Cardnet, the JV between the Lloyds Bank of the UK and First Data, grew net revenue 5% to £60m in 2022 despite a fall of 10% in total payment volume to £59bn. The business was hit by the loss of two key clients processing £10bn between them. Underlying payment volume rose 6%
Cardnet is a merchant acquiring joint venture between Lloyds Bank and First Data (Fiserv) with the bank holding 51%. Cardnet has no staff and is recharged for services provided by the parents. This means its financial accounts are not always directly comparable to more conventionally structured acquirers.
Lloyds provides sales and marketing through its business banking network. First Data is the processor and supplies card acceptance products including Clover. Cardnet also has relationships with 3rd parties including Liberis for Merchant Cash Advance and Qikserve for a mobile ordering app.
Overall debit volumes fell 18% to £44bn due to the loss of the two clients. These were financial institutions which processed £10bn annual volume between them at a very high average transaction value (ATV) of £476.. This transaction profile is typical of the sector, was most probably very low margin and would have contributed little to the bottom line.
In contrast, higher-margin credit volumes, driven by a resurgence in the travel sector, grew 24% to £15bn. Airlines, hotels and cruises contributed an incremental £2.4bn volume at an ATV of £406 and more than made up for the loss of the financial institution clients.
The more favourable credit/debit mix combined most likely with price increases, drove net fee and commission income up 5% to £60m. This is a good performance in the context of the fall in volume processed. But neither Lloyds or First Data would be happy with revenue lagging UK inflation which was almost 12% for 2022 . Net take rate ticked up 1bp to 0.1% while net income per transaction was steady at 5.3p.
Despite the growth in net fee and commission income, higher costs hit profits. The increased number of transactions drove higher service fees from First Data, Cardnet was recharged an extra £3m staff salaries by its parents and the company spent £6m on its “Strategic Investment Programme.” As a result profit before tax fell 9% to £39m. Nevertheless, management felt confident enough to resume dividends with payments to the shareholders of £53m in 2022 and a further £35m after the financial year end.