- To become the largest payment company in the world. This new combine is expected to drive $12.5 billion in sales with about $5 billion in net income. The market has been very receptive to the announcement and you will also see a rise in market valuation of the other independent providers. The long-term sentiment for FIS is good as long as they keep their focus on overall efficiency.
- To become a market leader in the world of merchant services. This was a considerable gap in the FIS story and now having a world processor (remember Vantiv bought Worldpay which is a global provider) is going to leapfrog them into a becoming a significant market leader.
- To have a platform to keep existing financial institution clients satisfied. The Worldpay payments processing platform receives much better reviews from clients than the FIS payments platform. Financial institutions who are on the current FIS platform and looking for change have a new migration option. The Worldpay acquisition could be the welcome change that FIS needs to both retain and grow market share.
- To have the data so they know more. Worldpay transactions on the issuer side are embedded into their merchant platform. This integration is how Worldpay can get access to data about who spends, market share, share of wallet, etc. This data is something that will significantly help FIS in their quest to know more (and serve well – consumers, merchants, and issuers).
- To gain efficiencies. Worldpay is already a very efficient and well-run organization. Integrating their resources into FIS will results in the creation of an elite division that can provide market leadership and wise counsel. The overlap will probably come from facilities and administration. The core service units, including sales and business development should continue to thrive in the new combine.
- To combat fraud. The Worldpay fraud platform was cited on the acquisition/analyst call as a significant market differentiator. FIS wants to eradicate fraud while facilitating and accelerating transactions. This fraud platform was originally rewritten when Worldpay/Vantiv divested itself of their reliance of First Data’s engine. Worldpay will need to apply the same initiative to the credit card side of the house to drive further improvements.
- To set the foundation for an omni-channel transactional device. Today, there is a big debate about contactless, tokenization, and delivering on personalized efficiency. The Jeanie network from Worldpay should now see more growth in functionality and a consequent acceleration in usage.
- To accelerate the adoption of the digital wallet for purchasing and a better platform for bill payment. The new organization will have a lot of touchpoints and underlying technology to enhance what it can do to enhance their digital wallet offering. Also, an effective bill payment strategy will result in more opportunities for all three – issuers, merchants, and consumers.
- To counter FinTech. FIS needs something to compete with FinTech. (All the processors do. Fiserv purchased Clover via their acquisition of FDR. Worldpay’s acquisition by Vantiv into Worldpay allowed them to compete globally with FinTech). The Worldpay platform will allow FIS to compete in that arena. Fintech brands like Stripe and One 97 with valuations of $20 and $10 billion are putting significant pressure on “traditional solution providers.” Stripe does the processing for Lyft. Worldpay does the processing for Netflix, Walmart, & Costco (among others). FIS also needs to compete with Clover (Fiserv) – this new merged company should offer more innovative options for omni-channel and card embedded transactions. Merchants of the future will rely less on physical instore devices (think about the innovation taking place in retail, especially with the Amazon Go Store).
- To assist their clients with card brands. You need market strength to negotiate rates with card brands like MasterCard, Visa, etc. to negotiate better rates for their base (Kroger is not using Visa at many of their stores as they complain about high fees). Having a $12+ Billion brand negotiate on your behalf (merchant or issuer) will go a long way. Traditional credit card brands like Mastercard and Visa are already struggling in emerging economies like China and India.
The CEO of FIS, Gary Norcross is a very pragmatic individual. I call him a structured “if-then-else guy”, remember, he started his career as a programmer and has a very practical approach to execution. Gary is a young man (53) and the CEO of Worldpay, Charles Drucker is not that much older. Both these leaders are very much in touch with the future. Charles had the vision to invest in an international processor giving Worldpay access to innovation across the globe. This new alliance will drive a lot of efficiencies and help create a roadmap for the future of payments.
Our future lies in a secure, convenient, and data rich digital wallet. The pace of innovation that is driving this change is going to be absolutely incredible. The future of any financial institution lies in focusing on and creating an elaborate payments strategy. If you lead with payments, you build your brand. A top of wallet strategy leads to top of mind which gives you an opportunity to become the primary financial institution.