There is scale — then there is scale. There is growth, and the resulting — often massive — increase in customers and revenues in markets across geographies, all achieved through organic growth, the launch of new products, the deployment of new technologies, the formation of new partnerships and even tuck-in acquisitions.
Then, there are the game-changing moves that do all of that — and more. In those situations, scale is achieved on a new level when complementary ecosystems combine to create something entirely new.
Today, in and around payments, we are watching scale, well, scale — digitally and globally. In addition, the demand for choice and new payment technologies by the modern, mobile, digitally savvy consumer is forcing everyone in the payment and commerce ecosystems to up their games.
Fresh evidence of that was seen on Monday (March 18) when Fidelity Information Services (FIS) said it would acquire Worldpay for $35 billion in cash and stock. The deal between FIS and Worldpay comes at a time when consolidation has become one of 2019’s hottest trends. (In January, Fiserv announced it would acquire First Data for $22 billion in, what was then, the biggest deal in payments history.)
FIS provides core banking and financial services technology for some 20,000 clients in 130 countries. Worldpay, the world’s largest merchant services player, processes more than 40 billion transactions each year, and supports more than 300 payment types in more than 120 currencies.
Like Fiserv and First Data, this deal will combine the issuing and merchant services sides of the payments ecosystem in an effort to create new business models and payment flows between those two, once disparate, endpoints. In a new PYMNTS interview, Karen Webster and FIS COO Bruce Lowthers discussed the need for scale in payments, particularly now.
“Scale really does matter,” Lowthers said, and not only “because the globe is coming together from a commerce perspective.” The appeal of scale also applies to what FIS is getting from its Worldpay acquisition. The company “is such a dominant player in the eCommerce space globally,” he added, one of the most attractive things about Worldpay from FIS' point of view.
Generally, Lowthers said the deal is designed to bring two endpoints of the digital commerce and payments experience together under one large, global umbrella. The end-to-end opportunity isn’t simply to connect the dots that already exist in payments between the issuing and merchant sides of the business, but to do so in a way that leverages the individual assets of each entity to “really accelerate new products to market.”
Some of those new service combinations, he said, could leverage mobile and digital banking to create “fresh opportunities across the vast and growing landscape of payments,” including new payment flows between consumers, businesses and merchants. Lowthers also explained that there are opportunities to accelerate the distribution of loyalty as currency, as well as installment loans at the point of sale.
That scale — geographic, and covering the entire transaction-and-commerce experience — will help the new organization (which will retain the FIS name) to stand out from a crowded field of payment and commerce services providers, he noted.
“No one in the market is doing what we are doing,” Lowthers said. “We just created a new global commerce community.”
What Customers Are Saying
Lowthers mentioned that he’s been on the phone with clients in recent days, including executives from smaller banks and credit unions, who have questions about how the deal will impact them. He’s been reassuring those financial institutions that FIS will continue to work with them “in a cost-effective manner,” even as the new FIS starts to flex its new muscles.
“Feedback is very positive across the board,” he said.
Due to the “trust points” that Lowthers said FIS has built over the years, he feels confident to reassure those clients who might have some apprehensions about what’s coming next.
Even with scale, no matter the variety, not every company can deliver every service. That certainly holds true in the digital economy, where innovation gains fuel from growing global reliance on eCommerce, and the spread of different payment methods and models. FIS, according to Lowthers, is open to serving as — what essentially amounts to — a distribution channel for other companies that might offer services not covered by FIS or Worldpay.
“We’ve taken the stance that you don’t have to build” every product, he said. “We are more than happy to partner with others, and deliver to clients” the services from other companies that fit into the larger offering. “They’ve done a similar thing at Worldpay, and we seem very much aligned on that. Inorganic growth is still on the table for us. If we see something that is really strategically attractive, we will move forward with those types of things.”
That’s still a bit in the future. For now, the immediate concern is to close the deal, integrate the two corporate teams and get scale right. “Changes to commerce are coming,” he added.