Global Payments Inc., incorporated in September 2000, is a provider of electronic payments transaction processing services for consumers, merchants, independent sales organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout the United States, Canada, the United Kingdom, the Asia-Pacific region, the Czech Republic and the Russian Federation. The Company serves as an intermediary to facilitate payments transactions, and operates in two segments: North America Merchant Services and International Merchant Services. The Company’s North America Merchant Services and International Merchant Services segments target customers in a number of vertical industries, including financial institutions, gaming, government, health care, professional services, restaurants, retail, universities and utilities. On September 28, 2009, it acquired Auctionpay, Inc. On June 12, 2009, the Company completed the purchase of the remaining 49% interest in HSBC Merchant Services LLP from HSBC Bank plc. On May 26, 2010, the Company completed the disposition of its DolEx and Europhil-branded money transfer businesses to an affiliate of Palladium Equity Partners, LLC.
Global Payments Inc. conducts its merchant acquiring business using two different business models: direct and indirect. In the direct model, merchants are its end customers. The Company provides its merchant customers with the ability to accept card-based and check payments. Card-based payment forms consist of credit, debit, gift, stored value and electronic benefits transfer cards. Credit and debit card transaction processing includes the processing of card brands, including American Express, China Union Pay, Discover, JCB, MasterCard, and Visa, as well as debit networks, such as Interac in Canada. The Company is the processing intermediary between the merchant, the credit and debit networks and the financial institutions that issue cards. Its services include offerings, such as terminal sales and deployment, front-end authorization processing, settlement and funding processing, customer support and help-desk functions, chargeback resolution, industry compliance, Payment Card Industry (PCI) security, consolidated billing and statements, and online reporting. The Company markets direct merchant services in the United States, Canada, the United Kingdom, the Asia-Pacific region and the Russian Federation.
Indirect merchant services provides similar products and services as the Company’s direct merchant services model, primarily to financial institutions and a limited number of ISOs on an unbundled basis, that in turn resell the Company’s products and services to merchants. These services are marketed in the United States, Canada and parts of Eastern Europe, primarily in the Czech Republic and the Russian Federation. The Company also offers sales, installation and servicing of automated teller machine (ATM) and point-of-sale (POS) terminals, and selected card issuing services, including card management and personalization, and provides payment processing for ATM providers and Card Issuers, through Global Payments Europe and ZAO United Card Service (UCS), which are also components of indirect merchant services. It also provides credit card transaction processing for Discover Financial Services or Discover Card (Discover) and is designated as an acquirer by Discover.
North America Merchant Services Segment
During the fiscal year ended May 31, 2010 (fiscal 2010), the North America Merchant Services represented 74% of the Company’s total consolidated revenues, and included operations in the United States and Canada. In the United States, the Company sells its services via ISOs, a direct sales force, trade associations, agent and value-added reseller (VAR) referral arrangements, as well as its telesales groups. The Company’s ISO channel targets a variety of merchant types with a typical annual bankcard volume of $150,000 or less. The ISOs contract with the Company to provide processing and other services depending on the ISOs requirements. These contracts are multi-year and priced by service on a per transaction basis. The ISOs act as a third-party sales group selling Global Payments-branded merchant acquiring products and services, with the majority of its ISOs marketing direct merchant acquiring. The Company’s direct sales channel receives qualified leads from its agent bank, VAR and trade association referral partners signing a variety of mid to large-sized merchants with annual bankcard volume on average above $300,000.
The Company’s United States revenue also includes check and gaming services and indirect merchant services. Its check products offer merchant customers risk management alternatives in the case of its verification and recovery offerings, or risk elimination in the case of its guarantee offerings, by using its internal and external databases of check writers to help decide whether the merchant should accept a check as the form of payment from a particular check writer. The Company’s check services products are part of its domestic direct service offering. Check guarantee services include check verification and guarantee services designed for a merchant’s specific needs and risk adversity. This service offering guarantees payment of all checks that are electronically verified. If a verified check is dishonored, the Company’s check guarantee service generally provides the merchant with reimbursement of the check’s face value, and then it pursues collection of the check through its internal collection services. In the specialized vertical market of gaming, the Company’s VIP LightSpeed software and VIP Preferred Advantage product provide the gaming industry with the tools necessary to establish revolving check cashing limits for the casino’s customers. The Company derives revenue from its gaming products primarily based on a percentage of the transaction value. In Canada, the Company sells its services primarily through its direct sales force using its bank referral relationships.
International Merchant Services Segment
International merchant services represented 26% of the Company’s total consolidated revenues in fiscal 2010, and consisted of operations in Europe and the Asia-Pacific region. The Company’s business in Europe is primarily located in the United Kingdom, the Czech Republic and the Russian Federation. Its Asia-Pacific region includes 11 countries and territories: Brunei, China, Hong Kong, India, Macau, Malaysia, Maldives, the Philippines, Singapore, Sri Lanka and Taiwan. The Company has a direct sales force in the United Kingdom, the Russian Federation and the Asia-Pacific region, through which it primarily sells its direct merchant acquiring services, while using its bank referral relationships. In the Czech Republic and the Russian Federation, the Company also provides indirect merchant acquiring services.
The Company competes with First Data Corporation, Bank of America Merchant Services, Chase Paymentech Solutions, TD Merchant Services, Elavon, Moneris Solutions, berbank, Alfa Bank, VTB, Raiffeisen Bank, Russian Standard Bank, SiNSYS, Euronet and Merchant Solutions.
| Analysts' Targets | |
| Deutsche Bank Securities | $46 |
| Hold | |
| Friday, April 01, 2011 | |
| Barclays Capital | $52 |
| Thursday, March 31, 2011 | |
| RBC Capital Markets | $55 |
| Outperform | |
| Friday, January 14, 2011 | |
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