Wednesday , August 12, 2020

How Fiserv’s First Data Deal Cemented Its Long-Term Payments Strategy

Fiserv Inc.’s acquisition of First Data Corp. this year was the first of a trio of big mergers that has made 2019 the year of the megadeals in payments. On Thursday, a key Fiserv executive close to the action explained how the $22-billion acquisition served as the capstone to a long-term strategy at Fiserv to transform itself into a major payments company.

“In 2018, we launched the first enterprise payments strategy for Fiserv. We began to think of the company almost entirely as a payments company,” said Devin McGranahan, a 20-year veteran of McKinsey & Co. who joined Fiserv’s management ranks in 2016 and now serves as executive vice president and a senior group president for payments.

But the groundwork for that strategy had been laid 12 years ago, McGranahan explained, when Fiserv acquired CheckFree, an early entrant in electronic bill pay, for $4.4 billion in cash. He was close to the company’s strategic thinking even then as an advisor. “That was the beginning of us becoming a payments company,” he told the audience at the Electronic Transactions Association’s Strategic Leadership Forum in Boca Raton, Fla.

McGranahan: “In 2018 … We began to think of [Fiserv] almost entirely as a payments company.”

By last year, the long-term strategy was nearly complete—but for one key component. “In 2018, we realized we were missing an important element, commerce, or merchants,” McGranahan told the audience of top payments-industry professionals. With more than half its operating revenue derived from merchant acquiring, and with some 6 million merchants in its portfolio, that was a gap First Data was eminently qualified to fill.

Now, Fiserv is bent on blending First Data’s capabilities with its historic strength in core account processing, a vital but unflashy business. “It’s hard to differentiate core processing,” McGranahan said. In this respect, the technology acquisitions First Data had made were of prime interest, he added.

First Data’s smart-terminal business, Clover, particularly appealed to Fiserv. So did CoPilot, a portfolio-management portal created by CardConnect, a merchant-services provider First Data bought in 2017. “We have the largest bill-pay platform in North America. We have Clover and CoPilot. How do we integrate bill-pay into the Clover platform, for example, and stitch these companies together to add value?” McGranahan asked.

Clover, which First Data acquired seven years ago, now features more than 400 commerce apps. First Data last year reached 1 million shipments of the device, according to Bala Janakiraman, a First Data executive vice president who shared the stage with McGranahan.

The next step, both men said, is to adequately fund new payments features under the Fiserv banner. To that end, the company is dedicating $500 million to innovation, Janakiraman said.

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