FIS looks to cloud tech for post-pandemic merchant growth

As merchants look to shift to marketplaces, software-based sales and integrated payments in 2021, FIS says it will lean heavily on its Worldpay acquisition to serve that market need.

Fidelity National Information Services says its merger with Worldpay helped the company weather the COVID storm, but more important places it at the forefront of what merchants and banks will need during pandemic recovery.

Fidelity National Information Services, or FIS, acquired Worldpay for $43 billion in mid-2019, with much of the focus on open banking and faster payments. The coronavirus pandemic fast-tracked those initiatives worldwide, with many merchants still looking to upgrade their payment acceptance for the long term.

"We actually do have muscle in that space, and have done a really nice job increasing our direct sales force," Gary Norcross, chairman and CEO at FIS, said Tuesday during a fourth-quarter earnings call. "Our partner-led sales and growth areas were up four to five times over the last year."

Worldpay reader with receipt
Bloomberg

FIS has made significant investment in technology that will allow it to rapidly onboard merchants and launch new products, Norcross said.

Products like Premium Payback, which allows shoppers to spend earned reward points at the point of sale, sit in the middle of two opposing trends: the slowdown of in-person shopping and the rise of digital payments. As shoppers return to stores, the balance will tip in the product's favor.

"The program continues to see a lot of positive momentum and we see a strong pipeline for it, but the only impact to Premium has been COVID," said Bruce Lowthers, president of banking and merchant solutions. "It's a transaction that is driven by retail purchases, so COVID will have an impact there, but we expect to see that product rocket forward."

Premium Payback was the prime contributor to an increase of more than $200 million in what FIS labeled as "revenue synergies" with Worldpay. The point of sale solution represents "a delight for the merchant, consumer and financial institution, so it's just a positive win for all three — and very few products come to market that have that kind of success," Lowthers added.

With 2020 fourth-quarter revenue of $3.3 billion essentially flat from last year, the Jacksonville, Fla.-based company reported financial highlights that have it bullish about 2021.

FIS reported a "growing backlog and robust pipeline" of sales, reaching $22 billion, and revenue growth of 5% for the company's banking solutions, while capital markets rose at 3% on continued recurring revenue growth. That helped offset a merchant solutions revenue decrease of 9% because of the ongoing pandemic in the fourth quarter.

The company discussed merchant solutions portfolio headwinds it faced the past year, citing a 49% drop in discretionary yields like travel and airlines; and a 5% drop in discretionary retail and restaurant yields, with that number dipping to 20% in the U.K. market.

"We anticipate significant growth on the merchant side, especially in Q2, as we see volumes start coming back in discretionary areas and for airlines and travel to improve," Lowthers said. "We certainly do not have airlines and travel at the same level pre-COVID during 2021, as we think it will take into 2022 before it comes back to 100%."

FIS and Worldpay merged at a time when the two companies' digital assets were critical to banks and businesses in need of quickly delivered Paycheck Protection Program funds.

PPP and other demands accelerated the company's development of new products, introducing 60 in 2020, among them real-time payments management services, the Ethos Data Solutions management system and ClearEdge, which helps banks bundle various technologies for automatic upgrades and easier management.

FIS's establishment of native cloud services were key to attracting new clients, and building new services will remain critical, Norcross noted.

"We were well ahead of the cloud migration going back five years ago when we started to move our capabilities into the cloud and take advantage of that, and an advantage to us was lowering costs," Norcross said.

"Three years ago we started building native cloud applications to sit on the technology framework," he added. "It is a totally different paradigm shift, and you are starting to see some startups in the market, but I would say we are well ahead … enabling speed and lowering costs and really taking advantage of the cloud."

FIS currently has "well in excess of 70% of its computing on the cloud" and will increase that to 80% during the course of 2021, Norcross said.

The company continues to invest in digital, omnichannel, banking and payments gateway technology to serve customers, he said.

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