Big banks are showing more interest in outsourcing, according to Fidelity National Information Services Inc.
"Institutions that traditionally would have been in-house, would have bought services, would have bought software, are now looking to outsource," said Michael Hayford, chief financial officer at FIS. "They're looking predominantly as a way to save money and cut costs, but they are looking at it as a way to make sure they're current to technology and they can get the upgrade and the cycle times that an outsource model brings them."
The Dodd-Frank Wall Street Reform and Consumer Protection Act is one reason banks are exploring outside assistance, Hayford said during a presentation Sept. 7 at the Citi Global Technology Conference in New York.
"Anytime you have financial institutions that are impacted by change, whether it's technology, whether it's the marketplace, whether it's, in this case, regulatory change, that will involve some type of change to their systems, and for us change is a good thing," Hayford said.
"So having that regulatory change, which will require people to make changes to how they run their business, how they get fee income, how they address some of the historical places that they get revenues, again is going to be an opportunity for [FIS] to participate in supporting that."
Hayford said that FIS has not observed any significant changes from the Card Act and that it does not expect any to result from pending shifts in debit interchange policies. "We generally see that as neutral to positive," he said.
However, FIS, which owns the NYCE debit network, could benefit from changes that ban exclusivity arrangements, barring banks from offering debit cards that access only one debit network.
"We look at that aspect of the law, specifically around the NYCE network, and see an opportunity to go into institutions that might use Visa on the front of the card for signature debit and sell to them the NYCE network on the back of the card for PIN debit and create an opportunity for institutions to still do fairly well on the interchange," Hayford said.
FIS, of Jacksonville, Fla., expects strong growth in Brazil. In August its joint venture with Brazil's Banco Bradesco SA struck a 10-year deal to provide processing and other services for the banking company. The deal came as Banco Bradesco increased its ownership in the venture, Fidelity Processadora e Servicios SA, to 49% when Banco Santander gave up its stake. That deal did not affect FIS' 51% stake in the joint venture.
Banco Bradesco has committed to migrating its portfolio, a process FIS expects to be completed by yearend, Hayford said, noting Brazil's large, untapped market.
"They're not talking about multiple credit cards for a customer, but customers that do not have a credit card," and Banco Bradesco "chose an outsourced model that we are very excited about," Hayford said.