FIS’s Top Brass Looks for Big Results Among Small Sellers Following the Payrix Deal

FIS Inc.’s acquisition of Payrix Solutions LLC, announced Monday, comes as e-commerce is booming and as payments platforms are weaving payments capabilities into the software they’re selling to online merchants. The deal will also help FIS, known for its processing capabilities for enterprises, reach small and medium-size online sellers, top management at the company said early Tuesday.

Atlanta-based Payrix, a 7-year-old specialist in technology for so-called embedded payments, will bring high-growth e-commerce platforms as well as small and medium-size online sellers into FIS’s client base, said Stephanie Ferris, recently promoted to president after coming to FIS as a result of its big Worldpay acquisition in 2019. 

“It’s a small but highly strategic acquisition for us,” Ferris told equity analysts on a Tuesday morning call to discuss FIS’s fourth-quarter and full-year 2021 results. One key to the deal, terms of which were not announced, is the ability to ease the onboarding of small sellers in a manner Ferris compared to the Stripe Connect service offered by e-commerce payments specialist Stripe Inc.

FIS already works with about 1,000 independent software vendors, typically small operators that specialize in programming—or embedding—payments and other financial capabilities into software used by small businesses, including online merchants. But with Payrix, the company has added critical capabilities, including onboarding and underwriting services, as well as know-your-customer checks. “We can now bring that to our ISV base,” Ferris added.

More broadly, FIS chief executive Gary Norcross hailed a quarter that represented “the strongest operating performance in our 52-year history,” though the Omicron variant of the Covid-19 virus depressed results in the company’s merchant-processing division, he said. 

Revenue from the unit’s small and medium-size merchant clients, which had grown fully 18% in the third quarter compared to the same period in 2019, slumped to an 11% growth rate in the fourth quarter. In travel, especially with respect to international volume, “the Omicron variant had a significant impact,” noted chief financial officer Woody Woodall during the earnings call.

Norcross hailed a new integration in which FIS can offer improved authorization rates to client merchants by combining issuing and acquiring data in cases where the company performs both functions. FIS offers technology in merchant processing, banking, and capital markets. Netflix is among the first clients to tap into “this extraordinary new capability,” Norcross told the analysts.

For the quarter, revenue totaled $3.7 billion, up 11% year-over-year. For the year, revenue came to $13.9 billion, also an 11% increase. Merchant Solutions, the second-largest of FIS’s three operating divisions, recorded $1.2 billion in revenue for the quarter and $4.5 billion for the year, increases of 19% in both cases.

FIS, which has just completed the integration of Worldpay, isn’t taking its eyes off of potential deals, Norcross added. “M&A will continue to play an important role,” he said. “We’re looking at things that can accelerate our growth.”