FIS, Fiserv and Global Payments are larger, but so is the fintech threat

More than $100 billion in deals turned the payment industry upside down over the past year. Now that the dust has settled, these new companies are set to spend the next 12 months and beyond battling each other and a dynamic market of technology challengers that have also gotten larger.

The success of Fiserv’s acquisition of First Data, FIS’ purchase of WorldPay, or Global Payments merger with TSYS rides on the companies’ ability to address merchants that are under extreme pressure.These companies spent much of the past year executing their deals, and now must put their new networks to work in the next year.

Retailers are struggling because of the influence of e-commerce from firms like Amazon, with thousands of stores closing in 2019 alone. And merchants also need to reinvent their business models quickly to accommodate a mix of mobile, online and in-store experiences for shopping, payments and delivery or pickup.

“Retailers are requiring full omnichannel solutions, the line between face to face transactions and card not present transactions is blurring,” said Cameron Bready, who has been president and COO of Global Payments since September.

Jason Alden/Bloomberg

The mergers came in part to counter the fast rise of firms such as Stripe and Square, which offer digital payment hookups for small businesses. Both of these firms also diversified as the legacy companies were merging.

Stripe's valuation has passed $35 billion. As FIS, Fiserv and Global Payments build new omnichannel and mobile payments technology in the coming months, Stripe will be building its Global Payments and Treasury Network, including products that cover payment technology, billing, and financial services. Square plans to use its data to fuel loans for micro-businesses, bringing Square closer to combining financial services with merchant acquiring.

And the challenges to retailers aren't just coming from Amazon, Stripe or Square. As customer experiences change in retail, merchants are also becoming more specialized. Innovation now includes testing products and buying as part of the same function.

The relaunched Toys R Us, for example, has set up stations in which shoppers can try toys and then digitally pay for them on the spot. To mimic the online experience, retailers are moving checkout around stores to reach consumers where they are shopping. A New York-based startup, ShopFulfull, is using elements of the sharing economy to court small businesses by sharing retail space and overhead.

The new goal in checkout-free retail is to make check-in more important than checkout, since that enables merchants to better personalize marketing and track sales through a mix of shopping and payment data.

Consumers have become used to seamless ride-sharing apps and e-commerce. As new payment technology de-emphasizes or even eliminates checkout as is the case with Amazon Go and its competitors, retailers will need to find specific ways to match their models with the changing customer experience.

“Our approach to address the needs in the market will be through software, to differentiate in different vertical markets,” Bready said, adding that means developing products that bring payments “out of the back office” and using the data that comes from transaction flows to find new sources of revenue for merchants. “Autonomous checkout is at the fore of these trends. We’re making sure we’re eliminating any friction that may occur,” he said.

Moves such as making the Genius omnichannel platform, which TSYS picked up from Cayan, available to Global’s ISV portfolio and distribution channels are one way to execute this strategy, according to Rick Oglesby, president of AZ Payments Group.

TSYS' ProPay platform can also combine with Global Payments network to help the combined company take advantage of the growing payment facilitator market. “There’s lots of complexity and risk in making big systems work together. We can expect innovation around the edges more than at the core, and a big focus on integrated payments,” Oglesby said.

In the next year, FIS will be positioned to focus on AI and identity management technology to reduce account takeover and improve anti-money laundering, with both U.S. and global needs for the payments market, said Krista Tedder, director of payments for Javelin Strategy & Research.

FIS can also manage a unified payment hub that would support transactions from multiple platforms, Tedder said. FIS also has a rewards program that the WorldPay business may look to utilize, according to Tedder.

Retail concepts can also be applied to banking, since the deals combine clients and services from both sides. Fiserv can look for ways to leverage Clover to upgrade bank branches, ATMs and self-service kiosks, according to Tedder, who added that Clover is a terminal that is based on the ability to add apps, which is similar to how consumer sad what they need for mobile devices.

“When I look at how the market has moved in the past few years, there’s been a notable shift toward experiences,” said Bruce Lowthers, president of banking solutions at FIS, adding the newly combined company will be targeting a range of clients that includes merchants, but also financial institutions such as brokerages, banks and hedge funds. “You can argue that technology is driving it, but it’s really the expectation of people as consumers. They want their entire lives to be as simple as shopping on Amazon.”