The Durbin amendment in Dodd-Frank eliminated debit-network exclusivity, prompting heightened competition among the electronic funds transfer networks to capture a greater share of card presence and transaction volume.
The NYCE network, which is owned by Fidelity National Information Systems Inc., already has benefited. Though it still generates less than 3% of FIS's total revenue, company executives see potential in NYCE.
"We think it still has opportunity," Gary Norcross, FIS president and chief operating officer, said during a July 17 analyst conference call to discuss second-quarter earnings.
But pricing competition could affect the extent to which NYCE can maintain its rate of transaction growth, he said.
"We have seen growth within our NYCE debit business as a result of the Durbin amendment," Norcross said. "Looking ahead, we are somewhat more cautious in light of Visa's aggressive pricing. … Obviously, we are seeing some of our transactions slow with some of the [competition] in pricing, but we've got a number of strategies ourselves we are deploying. And we feel good about some of the early results of those strategies."
During the quarter, FIS also added clients, including several new core processing relationships. And such relationships drive strong reoccurring revenue and provide cross-sell opportunities, Norcross noted. For example, Cadence Bank, a longtime FIS core processing client, recently expanded its relationship through the deployment of several new products and services, including debit, ATM-driving and fraud management, he said.
Norcross also cited opportunities internationally, announcing the completion of a large core implementation project for Bank for Agriculture Cooperatives, also known as BAAC, which has approximately 20 million customer accounts and operates more than 1,000 branches in Thailand.
"We are also excited about opportunities to grow our payments business throughout the region, including India, where we currently support nearly 4,000 ATMs," Norcross said.
Declining check volumes slowed second-quarter revenue growth for the Payment Solutions unit at FIS.
The banking and payments-technology company otherwise was aided by a boost in electronic transactions, the company said in its July 17 earnings announcement.
The payments unit's revenue rose 0.4%, to $606.1 million from $603.6 million during the same period a year earlier. Revenue was up 2.7% when excluding the check-related businesses, whose revenue dropped 8.9%, to $108.9 million from $119.6 million.
Payment Solutions earnings before interest, taxes, depreciation and amortization increased 8.6%, to $249.6 million from $229.9 million. The EBITDA margin increased 310 basis points, to 41.2%, year over year, "reflecting continued transaction growth and an ongoing focus on cost management," FIS said.
Processing and Services revenues for the quarter were up 3.5%, to $1.46 billion from $1.41 billion.
As a company, revenue from continuing operations increased 3.1%, to $1.46 billion from $1.41 billion. Net earnings from continuing operations attributable to common stockholders rose to $155.8 million, or 52 cents per diluted share during the quarter, compared with $126.6 million, or 41 cents per diluted share, a year earlier.