Total System Services Inc. plans to build upon NetSpend's new partnerships with Western Union and Paychex to boost its presence in the prepaid card market, which it says can reach 68 million underserved consumers throughout the world.
The Columbus, Ga.-based payments processor and merchant services provider also announced that, after years of mixed results in Japan, it pulled the plug on its operations in that country. The TSYS Japan business has been sold to "a local entity" operated by leaders of TSYS Japan, said Troy Woods, TSYS's president and chief operating officer, said during an April 22 conference call to discuss first-quarter earnings.
In addition, TSYS sold its 54% interest in Japan's GP Network Corp. to Visa Inc. In 2000, TSYS acquired a majority share of GP Network Corp., a joint venture formed by seven leading Japanese financial companies.
"We assess all lines of business in the international segment, and in 2011 we began discussing how to streamline our operations to get our highest returns," Woods said.
"Card business in Japan is heavily concentrated by a few large institutions that process payments internally," Woods added. "It caused us to have limited success, and we decided to exit Japan."
In prepaid, TSYS is focused on building its NetSpend business through partnerships. It will work with Paychex to introduce new payroll card products during the second quarter. NetSpend also announced April 21 that it is working with Western Union to launch a prepaid card this year.
TSYS bought NetSpend in October. Once TSYS has NetSpend revenues to compare on a yearly basis, executives said they expect it to deliver quarterly increases of $15 million to $19 million.
NetSpend operates a network of 70,000 distribution locations and 130,000 reload points.
NetSpend contributed $132.6 million in revenue during the first quarter, mostly because of a "strong and successful tax season," Woods said, referring to consumers receiving tax refunds through prepaid cards.
TSYS reported total revenues for the quarter of $592.8 million, an increase of 32.1% over $448.7 million in 2013. TSYS reported net income from continuing operations at $51.6 million, a 12.7% decrease compared to $59.1 last year.
The sale of Japanese operations caused TSYS to exclude $16.2 million of revenue for Japan, moving that figure to discontinued operations, TSYS chairman and CEO Philip W. Tomlinson said.
"We may have one small area where results are not what we want, but we are not expecting to exit from any other areas," Tomlinson said.
The North American services segment produced its largest year-over-year quarterly revenue growth in five years with a 9.1% increase in revenue at $224.3 million, Woods said. The increase was partly because of a 16% increase in transactions and increased sales related to security services and re-issuing of cards after major breaches at retailers in the U.S.
Last year was the first in which TSYS' yearly revenue topped $2 billion, in part because of the acquisition of NetSpend.
"In an economy that is still struggling to get its footing, we are pleased with the first quarter as the financial results met or exceeded our plans," Tomlinson said.