Consolidation in Payments Continues as FIS Announces Plans to Purchase Worldpay for $43 Billion
It is commonplace to refer to payments as a fragmented ecosystem with complicated value chains, but continued consolidation on a massive scale is simplifying the landscape. News broke today that Fidelity National Information Services (FIS) has agreed to purchase the payment processor Worldpay for $43 billion, which includes some $9 billion in debt. The news follows by several weeks Fiserv’s announced plans to purchase payment processor First Data for $22 billion. This is unlikely to be a coincidence, but demonstrates how quickly fintech players are moving when they see the need, and indeed, that is the point of consolidation — growing larger in order to provide better solutions more efficiently.
The combined company will be based in Jacksonville, Fla. and have $12.3 billion in annual revenue. “Upon closing, the combined company will be positioned to offer best-in-class enterprise banking, payments, capital markets, and global eCommerce capabilities empowering financial institutions and businesses worldwide,” FIS noted in a press release this morning.
Cincinnati, Ohio-based Worldpay was formed from the 2017 combination of Vantiv (created by Fifth Third Bank in 1971) and U.K.-based Worldpay, created in 1989 by NatWest (since acquired by RBS) and spun off in 2009. The combined company was the top merchant acquirer in the U.S. The other top acquirers belong to the nation’s largest banks, with the exception of First Data and a few remaining independents such as Global Payment Systems, which also owns Heartland Payments, and TSYS. Once the Fiserv and FIS deals close, nearly 80% of processing volume will pass through either a Top 5 bank or the two leading core providers.
Consolidation in payments is happening so rapidly that Worldpay is still working on integrating its Vantiv and Worldpay pieces. Worldpay processes more than 40 billion transactions a year, and FIS has relationships with more than 14,000 banks.
The U.S. Department of Justice is currently reviewing the Fiserv – First Data deal to determine its effect on the U.S. debit card market, as the acquisition would give the combined company control of both the industry-leading Accel and Star debit networks. It is not yet known if the FIS – Worldpay deal, which will have a more global focus, will invite similar scrutiny, or affect the considerations of the Justice Department on the previous case.
The combined companies in both cases can be expected to increase technology spend and enjoy efficiencies of scale from combining operations. The FIS – Worldpay transaction is expected to close toward the end of the year, and executives laid out a plan of 8% to 9% growth within three years on a conference call this morning.
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