Saturday , April 4, 2020

With Expanded Merchant Business Thanks to Worldpay, FIS Seeks to Exploit Its Acquiring Chops

When Fidelity National Information Services Inc. closed on its $43 billion acquisition of Worldpay Inc. last summer, the payments industry knew the massive deal would boost FIS instantly into the top ranks of global merchant processors. On Thursday, the company let the world know just how big its position in that market is and how it intends to capitalize on that position.

FIS finished the fourth quarter, its second full period with Worldpay in its tent, with $1.12 billion in revenue from its merchant business, up from $71 million in the year-ago period, the company reported as part of its quarterly results. As a result, the merchant business now accounts for about one-third of Jacksonville, Fla.-based FIS’s total revenue, up from just over 3% a year ago. The company reported the unit expanded 10% over the previous quarter without factoring in the Worldpay business.

Norcross: “We continue to focus on any [merger-and-acquisition activity], we watch that very closely.”

Gary Norcross, FIS’s chief executive, made it plain expectations for the newly expanded business remain high. In an initiative announced Wednesday, the company is working with PayPal Holdings Inc. to launch later this year a service called Premium Payback that will allow consumers to collect rewards payouts when checking out at stores. That program, Norcross told stock analysts listening to FIS’s fourth-quarter earnings call, holds “huge opportunities.”

At the same time, the merchant unit’s e-commerce and integrated-payments business, much of which came with Worldpay, now accounts for 45% of the unit’s revenue, Norcross reported. Integrated payments includes business resulting from integration of payments capability by software developers. The two segments together are growing at percentages in the “mid-to-high teens,” FIS reported, without giving further detail.

Overall, Woody Woodall, FIS’s chief financial officer, pronounced the integration of Cincinnati-based Worldpay, the “most significant and transformational acquisition in our history” and added the integration of the big processor is running “ahead of schedule.”

Next up could be expansion into more international markets. “We’re actively working through those strategies,” Norcross said. “More will be coming on that.” In Europe, the proposed merger of two French companies, processor Worldline S.A. and processor and terminal maker Ingenico Group S.A., announced last week, could create a formidable competitor. “We continue to focus on any [merger-and-acquisition activity], we watch that very closely,” Norcross said.

With respect to recent news that Visa is revising—and, in some cases such as e-commerce transactions, raising—interchange rates, Norcross called the matter a non-issue for FIS, echoing the position other processors are taking. “We typically pass all of those [changes] through in our fee structure, so we don’t see any impact at the moment,” he told the analysts.

For all the growth in merchant processing, core-banking software remains FIS’s biggest business, generating $1.56 billion of revenue in the quarter, up 6% over the year-ago period. And apparently more business is on the way. “The pipeline [of projects] is as full as I’ve ever seen for core banking,” Norcross said.For the quarter, FIS reported $3.34 billion in total revenue, up 54% over the same period in 2018, with most of that growth stemming from the addition of Worldpay. Organic growth, the company reported, was 7% year-over-year. For all of 2019, revenue totaled $10.33 billion, up from $8.42 billion in 2018. The 2019 result includes five months of Worldpay activity and a 6% organic growth rate.

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