Fidelity National Information Services Inc. has created an outsourcing business in Brazil, in a move that showcases the company’s strategy of linking the processing of payment card transactions and paper checks.
Fidelity, of Jacksonville, Fla., announced Fidelity BPO Brazil Ltda. on Monday. It also said that it had signed 10-year contracts with two of Brazil’s four top nongovernment banks for back-office business process outsourcing and item processing, and that it had acquired the company that currently provides those services to the two banking companies.
One of the customers is Unibanco. Fidelity did not name the other, though it appears to be either Banco Bradesco SA or Banco ABN Amro Real.
Fidelity said in March that it had formed a joint venture with Bradesco, which it identified at the time as the largest private bank in Brazil, and Real, the fourth-largest, to provide credit card processing for those two banks and others. Bradesco and Real are to move their card processing to the joint venture, Fidelity Processadora e Servicos SA, over the next two years.
Michael Sanchez, the president of Fidelity’s international division, said in an interview Monday that the shift would validate the assertion his company made last fall — that check processing and card processing fit together — when it agreed to buy the card processor Certegy Inc. of St. Petersburg, Fla. That deal closed in January.
“This is the first place where the market has rationalized that,” Mr. Sanchez said. “The market is saying, ‘We want to have a company that can do both.’ ”
In establishing the item-processing unit, Fidelity agreed to buy Proservvi Empreendimentos e Servicos Ltda.; Mr. Sanchez said that Unibanco, the unnamed bank, and about five or six other Brazilian banks have outsourcing agreements with Proservvi. Fidelity paid $2.8 million in cash and assumed $13.3 million of debt in the deal, which closed last week.
Mr. Sanchez said that Fidelity was planning to establish the item-processing business with or without acquiring Proservvi, and that because Proservvi was about to lose two of its biggest customers, it was receptive to Fidelity’s offer. “The company had the choice of losing its customers to Fidelity or becoming part of Fidelity,” he said.
Fidelity’s talks with Unibanco dated back about eight months, to before the Certegy acquisition, though acquiring the processor helped land Unibanco as a customer, Mr. Sanchez said.
“The banks had outgrown their local suppliers,” he said. “It certainly helped that we had closed the other deal. It proved Fidelity was very serious about the Brazilian market.”
Fidelity said that revenue from Proservvi clients was about $16 million last year, and it projected revenue of more than $1 billion over the next 10 years from new and existing processing contracts in Brazil.
“The acquisition gave us the infrastructure” and “the contracts gave us the revenue,” Mr. Sanchez said. “We’re off and running out of the gate.”
Fidelity said it plans to invest $13.6 million to provide working capital to the new operation, and hopes to increase efficiency by making Proservvi’s 40 operations centers more uniform.
“Our job now is to standardize those centers so it’s a franchise business, rather than each of these centers running its own way,” Mr. Sanchez said.
Fidelity said it expects the transaction to be neutral to earnings this year and to add to them beginning in 2007.
William Martorelli, a principal analyst at Forrester Research Inc. in Cambridge, Mass., said Fidelity seems to be taking an effective approach in entering a fast-growing market. “A lot of companies prefer to have a lot of local capability from their suppliers,” he said.
Fidelity is 51%-owned by Fidelity National Financial Inc., also of Jacksonville. The two announced a plan in April to separate the ownership.
