The Green Sheet Online Edition
May 12, 2008 • Issue 08:05:01
Revenues up in downturn
The payments industry has taken a beating lately in the media. Today's ISOs and merchant level salespeople (MLSs) must deal with regulatory legislation, security breaches, fraud, myriad new products and services, unprecedented scrutiny - the list seems endless.
Regardless of recent media attention, the payments industry is healthy. Net earnings for fiscal year 2007 and the first quarter of 2008 were up overall despite higher credit card costs, market fluctuations and a deepening economic downturn.
CO-OP Financial Services, which operates the largest automated teller network serving credit unions exclusively, saw a 10 percent increase in cash distribution to its shareholders totaling $24.5 million for 2007. "Our electronic funds transfer services, strategic partnerships and growing membership play a significant role in allowing us to achieve astounding transaction figures," said Stan Hollen, CO-OP Financial's President and Chief Executive Officer.
Alpha Card Services Inc., a Pennsylvania-based processor and merchant acquirer, adds about 4,000 merchants a year and saw revenues approaching $2 million for the first quarter of 2008, nearly half of the amount of revenue the company earned for all of 2007.
"From 2004 to 2006 we had 1,540 percent growth," said Lazaros Kalemis, Alpha's CEO. Kalemis is confident about overall industry growth, but he sees a sound infrastructure as a major key to success. "I think it depends on how somebody is set up," Kalemis said. "We're a conservative company but we're growing at a good clip, and our growth is high due to our attrition rate which, at 4.5 percent, is about 12 percent below the industry average."
First quarter 2008 numbers for some of the larger acquirers and card brands include:
- Visa Inc., which made the biggest splash in the financial services pool with its record-breaking IPO in March 2008, reported an adjusted net income of $401 million. Payment volume grew 19 percent over 2007 to $681 billion.
- MasterCard Worldwide had a net income of $398 million, with a net revenue growth of 29.2 percent to $1.2 billion.
- Fiserv Inc., a Wisconsin-based processor, had a net income of $439.3 million and overall revenues of $3.92 billion in fiscal 2007, up 10 percent from 2006.
- Tier Technologies Inc., which specializes in electronic processing solutions for state, county and municipal government agencies, posted a 12 percent increase in revenues with $29.2 million.
- Consolidated revenue for First Data Corp., the industry's largest merchant acquirer, was up 11 percent to $2.1 billion in the fourth quarter of 2007. "Our performance reflects continued execution in a challenging economic environment," said Michael Capellas, First Data's Chairman and CEO. "In the fourth quarter, First Data saw accelerated momentum in the areas of new product innovation, sales and operational efficiency."
- Fifth Third Bancorp, one of the nation's top five payments processors, showed an 11 percent net income increase and a payments processing income growth of 15 percent.
- Discover Financial Services, which recently acquired Diner's Club International Ltd., had a $239 million net income. Third-party payment debit and credit volume was $26.3 billion, 24 percent above last year.
As always, the payments industry is going through a metamorphosis; new markets, technologies and revenue growth opportunities for ISOs and MLSs continue to evolve.
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