Global Payments Inc. hopes to begin processing payment card transactions in China's currency this summer, after getting approvals from China UnionPay and the People's Bank of China.
The Atlanta processor said last week that it plans to initially acquire transactions made in Beijing; other Chinese cities are expected to follow. No other Western processor handles renminbi transactions in mainland China, Paul R. Garcia, Global Payments' chairman and chief executive, told analysts during a conference call to discuss its third-quarter results.
"We've been working on this for years," Garcia said. "We're going to be the first Western company to do this. But we still have some heavy lifting to do."
Global Payments also joined the Beijing Bank Card Market Coordination Committee after being encouraged to do so by China UnionPay and the People's Bank, Garcia said. Global Payments must get the approval of similar committees in other Chinese cities, he said, and Shanghai will probably be next.
Garcia also said that, having gotten Beijing's approval, OKs from other Chinese cities could "happen in pretty short order."
The potential is "massive," he said. China UnionPay, which operates China's only payment card network, estimates there are 2 billion debit cards in the country, he said.
Global Payments already works with China UnionPay in Taiwan in a deal that lets mainland Chinese consumers pay for products in Taiwan with their China UnionPay cards at merchants that process through Global Payments.
Currently, Global Payments' China operation serves only international merchants, Garcia said.
Global Payments' China operation potentially is "very substantial," said analyst Robert Dodd of Regions Financial Corp.'s Morgan Keegan & Co. "But it will take a while to play out."
Global Payments' China acquiring business could generate $5 million to $15 million in incremental revenue, said Christopher Shutler, an analyst at William Blair & Co. LLC in a research note issued Thursday.
"The opportunity could be larger when and if Global is able to do its own processing in China, which sounds like a good possibility within the next year or two," he said, "and if it is able to form a referral relationship with a bank."
The processor also said last week that it had hired Jeffrey S. Sloan, a former Goldman Sachs & Co. partner, to become president on June 1.
Sloan's expertise will be useful in planning Global Payments' growth strategy, including acquisitions, Garcia said.
The hiring prompted speculation that Global Payments would increase its acquisition activity.
"This management hire makes it increasingly likely that Global will become more active in the [mergers and acquisitions] front over the balance of … 2010 and into 2011," Shutler said.
Sloan's real benefit may be in who he knows, said Dodd.
"Anyone can overpay for an acquisition," he said. "If you don't want to overpay, you have to have better contacts to find acquisitions without getting into a bidding war."
For its third fiscal quarter, ended Feb. 28, Global Payments' net income improved to $48.5 million, from a $106.8 million loss the year earlier. Revenue was $398.5 million, up 10.8%.
