Digital River offers a full range of payment processing services to clients through its subsidiary Digital River World Payments. These services include multiple payment methods, fraud management, tax management, cloud-based billing and other payment optimization services.
For American Express, Digital River World Payments will operate as a single commercial, technical and operational connection for online merchants offering American Express as a payment option on their e-stores around the world.
The agreement provides an opportunity of expansion for Digital River along with consolidating its card acquiring services and strengthening its position as a leading turnkey e-payment solution provider.
Digital River aspires to be a cloud-commerce expert driving client revenue for software and digital products developers, high-tech product and computer manufacturers, and video game publishers.
Hence, the company is undertaking significant steps to broaden its payments portfolio, empowering merchants with more payment options and creating new opportunities for them to capture online market share internationally.
To strengthen its portfolio, Digital River acquired LML Payment Systems Inc. for $3.45 per share or $108.2 million in September.
LML Payment Systems offers financial payment solutions including credit card processing, online debit, electronic funds transfer, automated clearinghouse payment processing and authentication services to e-commerce and traditional businesses.
The company also provides selected transactions to third-party processors and banks for authorization and settlement.
Management believes that the acquisition will complement the company’s existing product portfolio and will enable Digital River to offer its online payment services to businesses of all sizes.
Meanwhile, for 2013, the company is likely to face some headwinds due to macroeconomic conditions, client attrition and additional necessary ramp up in investments to ensure an updated technology infrastructure.
Digital River forecasts that overall softness in the economy, especially in Europe coupled with recent decline in PC sales will make it challenging to post a growth in revenue. The company saw some client attrition in 2012 and expects the same in 2013 along with a decline in supporting business revenue.
Hence, we maintain a Neutral recommendation on Digital River. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.
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