Countries all over the world are moving towards a cashless economy. The trend is expected to gain strength as technology keeps evolving to support the large volume of transactions. Another factor which will drive online payment system further is the rise of e-commerce. All electronic transactions as well as offline transactions involving different bank cards require the services of processing companies for executing payment instructions.
Payment Data Systems Inc. (NASDAQ:PYDS), based out of San Antonio, Texas, offers integrated payment processing services. Its portfolio of services includes different types of automated clearing house (ACH) processing, and credit, prepaid card, and debit card-based processing services. Read more
Q4 – The company recently announced its processing results for the fourth quarter 2016. Payment Data Systems processed more than $735 million worth of transactions. While its processing volume for ACH remained flat in the fourth quarter, its returned check processing volume increased 3 percent on quarter over quarter basis.
The main area of concern was the decline in credit card processing volume, which decline by 10 percent in the fourth quarter, in comparison to the third quarter. The company is looking to reverse the trend with new initiatives planned for 2017.
2016 – The annual data more or less mimicked the quarterly data as it showed 6 percent decrease in the processing volume to touch $2.9 billion. The company’s ACH transaction processing volume dipped 14 percent in comparison to 2015. Similarly, credit card processing volume was down 5 percent while credit card transactions processing showed mild improvement at nearly 1 percent.
Payment Data System reported transaction processing at $2.9 billion, which is the second highest yearly level of dollars processed by the company in its entire history. So, while there was a slight decrease year-over-year in the volume of dollars processed, this was still very good performance, as stressed by President and CEO Louis Hoch.
Payment Data Systems is on track to implement newer technologies and initiatives to maintain the pace of its business. The company had recently introduced its real-time debit card service, which has shown good performance. The service, which supports real-time provisioning of reloadable prepaid debit cards to mobile wallets, was made operational in October last year.
The company is also forging new collaborations for driving up business. It recently inked a deal with Applied Business Software Inc., which develops software for loan servicing and other financial services. The company’s flagship product is The Mortgage Office, which is widely considered to be the benchmark in the lending industry.
Under this new deal, both the companies will collaborate on a wide range of initiatives such as for the use of ACH module for the purpose of making electronic payments and for online payment processing of credit cards, debit cards and checks.
Payment Data Systems is also restructuring its financial setup since late last year; the company authorized a new share buyback program allowing the company to buy-back up to $1 million of the company’s stock. The company may carry out these transactions in the open market or through privately negotiated transactions. The scheme will remain open until all funds are exhausted. Payment Data Systems also retains the right to withdraw the scheme.
The authorization shows the management’s conviction about the scope of the company’s performance. Payment Data Systems had unrestricted cash of nearly $4.3 million as on September 30, 2016. It also had 12 million shares outstanding at the same point of time.
The company stock has shown some choppy performance over the course of the past 12 months, losing nearly 19 percent of its value. During the year so far, the share price declined over 10 percent. However, with the new initiatives, the stock price is expected to be revived in the near future. The current market price of the stock is nearly 50 percent down from its 52 week high of $3.80 per share. This offers a good opportunity to open a position in the stock with mid to long term horizon.
Payment Data Systems recently realigned its management cadres as well which saw the departure of its erstwhile CFO Habib Yunus. He was replaced by Tom Jewell. The company had also appointed Louis Hoch, the founder, as its new CEO in August last year. These new appointees are expected to steer the company into a new direction. In the coming months, Payment Data Systems is expected to take bold actions to further solidify its position in the market.
The company is expected to be in a prime position to exploit potential increase in electronic and card transactions. E-com has been projected to grow further and Payment Data Systems may use its new collaborations and technologies to further drive up its volumes and boost revenue streams.