First Data Corporation (FDC - Free Report) announced an extended partnership with Alibaba’s (BABA) Alipay, operated by Ant Financial Services Group.
The deal enables the company to integrate Alipay at its point-of-sale (POS) across 35,000 North American merchants. Reportedly, Alipay has more than 600 million registered users in China and 200 million of financial institution partners. Therefore, the deal will help First Data to expanding its client base, increasing its top-line numbers.
Also, the deal will allow Alipay to expand its reach across North America. With the ease of the online payment application, the merchants in the United States will also be able to serve the travellers from China in a better way.
This new tie up is a follow on deal of First Data’s previous partnership with Alipay that took place last year to deploy the payment platform at the Clover POS for four million U.S. business clients.
Alipay is an online and mobile payment platform that allows customers in China to make payments for taxi rent, movie tickets, doctor fees, utility bills and many more by using the application.
Coming to the price performance, the shares of First Data have returned 8.6% over a year, underperforming the industry’s rally of 10%.
Strengthening Presence in North America
We believe that the partnership will help First Data to gain momentum in its Global Business Solutions business. Alipay integrated into Clover POS is certainly helping the merchants to grow their business.
First Data’s merchant clients across North America are likely to increase with the rising demand for Alipay among the Chinese customers. Thus, the company’s performance is likely to improve.
Reportedly, businesses ranging from small merchants to large merchants who have deployed the app in their payment system are benefiting from the growing number of travellers from China to the United States.
We believe First Data’s business in North America will expand further with this deal as the U.S. is experiencing an upward trend in travellers from China. Per Curbed, there were 1.1 million travellers from China to the United States and they spent almost $1.6 billion on hotels, restaurants and other stores.
According to Nielsen’s latest report, over 90% of Chinese tourist would prefer mobile payment option while travelling abroad.
Further, with Alipay, the company has entered the market of mobile and digital payments and in the U.S., total transaction value is expected to grow at a CAGR of 11.1% between 2018 and 2022 as per the report from Statista.
Partenership – Key Catalyst
Over the past few years, strategic partnerships have played an important role in shaping First Data’s growth trajectory.
Recently, First Data joined partnership with RBL Bank which allows the bank to shift its credit card customers on the VisionPLUS platform.
In late January 2018, the company also announced a partnership with SBI Card, a leading credit card issuer in India, which allows SBI Card to leverage VisionPLUS to enhance service offerings.
Last quarter, the company also teamed up with AccorHotels Group which is benefiting its global and cross channel payments.
Zacks Rank & Stocks to Consider
Currently, First Data carries a Zacks Rank #4 (Sell).
Investors interested in the broader business service sector can consider WageWorks (WAGE - Free Report) , Global Finance Corporation (GFN - Free Report) and Fiserv (FISV - Free Report) . While WageWorks sports a Zacks Rank #1 (Strong Buy), Global Finance and Fiserv carry a Zacks Rank #2 (Buy), each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for WageWorks, Global Finance and Fiserv is currently pegged at 15%, 11% and 11.5%, respectively.
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