Fiserv buying First Data in $22 billion deal to build fintech scale

Fiserv will acquire First Data in an all-stock deal with a value of about $22 billion that will combine two of the financial services industry's largest technology and processing companies. Fiserv shareholders will own almost 58%t of the combined company, with First Data's shareholders holding the rest. The acquisition is expected to close in the second half of 2019.

The combined company will be called Fiserv; and current Fiserv President and CEO Jeffery Yabuki will be CEO and chairman. Current First Data Chairman and CEO Frank Bisignano will be president and chief operating officer.

Jacob Kepler/Bloomberg

Both companies have been adding new technology to adjust to the expansion of digital financial services that have threatened traditional business models for companies that service financial transactions. It's an environment that challenges these companies despite their considerable size, and has put pressure on companies such as Ingenico, which traditionally thrived in a plastic card-centered commerce system.

The growth of e-commerce and digital has helped relatively smaller companies that serve that model, such as Square and Stripe, and is forcing the larger established companies to team up and diversify to create larger umbrellas to add a larger and more automated menu of services to lure banks and merchants that no longer want multiple vendor relationships.

First Data has enhanced its point of sale technology, and has made acquisitions such as its $750 million CardConnect deal to build e-commerce, CRM and security. It has also enhanced its distribution via collaborations such as its recent deal with Alipay.

And while Fiserv controls more than a third of the U.S. core banking market, it also finds itself challenged to deal with the encroachment of fintech companies.

The Fiserv/First Data deal's impact starts with massive scale that will be a formidable competitor to both bank technology vendors and merchant acquirers. Fiserv has more than 12,000 financial services clients in 80 countries, and First Data serves more than 6 million merchant locations.

When combined, Fiserv and First Data create a global franchise that can serve both merchant and card-issuing interests, covering account processing, digital banking, card issuer processing, e-commerce, and integrated payments. It also opens new channels for First Data's Clover point of sale system.

Fiserv and First Data will combine merchant and cash management services, supporting merchant account enrollment to be integrated with digital banking; and combine First Data's corporate payment services with Fiserv's billing technology.

This is a developing story ...