Fidelity National Information Services Inc. (FIS), the provider of banking and payments technology, will be providing prepaid processing solutions to 80 new clients across the globe. Fidelity’s prepaid processing activities range from account set up to card production, inventory management, transaction processing and funds settlement. Also included is fraud detection and dispute processing among other facets of the system.
Among the new clients, Los Angeles-based company 24/7 Card, which has a business unit in Manila, Philippines, has joined hands with FIS and the Central National Bank of Enid as issuer (pursuant to a license from Visa U.S.), to launch its reloadable prepaid card especially for foreign nationals living in the U.S.
Through the 24/7 prepaid card, customers have the option to purchase and/or withdraw cash from ATMs and also have the added advantage of transferring money to the Philippines or 20 other countries.
The incremental popularity of the prepaid card segment provides a growing source of non-interest income portfolios, attracts new customers, and strengthens existing relationships. It also posts a unique opportunity for financial institutions to gain a foothold in the non-traditional and under-banked market segments. Fidelity’s prepaid card solutions are preferred by financial institutions because of its prepaid expertise and its ability to integrate with existing systems and provide real-time capabilities.
We believe Fidelity’s commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base will drive growth over the long term. Expansion into emerging markets such as Brazil, India and China will also help organic revenue growth over the long term.
However, increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business and an uncertain regulatory environment are the primary headwinds, in our view.
We maintain our Neutral rating on a long-term basis (for the next 6 to 12 months), primarily due to increasing debt and intense competition from Fiserv Inc. (FISV), Alliance Data Systems Corp. (ADS), Global Payments Inc. (GPN), MasterCard Inc. (MA) and Visa Inc. (V).
The company is set to announce its third quarter 2011, results on November 1, 2011, before the opening bell. We have noticed 3 analysts, out of the 13 covering the stock lowering estimates in the last thirty days, while there were no positive revisions. However, the Zacks Consensus for the quarter remained at 61 cents.
Judging from the past four quarters, we notice that Fidelity has reported a positive earnings surprise of 3.49% on average. Therefore, the possibility of another earnings beat remains.
Currently, Fidelity has a Zacks #3 Rank, which implies a short-term Hold rating (for the next 1-3 months).
