Business model of First Data

Customer Segments

First Data provides a range of services and solutions to a diverse customer base. These customers can be organised broadly into the following categories:

• Retail and Merchant Clients, comprising various retail outlets, foodservice business, online ecommerce merchants, and other small businesses to which the Company provides point-of-sale payment solutions and other card processing services;
• Financial and Banking Clients, comprising financial service providers, banking institutions, community banking organisations, and other financial and credit companies, to which the Company provides various card and payment processing solutions; and
• Government and Institution Clients, comprising various government bodies and public institutions, including in the healthcare and human services sectors, to which the Company provides a range of services.

According to its annual report, First Data does not have any significant customers that account for 10% or more of the Company’s total consolidated revenues.

First Data principally serves customers in its native US, as well as in Canada. The Company also serves a range of international clients, Europe, the Middle East, Africa, Latin America, and Asia Pacific.

Value Propositions

First Data provides value to its clients in the following ways;

• Its reputation and track record, with the Company established as a reliable and effective provider of payment processing solutions, having a positive track record within the industry;
• Its broad range of products and services, with the Company offering a wide range of products and services – including payment solutions and card processing services – to a diverse customer base, including financial institutions, retailers, and government bodies;
• Its proprietary technologies, with the Company owing and developing a number of proprietary technologies that are utilised in its solutions, setting its service offerings apart from those of its competitors;
• Its international reach, with the Company providing services to a large domestic customer base in the US, as well as serving clients across Europe, Asia Pacific, Africa, Latin America, and the Middle East; and
• Its technical industry expertise, with the Company employing highly trained technical personnel across its two reportable business segments, as well as a team of experienced industry executives.

Channels

First Data operates a website at www.firstdata.com, through which it provides information on its products and services, as well as its target industries and operating regions. The Company also operates website in certain jurisdictions in local languages, including a website in Portuguese for Brazilian customers and a website in Korean. The Company does not operate an online sales force, nor does it provide an online customer portal.

First Data has an extensive distribution network. The Company makes the majority of its sales through an in-house direct sales force, which operates out of the Company’s network of offices located across the US, as well as internationally in Latin America, Asia Pacific, Europe, the Middle East, and Africa.

First Data additionally makes sales through a network of third party intermediaries. This includes an indirect non-bank sales force – comprising independent sales agents, independent sales organisations, independent software vendors, value added retailers, and payment services providers - as well as various banking and financial services partners, joint ventures, revenue sharing alliances, and referral partnerships.

Customer Relationships

First Data does not offer any products or services to its customers on a self-service basis. The Company makes a significant portion of its sales through its own in-house direct sales organisations, which seeks to provide tailored services to each individual client. The Company’s sales force consults directly with its customers in order to ensure that it provides services and solutions that meet their needs.

First Data provides ongoing support to its customers, who are able to receive personalised responses to queries, enquiries, and complaints from dedicated customer support representatives over the phone, by email, or through an online chat service. The Company also provides a range of support resources through its website, including user manuals and FAQs.

Additionally, customers are able to follow First Data’s activities and interact with the Company directly through its social media accounts, including with Facebook, Twitter, LinkedIn, and YouTube.

Key Activities

First Data is an electronic commerce company and payment solutions provider. The Company operates as a merchant acquirer, issuer processor and independent network services provider, enabling businesses to accept electronic payments, and helping financial institutions issue credit, debit and prepaid cards.

The Company aligns its operations into three reportable business segments: Global Business Solutions, which provides a range of retail point-of-sale merchant acquiring and e-commerce services, as well as mobile payment services; Global Financial Solutions, which provides a range of credit solutions for bank and non-bank issuers, including credit and retail private-label card processing; and Network and Security Solutions, which provides a range of solutions to retail, banking, and government clients from its other two segments.

Key Partners

First Data works closely with a network of partner companies and organisations that assist in developing, selling, and implementing the Company’s solutions. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, including suppliers of services, technologies, and equipment that support the Company’s operations across its three business segments, as well as companies to which certain non-technical functions can be outsourced;
• Channel and Distribution Partners, comprising the Company’s network of sales intermediaries, including independent agents, software vendors, sales organisations, banking and financial services providers, and resellers that extend the Company’s sales and marketing reach;
• Technology Partners, comprising a range of technology companies, hardware and software providers, and systems integration partners that help to ensure the Company’s technology systems are reliable and effective; and
• Strategic and Alliance Partners, comprising market leading companies across multiple industries, with which the Company collaborates on various joint projects, including in relation to marketing and branding.

First Data has a number of partnerships in place. This includes a payment partnership with Chinese payment solutions company AliPay, a strategic partnership with Silicon Valley Bank, and a distribution partnership with Bankers’ Bank of Kansas.

Key Resources

First Data’s key resources are its technologies and intellectual properties, its supply chain, its IT and communications infrastructure, its network of offices, its network of sales intermediaries, its partnerships, and its personnel.

First Data owns a global portfolio of trademarks, trade names, patents, and other intellectual properties that are key in its various service and product offerings. Searches of records published by the US Patent and Trademark Office identified numerous patent applications filed in First Data’s name, including applications entitled ‘Device stand for point-of-sale mobile devices’, ‘Mobile coupon analysis systems and methods’ and ‘Systems and methods for determining check information’.

First Data additionally owns and or leases a number of physical properties that are key to its activities. This includes 66 domestic properties and 90 international properties, such as sales offices, administrative offices, and operational facilities.

Cost Structure

First Data incurs costs in relation to the development of its intellectual properties and technologies, the procurement of equipment and services, development and maintenance of its IT and communications infrastructure, the operation of its office network, the management of its intermediary and other partnerships, the implementation of marketing schemes, and the retention of its personnel.

In 2015 First Data recorded total operating expenses in the amount of $10.23 billion. This included cost of services totalling $2.87 billion, cost of products totalling $356 million, and selling, general, and administrative costs totalling $2.29 billion.

Revenue Streams

First Data generates revenue through the provision of various payment and ecommerce solutions to retail, financial, and government organisations. This includes revenue derived from collecting fees for providing processing, loyalty and software services, and the sale and lease of point-of-sale devices.

In 2015 First Data generated revenue of $11.45 billion, up marginally on the $11.15 billion recorded by the Company in 2014. The bulk of the Company’s revenue, around 58%, was generated by its Global Business Solutions segment. The Company’s Global Financial Solutions and Network and Security Solutions segments each accounted for 21% of the its revenue.