Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
Fidelity National-Worldpay deal would further consolidate debit processing market
26 Mar 2019 12:36 pm by Brian Baker
The proposed merger of Fidelity National Information Services and Worldpay will further consolidate debit processing, a key function in the payment ecosystem.
If approved, the deal and the recent proposed combination of Fiserv and First Data would leave half the debit processing market in the hands of two companies. Competition regulators consider market concentration of major competitors when they review a deal.
Fidelity National, known as FIS, controlled 13 percent of the US debit processing market in the first quarter of this year, according to financial data firm FedFis, while Worldpay’s share stood at 6 percent. Fiserv and First Data held 23 percent and 8 percent of the market, respectively.
In its annual report, Worldpay identifies FIS as a competitor in its issuer solutions segment, which processes transactions for credit and debit card issuers, along with Fiserv and First Data. This step in the payments process verifies that a card holder has the necessary funds to complete a transaction.
FIS provides a variety of back-office services for financial institutions, including payment processing and systems for trading and core operations. Most of Worldpay’s business centers around merchant acquiring, or the retailer side of payments. FIS hopes its existing presence in emerging markets will help Worldpay to reach new businesses.
Worldpay is the largest merchant acquirer in the US, according to data from The Nilson Report, a publication that tracks the payments industry. At the end of last year, the top five merchant acquirers held an 81 percent share of the market, up from 71 percent a decade ago. First Data, Chase Merchant Services, Bank of America and Global Payments round out the top five.
“We’re very, very small in merchant acquiring,” FIS CEO Gary Norcross said on a conference call with analysts following the deal’s announcement. Adding Worldpay will allow the company to “penetrate that high-growth secular market,” he said.
The $34 billion combination, announced last week, will create a fintech giant with more than $12 billion in revenue. FIS shareholders will own 53 percent of the combined company with Worldpay’s shareholders owning the rest.
The deal comes amid a wave of consolidation in the payments industry. Fiserv and First Data agreed to a $22 billion merger earlier this year, where antitrust regulators could focus their review on competing debit networks owned by the companies.
Networks such as Visa and Mastercard sit in the middle of the payment process between merchants and card-issuing financial institutions such as Bank of America or JPMorgan. Merchant acquirers enable retailers to accept card payments, while issuer processors ensure that a customer has available funds for a transaction.
Visa and Mastercard have come to dominate the card network business, accounting for 85 percent of combined credit and debit purchase volume in 2017, according to The Nilson Report.
FIS and Worldpay also own debit networks, but that fact is not likely to draw antitrust scrutiny, according to Eric Grover, a payments analyst, because their collective market share is not significant. “It is inconceivable that their combination would raise anti-trust concerns,” he said in an email.
Cincinnati, Ohio-based Worldpay was itself acquired by Vantiv in a $10.6 billion deal that closed last year. The combined company took on the Worldpay name. The companies didn't receive a second request for information from antitrust regulators.
A 2015 merger between FIS and SunGard Data Systems was also permitted to go forward with an early termination of the antitrust waiting period less than a month after the deal was announced.
FIS Chairman and CEO Gary Norcross will continue to serve in those roles at the combined company, which will be named FIS. Worldpay CEO Charles Drucker will serve as its executive vice chairman.
The transaction requires approval from US antitrust authorities, the UK’s Financial Conduct Authority and the Dutch Central Bank. The companies expect the deal to close in the second half of this year.
US antitrust authorities stand to gain high-ranking DOD ally with Kendall nomination for Air Force Secretary10 May 2021 12:00 am by Curtis EichelbergerUS antitrust authorities could gain a powerful ally in Frank Kendall if former Pentagon acquisitions chief is confirmed.