Buying its next-largest competitor in core processing would make Fidelity National Information Services Inc. a giant in banking technology and position it against the even larger companies it expects to enter the market.

The Jacksonville, Fla., company announced a $2.94 billion stock deal for Metavante Technologies Inc. on Wednesday.

Lee Kennedy, Fidelity's president and chief executive, said the purchase would make his company the world's largest provider of banking technology products and services, and that it would need that kind of scale to face the newcomers that are eyeing the payments market.

"There are going to be larger competitors in this space in the not-so-distant future," including Oracle Corp. and International Business Machines Corp., Kennedy said during a conference call with analysts.

Both Oracle and IBM are already in the financial services technology market, he said. "They dabble in this space, but not in a big way yet."

Oracle purchased a controlling stake in the Indian core processing software vendor i-flex solutions ltd. in 2005. Though popular elsewhere in the world, its Flexcube product has not gained support in the United States.

IBM is also looking for a bigger role in the banking market, Kennedy said. "We know that they're going to be in it, one way or another."

He also mentioned Hewlett-Packard Co., whose chief, Mark Hurd, is the former CEO of NCR Corp.

"Those companies have the capital and resources to move into a market when they want to," Frank R. Martire, Metavante's president and chief executive officer, said in an interview.

Technology spending has been pushed to the back burner at many banks. Fidelity and Metavante said they would be able to generate significant savings by joining forces.

Because the two companies have similar product lines, cutting costs was a big factor in their decision to get together. Executives said they anticipate $260 million of "cost synergies" through consolidating duplicated operations and streamlining product offerings, with $210 million of the savings to be achieved by the end of next year.

"Our intention is not to cut cores or core platforms," but rather "the ancillary products around them," Michael D. Hayford, Metavante's chief operating officer and a senior executive vice president, said during the call. "Those relationships are so strategic for the ability to cross-sell. We don't want to jeopardize any of those."

Christine Barry, a research director at Aite Group LLC, said bankers increasingly will demand integrated data processing systems from well-integrated vendors.

"It's almost impossible to deal with multiple vendors, because of all the information you have to provide to regulators," she said. "The fewer vendors you deal with, the lower the cost."

James Van Dyke, the founder and president of Javelin Strategy and Research of Pleasanton, Calif., said in an e-mail that the deal could trigger others.

"With so much vendor and provider consolidation going on in the industry, we'll see impact immediately in slowing product innovation, followed by a faster pace of next-gen capabilities once road maps are merged," Van Dyke said. "We're about to see the clash of the titans."

Buying Metavante would make Fidelity a more international company, though it already had a strong card processing operation in Brazil and sells its core systems into other countries. In January of last year Metavante bought Nomad Payments Ltd., a London processor of prepaid and debit cards.

Fidelity would have operations centers in 25 countries and customers in 90 countries after the acquisition, Kennedy said. "We'll have the broadest international reach in the whole industry."

The deal is expected to close next quarter. Fidelity was the No. 2 vendor in American Banker's FinTech 100 list last year, behind Fiserv Inc. Metavante was No. 10.

It was not immediately clear where the companies would consolidate. Metavante runs one of the industry's largest platforms for online bill payment, and Fidelity has a platform its own, "but that doesn't mean we're necessarily going to convert our FIS customers" to the other platform, Hayford said, though he acknowledged that Metavante has the "broader, more open platform."

Kennedy said that if there were to be any divestitures as a result of the purchase, the check authorization operations Fidelity inherited from its 2007 purchase of eFunds Corp. would be a candidate.

"We said repeatedly over the last couple of careers that we would love to find a buyer for the check business," he said.

Fidelity said it would exchange 1.35 of its shares for each of Metavante's 119.78 million shares outstanding. Fidelity's shares closed at $18.20 Tuesday; that would value the deal at $2.94 billion.

The deal values Metavante at $24.57 a share, a 23% premium over the stock's closing price Tuesday. The market responded favorably. Metavante's shares jumped 9.82% Wednesday, to $21.92.

Executives said that the deal talks had been under way for months, and that details would be included in a proxy statement to be sent to shareholders soon.

The deal also requires regulatory approval. Executives said they do not anticipate antitrust objections.

Kennedy would serve as executive vice chairman, with responsibility for integrating the two companies, and Martire would become president and CEO. Fidelity's headquarters will stay in Jacksonville.

John T. Williams, an analyst at Macquarie Capital U.S.A. Inc., said Metavante's payment lines, including the NYCE debit network and the Endpoint Exchange image network, were important factors in Fidelity's decision.

"While we expected that the company would eventually be an acquisition target, this deal arrived somewhat sooner than we expected," Williams, who rates Metavante's shares "outperform," wrote in a note to clients Wednesday. "That said, another relatively strong acquisition premium shows that payments businesses remain quite attractive, even in the current challenging environment."