Fidelity National Information Services Inc. is pushing its debit processing network to banks and credit unions as they await the outcome of pending caps on interchange fees.
FIS has seen deals for its payments services slow because of uncertainty over the Federal Reserve Board's final rules for implementing the caps, which could result in the loss of up to $13 billion for the industry.
But the company's NYCE Payments Network, which routes PIN debit transactions, is gaining interest in light of the Durbin amendment, which requires card issuers to also include multiple unaffiliated processing networks on their cards.
"Clearly NYCE is at the forefront of our discussions," Gary Norcross, the Jacksonville, Fla., vendor's chief operating officer, said in an earnings conference call on Tuesday. "Especially with the Durbin amendment, people are looking for alternative networks and so we are having a tremendous amount of conversations around NYCE. We've also had a tremendous number of signings on the NYCE offering as well."
The Durbin amendment to the Dodd-Frank Act instructed the Fed to limit debit interchange rates. The Fed was to issue final rules last month but announced it needed more time to consider comments on its proposed cap.
There are also legislative efforts to delay the cap's implementation, but "at this point in time we can only assume that the way it was drafted is the way it is going to be implemented," Norcross said. "But we continue to work with our clients on this."
Jeff Yabuki, the chairman and chief executive of Fiserv Inc., an FIS rival, said last week in an interview that the company is making "good progress" on discussions with issuers about adding its ACCEL/Exchange PIN debit network, but said that "the market is really trying to figure out what is the Durbin path going to be."
For FIS, a pickup in interest could help stalled activity on the payments side of its business. While first-quarter revenue for its payments services, including processing, account management and card production, increased 4.5% from a year earlier when excluding paper check processing services and an accounting change it made, the uncertain regulatory environment has also caused a delay in closing payments deals, Norcross said.
Where FIS is seeing the most growth is for its financial solutions group, which provides core processing platforms, technology outsourcing, consulting and other services.
"There's still some regulatory overhang that people are concerned about, but generally things are getting better and in that environment this project management or IT consulting work certainly has every opportunity to grow" similar to growth in core processing, said Peter Heckmann, a senior research analyst at Avondale Partners LLC.
FIS said first-quarter revenue rose 12% from a year earlier, to $1.4 billion. Net income fell 1%, to $96.1 million. However, FIS' net earnings per diluted share rose to 31 cents from 26 cents.
FIS' earnings were weighed down by a $13 million loss during the quarter related to "unauthorized activities" involving one client and 22 prepaid card accounts on its Sunrise processing platform. FIS said that 7,170 prepaid accounts "may have been at risk" and that three individual cardholders' personal information "may have been disclosed." FIS' chief financial officer, Mike Hayford, said on the call that FIS does not expect to incur additional costs related to the incident. FIS' shares rose 1.82% Tuesday, to $33.54.
