Tyro (ASX:TYR) share price shoots higher on Bendigo and Adelaide Bank (ASX: BEN) deal

The Tyro Payments Ltd (ASX: TYR) share price is on course to end the week with a bang.

In morning trade the payments company’s shares are up 5% to $4.12.

Why is the Tyro share price charging higher?

Investors have been buying the company’s shares after it announced a partnership with Australia’s fifth biggest retail bank, Bendigo and Adelaide Bank Ltd (ASX: BEN).

According to the release, the two companies have agreed to a 10-year merchant acquiring alliance which will see Tyro deliver its leading card-present and card-not-present payments solutions to Bendigo Bank’s merchant acquiring customers.

It expects this to provide greater functionality, more payment options, enhanced reliability, and seamless cloud integration to more than 300 point of sale systems.

Bendigo Bank will continue to provide all other banking services to these customers.

What is expected from the deal?

Tyro expects to deploy more than 26,000 Tyro terminals through the alliance in 2021, increasing its terminal fleet to just above 89,000 terminals.

This will come with a one-off project resourcing cost of $3.8 million, plus one-off other project costs (including terminals) of $16.1 million. In addition to this, ongoing additional personnel costs to support the alliance are expected to be $6.7 million per annum.

But these investments appear more than worthwhile. Management expects Bendigo Bank’s business customers to generate approximately $5 billion in transaction value in FY 2022.

Tyro’s gross profit share (after gross profit share to Bendigo Bank and before operating costs) from the Bendigo Bank cohort will be approximately $19 million that year.

The company’s CEO and Managing Director, Robbie Cooke, was very excited by the alliance with Bendigo Bank.

He commented: “The alliance with Bendigo Bank is an exciting combination of Australia’s fifth biggest retail bank with the fifth largest merchant acquiring bank. Partnering with Bendigo Bank will see Tyro’s leading proprietary payments platform made available to Bendigo Bank’s current and future business customers – giving them access to more features, more payment options and seamless integrations to more than 300 point of sale systems.”

“Tyro will deploy its payments expertise to Bendigo Bank’s business customers, with Bendigo Bank continuing to provide all other banking services to these customers under a long-term, collaborative and strategic alliance. This is a great example of two customer focused Australian organisations coming together to provide better solutions for Australian businesses through a partnering of capability and expertise,” he added.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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