Friday , April 19, 2024

Global’s ‘Profac’ Model Starts Paying Dividends for Its Acquiring Business

A new tactic Global Payments Inc. began pursuing last year is delivering continuing benefits for the company as its merchant-solutions unit saw year-over-year point-of-sale volume growth of around 20% in the fourth quarter, top management at the big Atlanta-based processor said early Wednesday.

Much of the credit for the growth is tied to the so-called profacs the company has lately recruited, with 16 signed up to date, said chief executive Cameron Bready on a call with equity analysts to discuss his company’s fourth-quarter and full-year 2023 performance. “We continue to see good momentum in merchant solutions,” he noted, referring to Global’s merchant-processing unit.

The unit, which logged $1.67 billion in revenue in the quarter, up 19% year-over-year, enjoyed “record bookings in software led by our new profac model,” Bready said. Payfacs, or payment facilitators, are independent software companies that enable other firms to sign up merchants on the payfac’s merchant account. Once aligned with Global’s back-office services, these entities become what the company calls profacs. Global Payments began laying heavier emphasis on its profac strategy last year.

Bready: “We’re carrying our merchant-business momentum into 2024.”

But other factors have been at work in expanding Globa’s merchant reach lately, including its $4-billion acquisition last March of the big processor EVO Payments. That deal is now paying dividends, Bready said Wednesday. “It gives us exposure to secular growth markets and opportunities to sell into EVO’s customer base,” he noted. Leveraging EVO’s assets in merchant processing, he added, is something Global has factored into its plans for 2024.

For 2023 as a whole, the merchant business recorded $6.54 billion in adjusted net revenue, a 19% increase. Excluding EVO and dispositions during the year, the unit still recorded an 8% increase in adjusted net revenue for 2023, the company reported. Further momentum may arrive soon as Global expects to launch new POS software in the heavily competitive restaurant market later this year. “We’re carrying our merchant-business momentum into 2024,” Bready declared. “We see a long runway for growth in POS.”

Other fronts where the company sees potential dividends, he said, include generative AI technology but not, perhaps, further M&A. “We’ve had meaningful progress in embedding gen AI in our business,” he said, referring to a hot new trend for a sophisticated form of artificial intelligence capable of performing many tasks once undertaken by humans. In Global’s issuer business, the technology helped deliver a 50% reduction in fraud losses for one client, Bready said, without mentioning further detail about the result. The issuer unit recorded $531 million in revenue in the December quarter, up 6%, and just over $2 billion for the year, a 5% rise.

On potential new acquisitions, however Bready expressed some hesitation. Following last year’s big deal for EVO, “we’re back to a business-as-usual mindset when it comes to capital allocation,” he noted. “We’re open-minded, but returns have to be competitive. We don’t have any M&A included in our guidance.”

For the December quarter, Global’s revenue totaled $2.43 billion, up 8% over the same period in 2022. Adjusted operating income was $978.5 million, up 9%.

For the year, revenue came to $9.65 billion, a 7.5% increase over 2022. Adjusted operating income was $3.87 billion, also up 9%.

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