Fiserv to buy Ondot as card payments get more digital

It isn't lost on Fiserv that consumers increasingly are moving to digital financial services. Its deal to acquire Ondot Systems, a digital card solutions platform, aims to capitalize on the shift.

Ondot Systems, which was founded in 2011 as a card controls platform, has expanded its mobile-first offerings to include a variety of mobile card and banking solutions that have made its platform better suited for large technology providers such as Fiserv, as well as the banks and credit unions served by them.

Fiserv plans to further develop Ondot’s platform to engage users at the moment of transaction by expanding its interplay between real-time authorization, user context and artificial intelligence. The transaction is expected to close in the first quarter of 2021, pending customary approvals and closing conditions. Financial terms of the deal were not disclosed.

“The importance of digital has accelerated and consumers are increasingly turning to online and mobile banking, as well as contactless payments experiences,” said Frank Bisignano, president and CEO of Fiserv, in a press release. “By combining Ondot and Fiserv capabilities at scale, we plan to provide our clients with a unified digital experience, spanning card-based payments, digital banking platforms, core banking, and merchant solutions, enabling them to deliver best-in-class solutions that continue to reduce friction for their customers.”

Ondot, which processes more than 1 billion transactions per month and provides digital services to over 30 million cards owned by banks and credit unions that are served by Fiserv and its rivals have made the company an attractive acquisition. Ondot’s platform enables bank clients to accelerate digital customer acquisition, drive digital commerce, increase card activation and engage customers during the entire purchase cycle.

Ondot's digital capabilities reflect consumers' growing adoption of digital banking and payments. It’s also relevant during a time where many banks have limited operations due to COVID-19-related restrictions on their branches.

COVID-19 has had a dramatic impact on how consumers pay in-stores and their interest in adopting mobile wallets as a primary payment method for online and in-store purchases, as shown in the PaymentsSource Future of Money study released in November. In the study, 61% of millennials, 48% of Gen Z and 43% of Gen X consumers said they would prefer to only use mobile wallets. Additionally, 43% of millennials, 37% of Gen Z and 29% of Gen X reported that they had changed their primary method of payment in-stores between March and September.

Ondot’s digital offerings enable financial institutions to offer card payment controls, virtual cards, digital card issuance, and push-to-wallet provisioning, as well as other solutions. These sidestep the need to mail physical cards to customers, and enable the use of Apple Pay and Google Pay wallets for contactless use in stores.

Ondot counts over 4,500 banks and credit unions as using its technology, both directly and through its major processor partners, which include FIS/Worldpay, Fiserv/First Data, Elan, Co-Op, TSYS, JackHenry and PSCU.

One challenge to Ondot’s go-to-market strategy has been the ongoing consolidation of the major technology providers to banks and credit unions.

Several large mergers in the past two years have affected Ondot’s partner ecosystem, starting with Vantiv's $11.6 billion acquisition in 2018 of Worldpay. This was followed by three mega mergers in 2019: Fiserv acquiring First Data for $22 billion, FIS's acquisition of Worldpay for $43 billion and Global Payments acquiring TSYS for $21.5 billion.

“The Fiserv aspiration to move money and information in a way that moves the world fully resonates with Ondot’s mission,” Vaduvur Bharghavan, president and CEO of Ondot Systems, said in the release. “Joining with Fiserv will provide Ondot the opportunity to innovate and impact the industry on a global scale. We look forward to expanding the scope of our offerings as we integrate with Fiserv’s vast array of capabilities to continue providing high-quality digital solutions to consumers, merchants, acquirers, networks and card issuers.”