First Data Plots Merchant Strategy Amid Tepid Financial Results

First Data is having a busy week. On Sunday it announced a new CEO, who started the job Monday. And today, it had a tough earnings call where the company admitted it could do more to leverage its considerable data to expand the services it sells to clients.

As part of its strategy, the payments processing company plans sell a broader range of technology to allow small- to medium-sized businesses to make use of their payments data, said Ray Winborne, First Data's chief financial officer, during the company's earnings call on April 30.

First Data's new initiatives will include software that allows businesses to integrate payments data with other transaction and back-end systems to inform marketing, sales and customer service. "This will allow small businesses to create loyalty and customizable campaigns with a smaller amount of spending and less effort to build the program," Winborne said.

First Data will also develop new point of sale technology in the coming months, Winborne said, though he did not offer details on these new initiatives. First Data has been tweaking its technology to make it easier for merchants and financial institutions to upgrade payments programs to respond to new market innovation, security or regulatory changes. 

"We have developed new tech that allows for merchant engagement in a more integrated fashion, to give businesses more actionable intelligence," Winborne said.

First Data's moves come as its earnings struggled compared to 2012. The company attributed this trend partly to tech investment, as well as larger economic uncertainty that is inhibiting consumer spending—and thus payments volume. "We will see variability in spending levels as consumer confidence is impacted by the payroll tax hike, rising gas prices or general economic uncertainty," Winborne said.

For the first quarter, First Data's consolidated revenue was $2.6 billion, up 1% from the prior year, and adjusted revenue was $1.6 billion, which was flat compared to the prior year. First quarter net loss was $337 million, compared to a loss of $153 million in 2012. In the financial services segment, first quarter revenue was $331 million, down $15 million or 4%, compared to $346 million during the same quarter in 2012. Merchant services revenue was up 1% and product revenue was up 4% as growth in prepaid cards was offset by a decline in check processing.

"This quarter's results should not be considered the new normal — we are investing in new tech," said Winborne. "The changes we are making today are transformative and will position us for top-line growth in the future."

First Data's new CEO, Frank Bisignano, spoke briefly during the earnings call, and his remarks suggested the company will look for more opportunities to tap its own data and technology.

"There is an opportunity to deepen those relationships with our clients," said Bisignano during the earnings call. "Our customers have spoken with me about adding more business."

Other large payment companies are also planning to make better use of payments data. PayPal, for example, is making actionable payments data a central part of its cross-channel strategy.  Heartland Payment Systems has partnered with LevelUp to broaden merchant services and tie marketing to payments data.  And TSYS is offering mobile acceptance as a way to reach smaller merchants.