First Data Sees Green In SMBs and Clover

In its second quarter results, payments processing firm First Data offered up a portrait of growth globally that may have mollified critics of the firm upon its public debut late last year.

The shares were up in lockstep with a sanguine outlook by management, with a 6 percent gain intraday that backed off slightly to 5 percent to close the day at $13.02.

Investors were cheered by a beat on the bottom line and by some deleveraging that found debt declining a bit, lessening a load that had been closely watched by observers.

But for those with gimlet eyes on the payments trends underlying the headlines, there also was evidence of positive momentum. The firm’s Global Financial Solutions, predicated on retail and credit processing and other services, was up 12 percent year over year, with twin engines of organic growth and new initiatives, which CEO Frank Bisignano said on the conference call with analysts came, in part, from merchants in North America, stirred by better salesperson productivity, total growth in accounts on file (up 14 percent) and EMV card personalization.

Signs of reversals from previous declines also were seen in the Global Business Solutions and Network & Security Solutions segments, which were respectively flat and up 3 percent. The standout, geographically speaking, was Latin America, which, ramping up new initiatives, saw revenues up 44 percent, with Argentina and Brazil seeing especially strong results.

All told, consolidated net income was $0.35 a share, with a penny beat versus the consensus surveyed by Bloomberg. The top line was up nearly 2 percent year over year to $2.93 billion and very slightly below The Street at $2.95 billion. But segment revenue, which strips away some items, such as fees tied to postage and debit fees that are reimbursed — in other words, revenues derived from operations — were at $1.8 billion, roughly in line with what analysts forecasted, representing growth of 4 percent year over year.

Drilling down a bit, the firm’s CEO called out the direct SMB business, with “solid progress on turning the business around … On new sign-ups, we’re seeing tangible progress already.” The result so far this year has been high single-digit growth in newly activated merchants. New bank partnerships in place are in various stages of ramp-up, including BBVA, Silicon Valley Bank, First Tennessee and Zions Bank.

Collectively, said Bisignano, the footprint of those banks extends across 1,500 branches in North America. Clover and Insightics, according to management, have been instrumental in bringing new merchants on board. The end result should be continued improvement in the merchant acquiring business through the second half of this year.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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