First Data Corp.'s consolidation of its merchant and card issuer processing units could help the payments company trim costs and better seize opportunities stemming from pending debit card regulation, analysts said Thursday.
The Atlanta company said it will combine the operations within its North American and international businesses, putting two executives in charge of leading the geographic segments.
"We have considerable assets in this company that benefit issuers, acquirers, card networks [and] merchants," Jon Judge, First Data's chief executive, said in an interview on Thursday. "It just makes sense that we have one sales force taking those to market and that our clients potentially have one throat to choke from a coverage standpoint."
First Data has marketed acquiring and processing services for merchants under its retail and alliance services division and card issuing services under its financial services division.
The Federal Reserve Board last month proposed capping the fees that card issuers collect from merchants at 7 cents to 12 cents per transaction, compared with the current average of 44 cents. The proposal also includes provisions that would open up an ability for merchants to route transactions over different payments networks.
First Data owns Star, one of several PIN debit networks that compete with Visa Inc.'s Interlink PIN debit system and are expected to gain business because of the proposal.
"I think it's going to drive even more processors and even card networks to streamline their operations, consolidate their processing assets, technology assets, and really operate as lean and mean as possible," Gwenn Bezard, a research director at Aite Group LLC in Boston, said of the interchange proposal.
As part of the combination, First Data promoted Ed Labry to president of its North American operations, which contribute more than 85% of its revenue. Labry since 2006 has been president of its retail and alliance services division.
Chief Marketing Officer John Elkins is to run operations in the Asia-Pacific, Europe, Middle East, Africa and Latin America regions on an interim basis while the company seeks a new executive.
Kevin Schultz, who has been in charge of the financial services division since joining the company in 2009, is to retire Jan. 31.
First Data, which was taken private in a leveraged buyout by Kohlberg Kravis Roberts & Co. in 2007, has been streamlining its operations, which have grown through acquisitions in recent years.
"With all the acquisitions they've done, with all the joint ventures they've done, they've got a portfolio of redundant delivery systems," said Eric Grover, a principal in the payments consulting firm Intrepid Ventures.
In that context, bringing together domestic and international operations makes sense.
"What they're doing is trying to rationalize operations and take out cost," Grover said. "If you look at the number of accounts they have on file and you look at the number of payments they process, it's more than any other processor on the planet."
But "they have not enjoyed all the benefits of their scale" because of their varied platforms, the consultant said.
