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First Data’s Small-Merchant Attrition Improves, but Leads from Bank Joint Ventures Soften
May 8, 2017

By Jim Daly
@DTPaymentNews

First Data Corp. reported Monday that transaction volume in its North American merchant-acquiring business grew 7% year-over-year in the first quarter to 11.5 billion. Attrition in First Data’s direct small and mid-sized (SMB) merchant business, which had been a problem for more than a year, improved, but sales leads from the leading payment processor’s bank joint-venture partners weakened.



Image Credit: First Data Corp.

“We’ve seen solid interest from developers,” says First Data CEO Bisignano.


The acquiring unit dubbed Global Business Services is Atlanta-based First Data’s biggest business and brought in $971 million in first-quarter segment revenues. That was up 3% from $955 million a year earlier when adjusted for currency fluctuations and the sale of the company’s Australian business last September.

Chief executive Frank Bisignano said on a morning conference call with analysts that the SMB direct business experienced “better sales force and merchant retention” thanks to efforts the company implemented in recent quarters to stem attrition. Chief financial officer Himanshu Patel added that while the SMB attrition problem is not yet entirely solved, “it’s at a pretty decent level now,” enough so that the company could consider “surgical” price increases.

But just as small-merchant attrition is improving, the company reported that leads for new merchant clients from bank joint-venture partners have weakened somewhat, continuing a pattern that first appeared in 2016’s second half. Bank partners include Bank of America Corp., Wells Fargo & Co., and PNC Financial Services Group. Revenue from venture partners, which generate more than 40% of the GBS segment’s annual total, “declined modestly in Q1,” said Patel. He added, however, that “we continue to believe that our JVs are fundamentally good businesses that are going through a transitory soft patch.”

Patel didn’t mention any particular bank, but made reference to “well-telegraphed issues in the media.” Wells Fargo’s growth rates have taken a big hit in recent months in the wake of a highly-publicized scandal involving improper consumer account openings by company staff.

Meanwhile, Bisignano said First Data is attracting business from independent software vendors (ISVs) since creating a new division earlier this year to serve that niche, with many ISVs interested in developing apps for First Data’s Clover line of point-of-sale equipment. New clients include Breadcrumb, Shopventory, Flywire, and Barracuda Networks, he said.

“While it’s still early days, we’ve seen solid interest from developers, and it’s becoming evident that our Clover platform is a key differentiator for them,” Bisignano said.

First Data’s Network & Security Solutions segment, which includes the Star electronic funds transfer network and prepaid cards, saw transactions rise 7% in the first quarter to 5.11 billion. Patel said debit clients are biting on new Star services such as signature and PINless debit, and he mentioned “new wins in the coming quarters.”

In all, First Data reported first-quarter net income of $36 million compared with a $56 million loss a year earlier, on revenues of $2.8 billion, up 1% on a constant-currency basis from $2.78 billion a year earlier.


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