldman Sachs had considered acquiring CoreCard but did not proceed “due to its classification under the financial institution category, which posed a potential conflict of interest for other clients in their portfolio. Subsequently, Goldman made the strategic decision to exit the retail banking business and is currently in the process of executing this exit,” the source said. 

What’s next?

Over the past couple of months, CoreCard’s trading activity has revealed that key members of its management, including its founder, have been buying company shares.

This could indicate confidence in the company’s future or serve as a strategic move to increase their stake ahead of a potential sale.

During its Q3 2024 earnings call, CoreCard Chairman and CEO J. Leland Strange acknowledged that the company frequently receives inquiries from private equity firms and investment bankers regarding potential acquisitions.

“I don’t expect to vote or support any acquisition offer that values the company at less than $200 million. I fully support the company buying back its shares with excess cash, given the current stock price,” Strange stated.

“The company is well-positioned to continue growing its non-Goldman business at a 30% compounded annualized rate over the next few years with decreasing earnings the next few years. Our expenses are increasing slowly, we are not as scaled as a processor, but margins will start going up. All internal planning is focused on achieving this while balancing the interests of our shareholders, employees, and customers, and remaining open to a potential transaction,” he added.