<img alt="" src="https://secure.insightful-enterprise-intelligence.com/784283.png" style="display:none;">
Pat McGrew,David Stabel
6057541
https://ki-dev.outsystemsenterprise.com/CEPContentPortalUI/img/logo3.png

More Consolidation as Fiserv Acquires First Data

Jan 18, 2019 11:22:28 AM

Billing and statement processing outsourcers with payment capabilities are continuing to consolidate in an attempt to dominate both the global payment and FinTech markets. On January 14th, 2019, Fiserv and First Data announced that they plan to consolidate their complementary technologies through a $22 billion deal that unites their strong merchant payment platforms, digital banking/billing solutions, and risk management options. Once the acquisition is complete (planned for 2H2019), Fiserv intends to refinance approximately $17 billion in First Data debt and to operate the combined business under the Fiserv name.

 

Fiserv is already one of the larger technology providers to the banking industry, but by acquiring First Data’s core technologies in new customer enrollment and digital payment management, they will further enhance their global footprint. First Data has built a solid foundation of billing, statement, and payment companies in over 100 countries. A significant portion of their small and medium-size business client base use the Clover payment platform, common in restaurants and small businesses.

This monster deal is the latest in an on-going series of acquisitions and mergers consolidating industry players into heavyweights. Last year alone, OSG Billing Services acquired NCP Solutions from Harland Clarke Corporation, Canada’s Foremost mediaOne, and the UK’s Communisis PLC, expanding their turnover, capabilities and revenue on both sides of the Atlantic.

Strengthening Market Positioning

By broadening their portfolio, Fiserv strengthens its position against FinTech startups. These smaller, more nimble tech companies have made a disruptive splash in consumer finance by providing mobility and transparency to younger generations of customers who bank primarily from their smartphones and expect financial services to be available anytime, anywhere. Flexibility and superior service are crucial elements of a successful consumer communications strategy. InfoTrends’ 2018 North American consumer survey for transactional communications found that improved customer experience, additional payment options, and the power to pick communication channels can encourage engagement and loyalty, especially among Millennials.

The merger also allows Fiserv to expand into adjacent markets. Today, more than a third of financial institutions in the United States rely on Fiserv’s core processing. Through this deal, Fiserv will assume First Data’s role as a provider of secure, innovative payment technology and services to more than six million merchants and financial institutions around the world, from small businesses to the world’s largest corporations.

How does this impact the communications outsourcing market?

Of course, consolidation of giants like Fiserv and First Data means that there is a shrinking pool of large-scale outsourced processors. The combination of global payment platforms with secure communication delivery both online and via mail means that once the two have integrated systems, optimized workflows, normalized pricing structures, and built comprehensive end-to-end packages to address the needs of their combined customers, mid-size outsourcers and in-plants may find it harder to compete without building their own niche products that address specific, hard-to-fulfill needs.

InfoTrends’ 2017-2022 forecast on Customer Communications Delivery shows that despite the erosion of transactional mail volumes overall, outsourced communications volume remains constant as enterprises close down in-plants and shift to outsourced production.

What Does It Mean for Customers?

Nevertheless, the integration of Fiserv and First data won’t happen overnight. They need time to integrate and determine how to carry their branded products forward, as well as what new products and services they might want to introduce. Their core clientele – the banks, insurance companies and other FinTech players – have been through this before. They know that there could be valuable options for them down the line, so they may be likely to stick with them during the transition. Smaller customers of either company, however, may be concerned they’ll slip through the cracks during and even after this period of transition. They should be asking questions today to build a box around their expectations since getting hard answers may take some time.

InfoTrends Opinion

The planned acquisition underscores a trend that we are observing in the customer communications market for the last several years: An ongoing consolidation among major outsourcing processors. This deal would be major. Not only in deal-size, but would it create one of the biggest, if not the biggest, financial services ecosystem in the U.S. This ecosystem would then not only serve banks and insurers, but also the e-commerce industry.

Traditional competitors should be alarmed by this anticipated acquisition but so should upcoming FinTech providers such as Square, Stripe, Braintree, TransferWire, and others. It will become more difficult to compete with a system that covers the whole payment supply chain, from payment processing to innovative end-user payment technology.

 

Keypoint Intelligence – InfoTrends, continues to track the customer communications market from the perspectives of consumer preference, business strategy, and investment, as well as through enterprise outsourcing services and the technologies that drive these communications. Our 2019 annual global research and forecasts are now underway. For more information on how to gain access to this market intelligence, contact Deanna Flanick today at deanna.flanick@keypointintelligence.com!