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Total System Services said Tuesday that its revenue for the fourth quarter rose 7.3%, to $472.2 million.
January 24 -
The prepaid card marketer Green Dot said Tuesday that it is purchased some assets of eCommLink, allowing it to move its processing in-house.
January 24
Increased consumer spending on credit cards in North America and Europe was enough to have executives from Total System Services Inc. singing the praises of solid fourth-quarter earnings and, for the time being, soft-pedaling the potential future loss of Green Dot Corp.'s processing business.
Columbus, Ga.-based TSYS on Jan. 24
But the payments processor learned earlier in the day that Monrovia, Calif.-based Green Dot, which has a two-year contract with TSYS,
TSYS executives appear prepared to take a "wait-and-see" approach regarding what will happen with TSYS revenue and the Green Dot contract.
"The truth is, we don't know, and I hate to speak for Green Dot," Phil Tomlinson, TSYS' chairman and chief executive, said during a Jan. 24 earnings conference call. "Green Dot has signed a two-year extension with us, and over the next couple of years they're going to try to figure out that process."
At this early stage of the Green Dot conversion, TSYS has no way of knowing if the revenue flow will "dribble out" or whether it will all occur at the moment the contract ends, Tomlinson said.
TSYS estimates processing for Green Dot produces 1% to 2% of the company's annual revenue.
If consumer spending with credit cards continues to increase and TSYS continues to expand in its international markets, the company may be able to absorb any losses from Green Dot leaving.
"It appears to us that consumer spending on credit cards increased as the year progressed, and delinquencies continue to fall," Tomlinson said. "Electronic transactions in general continue to show growth, and we're obviously excited about that."
TSYS should easily be able to absorb the loss of Green Dot's business because of the fairly small revenue stream it provided, says Gil Luria, an analyst with Los Angeles-based Wedbush Securities.
"It was a unique relationship with TSYS helping Green Dot get off the ground, but as Green Dot grew so fast, it got to the point where it could handle its own processing," he says.
And Green Dot leaving TSYS "is not an indication of others potentially doing the same," Luria says.
With the global economy still trying to steady itself in light of the European debt crisis, Tomlinson said he was "pleasantly surprised" at the strength of the European consumer during the quarter.
"Europe was virtually the same as the United States as far as transaction growth," he said.
For North America, TSYS revenue increased 5.1%, to $246 million from $234 million. Transaction volume for the quarter rose 13.3%, to 1.96 billion from 1.73 billion, while accounts on file reported for all of 2011 increased 18.6%, to 351 million from 296 million.
International Services generated a 15.5% increase in revenue, to $106.5 million from $92.2 million. Transaction volume for the quarter increased 11.7%, to 399.5 million from 357.6 million, while accounts on file rose 14%, to 52.8 million from 46.3 million.
The transaction increase for the quarter in North America provided TSYS with "the highest number of transactions since the 2007 peak," Tomlinson said.
Converting 14 new clients bolstered international business after TSYS entered the Swiss, Italian and Brazilian markets, Tomlinson added.
"We continue to focus more resources to support the technology and services in those markets, which is a positive for our current, and certainly prospective, clients," he said.
Merchant Services reported a 0.8% decrease in point-of-sale volume, to 1.22 billion transactions from 1.23 billion.
Operating income increased in the merchant-services segment as the company continued to focus on building its direct merchant-acquiring business, Tomlinson said.
