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Finance First Data needs to pursue high-growth initiatives (FDC)

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Major US payment processor First Data reported its Q4 2017 earnings, where it grew segment revenue 4% annually on a constant currency basis

first data global solutions revenue play

first data global solutions revenue

(BI Intelligence)

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Major US payment processor First Data reported its Q4 2017 earnings, where it grew segment revenue 4% annually on a constant currency basis.

The firm called the quarter “solid” in a press release, and it was, marking a slight acceleration from the 3% annual growth it reported in both the previous quarter and the prior Q4.

Though rising card usage around the globe should be propelling First Data’s growth more than it is, the firm’s slight annual acceleration should bode well for its future performance.

First Data’s growth was driven by international segments. Global Business Solutions (GBS) is First Data’s largest segment, comprising 58% of its overall segment revenue. It grew at the same 4% pace annually as the processor’s overall segment business, propelled by international gains. The firm’s EMEA region saw 10% annual growth because of gains in Germany and the UK. Likewise, Latin America saw 52% annual growth. And APAC increased 24% annually, driven mostly by the digital payments boom that followed demonetization in 2016. The gains in the APAC region could also be propelled by ongoing growth initiatives in Asia, like First Data’s partnership with JCB, which could grow its reach in the market.

But the firm continues to encounter shifting headwinds in the US — its largest segment — which is hurting overall performance.

  • North American performance was flat overall, thanks to ongoing joint venture issues. North America comprises over 75% of the firm’s GBS segment, which inflates the impact of a less-than-stellar performance in that market. That’s been an issue for First Data’s growth, since the firm has been struggling there for over a year. It first battled churn around small businesses from 2016 through early last year, and then hit a larger snag with “softness” in its joint venture (JV) business, which brought performance down even harder than the SMB issues did and offset gains in other areas in the region.
  • First Data must continue to aggressively push into high-growth segments to compensate. Initiatives to improve JV performance are “gaining traction,” according to the firm. However, First Data didn’t provide further details, making it hard to know when we’ll see strong improvement in the segment. But we’ve seen the firm invest in other high-growth areas over the course of the past year: It acquired CardConnect and BluePay, two processors that could help grow distribution channels and prop up e-commerce business as online shopping continues to surge. The firm also partnered with Apple in a deal that could accelerate its Clover business as mobile point-of-sale (mPOS) systems continue to deepen their penetration into the market. These moves could help First Data compensate for softness in other areas, and give the firm a consistent source of growth as it navigates the tail end of hurdles.

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