Independent sales organizations contribute about 35% of Global Payments Inc.’s annual revenue, but the revenue they generate has a lower profit margin for the Atlanta-based payments processor than that of some of its other business, suggests a recent analyst report.

But the issue is not that significant, notes analyst David J. Koning of with Robert W. Baird & Co. “The U.S. ISO unit … continues to grow around mid-teens behind strong execution among its large ISO clients,” says Koning, who based his research note on a meeting with David Mangum, Global Payments chief financial officer.

Paul Garcia, Global Payments chairman and CEO, also is not concerned. “This business isn’t less valuable; it’s just the way the accounting is,” he says, referring to procedures that mandate how the company reports revenue from its approximately 100 ISOs.

ISOs are continually growing, and because they often must sell credit and debit card-processing services for the lowest possible price, that puts pressure on margins, Garcia tells PaymentsSource.

The merchant processor reported $1.6 billion in total revenue for the 2010 fiscal year ended May 31, up 6.7% from $1.5 billion the previous fiscal year (see story). 

Koning expects Global Payment’s ISOs to experience 10% to 15% revenue growth in the next couple of quarters.

Even in the midst of a stinging recession, Global Payments’ North America merchant services business experienced a 9% increase in revenue, to $1.2 billion in its fiscal 2010 from $1.1 billion a year earlier.

“Even in the worst economy in 75 years, these [ISOs are] growing by double digits,” Garcia says. Many ISOs are doing that by taking market share, “partly from people who aren’t as aggressive as they are,” he notes.

Worldwide, Global Payments processes payments for approximately 1.5 million merchants.

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