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First Data Partners Mastercard for Digital Disbursements

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First Data Corporation (FDC - Free Report) has sealed a partnership deal with Mastercard Inc. (MA - Free Report) for making its Disburse-to-Debit solution available to Mastercard customers.

Launched in September 2017, Disburse-to-Debit is a low-cost payout solution that enables instant delivery of funds directly to a debit card.

Targeting the “Gig” Economy

This latest move is a part of First Data’s push to tap the so called “gig” economy, which constitutes a fast growing workforce that prefers to be paid just when their job is done. The deal should also help First Data tap businesses with high customer payout volumes.

According to Dan Charron, executive vice president, head of Global Business Solutions for First Data, “We are focused on bringing an exceptional standard of sales and service, along with innovation, to our clients. We look forward to working closely with Mastercard to introduce its customers to our digital disbursement platform.”

Year to date, shares of First Data have gained 28.7%, significantly underperforming the 4% rally of the industry it belongs to.

Our Take

We believe that the partnership will boost First Data’s Global Business Solutions segment. Revenues from this segment include debit and credit card transaction fees that business clients pay. These also comprise fees paid for providing processing, loyalty and software services, and sales and leases of POS devices.

In the first quarter, this segment generated revenues of $1.3 billion, which grew 18% year over year on a reported basis, 15% on a comparable accounting basis and 7% on an organic constant currency basis.

Zacks Rank and Stocks to Consider

First Data currently carries a Zacks Rank #3 (Hold).Better-ranked stocks in the broader Business Services sector  are Mastercard, FLEETCOR Technologies, Inc. (FLT - Free Report) and WEX Inc. (WEX - Free Report) . While Mastercard and WEX sport a Zacks Rank #1 (Strong Buy), FLEETCOR Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share growth rate for Mastercard, FLEETCOR Technologies and WEX is 19%, 16.5% and 14.3%, respectively.

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