Fiserv’s Yabuki Sees Potential In P2P Payments

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Bank technology provider Fiserv Inc. has positioned itself for a wave of growth in electronic payments.

Though Fiserv’s recent purchase of rival CashEdge Inc. is contributing just a small portion of its of revenue today, it expects CashEdge and related business lines to balloon in the coming years as more consumers and small businesses initiate payments through mobile devices and the Web.

"The energy around this is great," Jeffery Yabuki, Fiserv president and chief executive, said during a Nov. 2 conference call to discuss third-quarter earnings.

CashEdge's Popmoney is a person-to-person payment product that many large banks offer consumers. It competed with Fiserv's ZashPay, which has been more business-focused. Both enable bank customers to make payments to one another using just a recipient's name and email address or mobile phone number.

Fiserv likely will combine the products to serve the consumer and small business markets better, experts say. The Brookfield, Wis.-based company has 1,000 customers for its ZashPay product, Yabuki said.

Fiserv's net income declined 5%, to $127 million from $134 million in the third quarter last year. Its revenue rose 3.7%, to $1.06 billion, from $1.02 billion.

Though Fiserv talks up the payments aspect of its CashEdge acquisition, its immediate revenue from P2P payments likely will be modest, says Peter Heckmann, senior research analyst for Avondale Partners LLC, of Nashville.

Fiserv completed its purchase of CashEdge in September (see story).

Fiserv will get about $60 million in annual revenue from its purchase of the New York company, although P2P payments will generate less than 5% of that, or less than $3 million, Heckmann says. By contrast, ZashPay will add less than $5 million in annual revenue.

A greater percentage of revenue will come from other products that CashEdge offers, such as its account-opening and funding services and account aggregation, Heckmann says. Popmoney is more strategic at this point, he says.

"By combining ZashPay and Popmoney, Fiserv probably has one of the larger footprints of affiliated banks, and we do expect P2P payments as a vehicle to grow," Heckmann says.

Fiserv's total revenue from P2P should increase to between $10 and $15 million by mid-2012, Heckmann predicts.

Popmoney and ZashPay products could enable banks to increase their revenue by charging a premium for faster payments, Yabuki said.

"We are big fans of the FedEx pricing model," where consumers pay commensurate with the speed of delivery, Yabuki said.

Though Fiserv talks up its newer payments products as differentiators, it is also working to make them a seamless part of a bank's overall payments offering.

"It will be difficult, we think, for consumers to make the differentiation: 'Do I go into bill pay [or] do I go into P2P?" Yabuki said.

P2P payments may be useful particularly for some small businesses that do not want to collect the greater amount of information needed for automated clearinghouse or wire transfers, says Steve Ledford, partner for Novantas LLC.

"If you think about these person-to-person transfers as being a complement to other methods like bill payment and purchase cards, they could fill a niche if there isn't a negotiated relationship," Ledford says.

Among core providers, Fiserv offers one of the more comprehensive products and service sets for small business banking, says Christine Barry, a research director for Aite Group LLC of Boston.

"Small businesses place a high value on things that save them time and money and help them operate more efficiently, and they particularly like it when those things are offered as an extension of the online channel," Barry says.

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