FIS Eyes Recurring Banking Solutions Growth After Sale of Worldpay Stake

Fidelity National Information Systems (FIS) reported fourth-quarter earnings results that showed momentum in recurring revenue metrics as financial institutions expand their digital banking initiatives and offerings.

Earnings materials Monday (Feb. 26) detailed that banking and capital markets-related revenue growth in the fourth quarter showed 7% recurring revenue growth as the segment logged $2.4 billion in sales. The capital markets segment recorded 1% revenue growth and notched 7% recurring revenues. For the full year, banking solutions revenues were up 2%, and capital markets revenues gained 5%.

Demand for Digital

FIS struck a deal in November, now completed, to sell a majority, 55% stake in Worldpay Merchant Solutions operations to private equity firm GTCR.

During a conference call with analysts, FIS CEO Stephanie Ferris said that after the sale of Worldpay, “FIS holds a meaningful 45% stake in Worldpay, and the two companies will continue to work together closely in the future. The strategic go-to-market partnership we established with Worldpay through our commercial agreements preserves the key value positions for clients of both companies.”

Ferris also told analysts that the trajectory of the company’s recurring revenue growth exiting 2023 will remain sustainable as FIS seeks to capture market share gains and expand into newer verticals. It is also seeing increased demand from larger financial institutions for digital banking solutions.

Investors bid the shares higher by about 2% in early trading Monday.

The CEO noted that for enterprise core platforms, the company is seeing increased demand from regional community banks for bundled offerings of core digital payments functionality.

“These banks have all deployed solutions from our digital suite, which offers deeper personalization capabilities in support of their deposit growth, product cross-sell and customer experience improvement objectives,” said Ferris.

FIS, she added, has a growing roster of clients either in contract or in the pipeline to become FedNow® Service-certified to send and receive payments.

Chief Financial Officer James Kehoe said on the call that looking ahead, revenue growth for this fiscal year is projected to be in the range of 3.8% to 4.3% on an adjusted basis. He said the company’s backlog of business remains stable at about $23.5 billion.

Asked on the call about the impact of a proposed Capital One/Discover deal, Ferris noted that “with the strategic relationship that we struck with Worldpay, going forward, we’ll still have access to the acquiring piece” and added that FIS maintains relationships with both Capital One and Discover.