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Fidelity to Build Debit Processing Network
Fidelity National Information Services Inc. plans to start its own debit processing network and to offer discounted interchange rates to merchants, a Fidelity executive said Wednesday.
Gary Norcross, the head of Fidelity's Integrated Financial Solutions unit, disclosed the plan at an investor day briefing that offered the first look at the Jacksonville, Fla., company since its Feb. 1 merger with the card processor Certegy Inc.
The merged outfit is processing 137.8 million transactions a month. With that scale, "the timing is right to roll out a Fidelity National network," Mr. Norcross said.
He said the network could get off the ground in 2006 and have full capabilities 12 to 18 months from now.
Fidelity plans to offer cheaper interchange rates than other national switches.
Fidelity already processes signature, PIN, and stored-value debit transactions, Mr. Norcross said. It operates a network of 4,100 automated teller machines, and its card-issuing institutions - mostly community and regional ones - have 14 million debit cards outstanding.
Dennis Moroney, an analyst at MasterCard International's TowerGroup, said the planned network could further roil the debit market.
Wal-Mart Stores Inc. is trying to obtain a banking charter to process its own transactions, and banking giants such as Bank of America Corp. and JPMorgan Chase & Co., Mr. Moroney said, are rapidly building "potentially closed-loop systems" encompassing consumer card issuance and merchant acquiring.
"The whole market is in a state of flux," Mr. Moroney said. Fidelity's plan, he said, "could be the first step in the initiation of a grander strategy" aimed at merchants or the unbanked.
Mr. Norcross could not be reached to discuss the plan in more detail.
Fidelity, which is majority-owned by Fidelity National Financial Inc., also provided its first earnings guidance since the merger. It said it anticipates pro forma diluted earnings per share of $1.50 to $1.55 for 2006, up from the $1.28 that the company would have earned in 2005 if it had been combined at that time.
It projected that revenue will be 4% to 6% higher than the $3.9 billion it and Certegy combined for in 2005.
VeriSign ID Network Will Include PayPal
VeriSign Inc. said PayPal Inc. would be part of its VeriSign Identity Protection network, a shared system allowing customers to use a single strong authentication device on multiple Web sites.
Nico Popp, VeriSign's vice president of authentication services, said customers who have received a strong authentication product from PayPal could use it "on any Web site that says VIP."
Companies that want to accept VIP authentication products do not have to distribute the product themselves, Mr. Popp said. "We'll have a VIP portal where consumers can go to purchase the device." Financial companies "can just basically send the users to us."
This is "more cost-effective than being an issuer," he said.
For its one-time password token, VeriSign would charge the consumer $25 for the device and a $10 annual fee for the service.
PayPal, a unit of eBay Inc., bought VeriSign's payment gateway business on Nov. 21. It agreed to use one of VeriSign's strong authentication products for at least 1 million of its accounts.
Amanda Pires, a PayPal spokeswoman, confirmed that the San Jose company will distribute a VIP authentication product sometime this year, but she would not be more specific. It could be a one-time password-generating token, a digital certificate, or some other product.
PayPal has more than 100 million accounts. It says that in the fourth quarter 28.1 million of its customers did transactions with the service.
VeriSign, of Mountain View, Calif., will also sell a fraud monitoring system that can be used with the strong authentication device.
It builds histories on individual customers to flag uncharacteristic online transactions.
The system also pools observations among all VeriSign customers, and has been fed with observations on attempted fraud against VeriSign. "Ourselves, we are under attack, so we tend to collect a lot of data," Mr. Popp said.
