Electronic payments products are boosting revenue for core providers Fiserv (FISV) and Jack Henry & Associates (JKHY).

Fiserv is trying to differentiate itself from competing core providers as a payments company while Jack Henry is benefitting from the lower penetration rates of its smaller bank clients, which continue to introduce online bill payment and mobile banking to customers, experts said.

Fiserv and Jack Henry "have a little different [customer] mix, but for both payments [is] the fastest-growing area on an organic basis," says Peter J. Heckmann, senior research analyst for Avondale Partners.

Fiserv tends to deal with mid-tier and large banks, while Jack Henry specializes in smaller community banks and credit unions.

On Tuesday, Fiserv, of Brookfield, Wis., reported earnings for its first quarter, and Jack Henry, of Monett, Mo., did so for its fiscal third quarter. Both ended March 31.

"Now that we're seeing mobile take off, we're seeing … bill-pay users begin to use mobile to supplement their online behavior, but more importantly as mobile is growing in its reach, we see new consumers coming on," said Jeffery Yabuki, president and chief executive of Fiserv, on an earnings conference call Tuesday.

For its part, Jack Henry's president, Tony Wormington, said, "Our electronic payments transaction volumes continued to experience very solid growth," with bill-payment transaction volumes increasing nearly 14% during the quarter.

Both companies said they are benefitting from a stabilizing economy where bank IT spending is on the rise again.

A good indication of that is the 18% growth in backlog business that Jack Henry reported, worth nearly $400 million and the biggest growth in backlog the company has had since 2003, says John Kraft, senior research analyst for D.A. Davidson & Co.

As for Fiserv, it "certainly is a more innovative company than they have been and they, probably more than their peers, are becoming a leader in payments, and that is a smart move," Kraft says.

Specifically, Fiserv says it expects a lot of momentum from combing ZashPay and Popmoney, its person-to-person payments products. Fiserv acquired the Popmoney product as part of its September purchase of the rival company CashEdge. Fiserv developed ZashPay in-house.

The combined product will be marketed by mid-year as Popmoney. It will allow real-time payments using the Accel/Exchange PIN debit network later in the year, Yabuki said. The combined network would have 1,500 financial institutions and more than 35 million online and mobile banking consumer relationships, Fiserv said.

Fiserv has about 55 million online banking customers today, but just 3.7 million mobile banking users, Yabuki said.

Though mobile banking growth should boost payments, Fiserv's payment growth of 4% should be more than it is, given that its CheckFree platform, which handles electronic payments, is among the best in the industry, Kraft says.

"It is surprising to me that they would not have at least industry-leading growth," Kraft says.

The lag might be because Fiserv's customers tend to be larger banks where online banking and bill-payment penetration is already higher, he says. It might also be due to the removal of former Wachovia accounts.

For its fiscal third quarter, which ended March 31, Jack Henry reported revenue increased about 7%, to $256.3 million, compared to $240.2 million in the same quarter a year earlier. Net income increased 11%, to $36.7 million.

Support and service revenue, which encompasses electronic payment services, grew 8% in the third quarter to $226 million. Electronic payments revenue increased 11% in the quarter. Support and services represents 88% of total revenue.

Fiserv reported revenue for the quarter rose 5.7 %, to $1.1 billion, compared to the same quarter a year earlier. Its net income rose 18%, to $132 million.

Fiserv said it signed 78 electronic bill payment clients, 59 debit clients and 93 person-to-person clients in the quarter.

Fiserv reported adjusted payment revenue of $545 million.

"There is still room in the electronic payments space for growth and these companies are doing okay [with payments]," says Larry Berlin, a vice president and research analyst for First Analysis.