Payments' big M&A players to apply new scale to old problems

Now that the big, multi-billion dollar payment deals of the past year have closed, the companies must figure out how their new scale can address tasks such as software migrations or data sharing compliance in specific markets.

Fiserv, for example, will shortly begin testing NFC technology in Poland. Called SoftPOS, it uses the NFC function in a merchant’s smartphone or tablet to support payments from contactless cards, handsets and wearables. Samsung and Visa are also collaborating on the project.

First Data’s payments technology diversification over the past several years was one of the lures for Fiserv when it agreed to acquire First Data. The project will later expand beyond Poland to the rest of EMEA and APAC, and is one of the first tests of how well Fiserv and First Data can combine to deliver a range of payments to merchants that may be committed to the likes of Square, Stripe and PayPal. Those smaller rivals have also made deals and raised funds to grow business in international markets.

Now that the $22 billion deal has closed, Fiserv and First Data can tangibly combine their systems, people and development to build new products to try to tap into new markets.

“One of the things that struck me when the deal actually closed was we could get into what we have in terms of complementary services,” said Nigel Motyer, senior vice president of global business solutions for EMEA at Fiserv.

Motyer joined First Data in 2011 and has worked in card services for much of his career, mostly recently in First Data’s merchant acquiring business in EMEA.

One of the criticisms of the recent large payment deals is they’ll be difficult to convert, creating more opportunity for relatively smaller challengers to introduce new products and markets quickly.

“It’s been a fascinating journey over the past six months,” Motyer said. “There isn’t a lot of overlap in EMEA, so what we’ll be able to do is work on combining core banking with some of the acquiring and processing capabilities that we had at First Data.”

In the case of the new NFC project, Fiserv can lean on First Data’s expertise in the region, particularly at launch. Motyer is part of a unit that focused on growing merchant business in Poland and surrounding markets like Germany, Switzerland, and nations that are farther afield that will eventually be part of the deployment, such as the U.K. and Australia.

The team was also involved in the introduction of First Data’s Clover point of sale system to Ireland, the U.K. and other parts of Europe. The acquired Clover is a key part of Fiserv’s strategy to counter smaller fintechs, given that it has more than 450 apps, many from third party developers.

“Clover has really been a game-changer for us in terms of building value-ads,” Motyer said.

Motyer also has experience with Poland's national initiative to streamline the country's payment system, such as promoting mobile point of sale and discouraging cash.

“Poland has created a model that gets stakeholders in the acquiring game to create and fund digital payments,” Motyer said, adding First Data has an Android-based client network in Poland. “Opening that device into a payments acceptance point opens up a new set of customers.”

Stripe and Square have both recently expanded, with Stripe drawing new investment that grew its valuation to $35 billion, and Square extending its APIs to reach third party developers.

“The Clover terminal provides significant capabilities to the market. Its app-based approach makes it more like loading the consumer mobile device with apps. It’s highly configurable,” said Krista Tedder, head of payments for Javelin Strategy & Research.

The combined Fiserv/First Data will also seek opportunities in PSD2 and GDPR compliance in the region, Motyer said. PSD2 compliance guides open banking, or data sharing between fintechs and banks to support e-commerce. This has been a mess in Europe, with a huge percentage of companies missing deadlines for strong authentication and requesting regulatory extensions.

The challengers are active here as well, with Stripe making investments are part of a global open banking push. A TSYS spokesperson referred to the company’s recently launched TSYS Authentication Platform, from the company’s issuer solutions segment, that it announced on Sept. 12, in advance of the Sept. 14 PSD2 deadline. TSYS redesigned its authentication platform to add different fraud prevention services quickly to respond to emerging threats. FIS did not return a request for comment, though it lists a range of PSD2 and API options on its site.

“There is also an omnichannel angle as well to the competition,” said Ron Van Wezel, a senior analyst at Aite Group. “The ability for providers to serve merchants across all channels physical and online — there aren’t many payment service providers who have a true omnichannel solution on a European level.”