Fidelity National Information Services Inc. has formed a joint venture that it says will make it the largest third-party transaction processor in Brazil.
The Jacksonville, Fla., unit of Fidelity National Financial Inc. said Tuesday that it formed the venture, Fidelity Processadora e Servicios SA, with two major Brazilian banks, Banco Bradesco SA and Banco ABN Amro Real, a unit of ABN Amro Holding NV.
The venture is expected to handle more than 20 million cards in Brazil and more than 63 million cards worldwide, and to generate $2 billion of revenue during the 12-year term of the contract, Fidelity National said.
“We got an entire market with one transaction,” said Michael Sanchez, the chairman of the international division of Fidelity National Information Services. “This makes us an instant large player.”
It would have been much harder to enter the market without this type of arrangement, Mr. Sanchez said. Brazil is “a hard market to get into as an American company,” and banks there are “very much into the joint-venture structure.”
Fidelity Processadora will provide outsourced credit and prepaid card processing services to Brazilian issuers. Fidelity National Information will provide support services such as call center management, back-office support, risk management, and collection.
The Brazilian card portfolios will include a substantial number of prepaid cards, Mr. Sanchez said, because many companies there provide them as benefits to employees. For example, many companies offer free lunches, which are paid through a prepaid card account.
Fidelity National Information, which will own 51% of the venture, expects to invest $100 million in it over the next three years, including about $25 million this year. The two banking companies will own the rest. Their card portfolios are expected to be fully converted to Fidelity Processadora by the end of 2008.
Banco Bradesco and Banco ABN Amro Real were initially in talks with the St. Petersburg, Fla., processor Certegy Inc., which Fidelity National Financial acquired last month and merged with its Fidelity Information Services.
Mr. Kennedy, Certegy’s chairman and CEO at the time, told analysts about the plans to form the joint venture in October, when his company reported its third-quarter earnings. He said then that Certegy had spent $900,000 in the third quarter brokering the deal, and that he expected it to yield more than $100 million of annual revenue. By late January the investment had risen to $1.2 million.
“What you see here is the beginning of the fruits of the Certegy acquisition,” said Theodore Iacobuzio, a managing director in the executive research office for TowerGroup Inc., the Needham, Mass., research unit of MasterCard International. He said he was unaware of any similar processing deal that Fidelity National has done.
Though the Brazilian banks originally negotiated with Certegy, Fidelity National Information brought a lot to the table, because it has both banking technology and payments infrastructure, a combination that few of its competitors can match, he said. “Fidelity’s got it all. They’ve assembled all of the pieces,” he said.
Mr. Iacobuzio said that focusing on both prepaid cards and credit cards is wise. “In a developing market, where a bank relationship can’t be something you take for granted,” many people use prepaid cards.
Working with banks is also a good strategy in Brazil, he said. “Third-party processing straight-up, the way it’s done in the U.S., is rare. Outside the U.S., a processor on its own is not going to be able to cut it.”
