Income growth may be stagnant and consumer confidence weak, but spending has been “surprisingly resilient” and has helped fuel modest revenue increases for First Data Corp., executives told industry analysts Nov. 2 while discussing third-quarter earnings.
Gains in debit-network fees, revenue growth in Latin America and favorable foreign currency exchange rates also helped the Atlanta-based processor to generate a 3.8% increase in third-quarter consolidated revenue, to $2.7 billion from $2.6 billion a year earlier.
First Data reported a net loss of $54 million, an improvement from the $431 million loss during the same period last year.
Revenue from debit-network fees rose 7.1%, to $919 million from $858 million.
Charged by debit networks for acquired PIN-based transactions, the debit-network fees are reported as revenue and an equal expense on the company profit-and-loss statements, Ray Winborne, First Data chief financial officer, said during the conference call.
“The vast majority of debit-network fees relate to interchange, and, therefore, the reduction in rates mandated under [the Durbin amendment] will cause related revenue and expense to decline substantially beginning in the fourth quarter,” he said.
Merchant-related services revenue rose 1%, to $925 million from $916 million, while card services revenue increased by 2.1%, to $441 million from $432 million.
First Data’s merchant-acquiring alliance with Bank of America Corp. in June 2009 has moved into a phase in which First Data processes nearly 75% of the bank’s merchant-client transactions, Winborne noted.
The additional processing became effective Oct. 1. After transition costs, it will drive annual revenue ranging from $65 million and $70 million, Winborne added.
Revenue growth in Latin America helped increase international services revenue by 12.7% to $453 million from $402 million.
The company benefited from market-to-market gains on interest rate swaps, a reduction of expense after an accounting correction and a favorable change in U.S. tax laws related to charges on income taxes booked the previous year, Winborne said.
The third quarter represented “a busy time behind the scenes” for the company, which is providing processing services for the launch of the Google Wallet, Jon Judge, First Data chief executive officer, said during the call.
“It’s really exciting to see this new payment technology become reality and for it to start to take hold,” Judge said of the Google Wallet venture.
In addition, First Data completed technical preparation to support interchange-pricing changes over 15 different PIN-debit networks, he said.
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