IMGCAP(1)]
This article appears in the January 15, 2008, edition of ISO&Agent Weekly.
ISOs in the United States and international markets bolstered transaction processor Global Payments Inc.'s revenue for the fiscal second quarter ended Nov. 30, the company announced last week, despite a U.S. recession and global economic uncertainty.
Global Payments reported net income of $48.9 million for the quarter, up 27.7% from $38.3 million during the same period in 2007. Second-quarter revenue was $401.1 million, up 29.9% from $308.8 million.
Though Global Payments is not immune to such changes, a number of factors are helping the company, Paul R. Garcia, Global Payments chairman and CEO, told analysts during conference call last week. Specifically, consumers overall are making more card-based payments globally, "and we will continue to benefit from that shift."
Global Payments also attributed its net income and revenue increases to its acquisition last year of 51% of HSBC Merchant Services, a joint venture it operates with HSBC Group in the United Kingdom, and to a 16% growth in U.S. credit and debit card transaction volume versus the same period a year earlier. Global Payments typically does not report transaction volume but said in the calendar year 2007 it processed 3.8 billion transactions worldwide.
The company's transaction growth is "organic," James G. Kelly, Global president and chief operating officer, told analysts. Organic "is not just same-store sales, which many merchants are flat or down and some are down pretty substantially, but it's by segment."
Within the United States, Global Payments continues to see growth from its ISOs. While ISOs are not seeing the same transaction growth they did before the economy went sour, "they've still had a very strong impact on the business that ... helps propel pretty impressive numbers for this time of year, for this [economic] situation," said Kelly.
Merchant-Services Growth
ISOs drove "most of the growth" of Global Payments' merchant services' segment, said David Mangum, Global Payments executive vice president and chief financial officer.
North America merchant-services revenue, including Canada and the United States, totaled $270.8 million, an 11.9% increase from $241.9 million for the second quarter of the previous fiscal year. International merchant-services revenue was $95.1 million, up 191.7% from $32.6 million. Global Payments' funds-transfer business also had revenue growth, increasing by 2.6%, to $35.2 million from $34.3 million.
Pricing in the merchant-acquiring business has remained consistent in the tough economic environment, said Garcia. "The rates we're offering our ISOs are fairly constant," and ISOs' pricing remains "fairly constant," he said. "The pressures we're seeing really are a more challenging environment in terms of volumes being produced by the merchant base," said Garcia.
International Performance
International markets are performing well for the company, and Global Payments continues to look for international acquisitions, Garcia said. The company expects its $120 million deal to buy United Card Service, a Russian Federation merchant acquirer, to close by June 30.
Garcia sees a lot potential in China, India and Russia, he told analysts. "While these are small markets to us today, we are laying the foundation for solid businesses, which will drive long-term growth," he said. "We believe we are in an excellent position to benefit from payment trends around the world."
Fraudsters Committing Data-In-Transit Theft
Much of the data fraud committed this year is data-in-transit theft instead of data-stored theft because merchants no longer are allowed to store magnetic-stripe data under the Payment Application Data Security Standard, according to Trustwave.
Data-in-transit theft occurs when consumer card information moves among merchants' servers, and fraudsters tap into a merchant's network and take the information as it moves if it is unencrypted, says Colin Sheppard, Trustwave forensics practice manager. Data-stored theft occurs when fraudsters steal card information written to a merchant's hard drive after a transaction, he says.
The Payments Card Industry Security Standards Council manages the Payment Application Data Security Standard. A recent Trustwave report found that the majority of U.S. and Canadian merchants do not store card-security codes.
