FIS’s $43bn Bid for Worldpay is Largest in Industry History

Once banished to the barrens of tedious banking tasks, processing payments was ignored even by those financial institutions tasked with administering them. Until recently, most businesses turned to their bank to process payments and move money on their behalf but little effort was put into making these systems better.

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“Traditionally, it’s been a poor cousin in the bank relative to investment banking,” says Todd Latham of CurrencyCloud, an international payment platform. Starting in 2006, many banks began to farm these functions out as independent commercial units.

The financial crisis fast-tracked this practice, with Worldpay being divested from the Royal Bank of Scotland as a condition of its 2010 British taxpayer bailout. Others began to see the potential and private equity firms were amongst the first to start snapping up these promising payment processing businesses. These companies were often merged into larger financial-serving tech corporations and made profitable.

Enter Fidelity Information Services (FIS), a global supplier of computing systems for thousands of financial institutions. Not one to sit idly by while opportunity knocked on their door, the Florida-based fintech company announced that they would acquire Worldpay, a payment-processor, for $43 billion, including debt.

It is the largest deal ever done in the payment provider industry. It is also the latest in a series of mergers as the race to build the next currency-conducting megacorp heats up. Worldpay’s own history is reflective of the industry push to make payments profitable. In 2012, Advent International bought Vantiv, the payment arm of America’s Fifth Third Bank, for $565 million. Subsequently, Vantiv bought Worldpay from Bain Capital, another private equity firm, for $12.3 billion in 2017. The companies were then combined and named Worldpay.

FIS’ decision to buy the cash-converting company represents a forward-looking strategy that appreciates the largely untapped market of cashless ecommerce. Projected industry revenue is expected to jump from $805bn in 2010 to $2.4trn in 2027. The Worldpay-FIS deal is “about grabbing that market today, and grabbing it quickly,” Charles Drucker, Worldpay’s executive chairman and chief executive, said when the merger was announced. The deal also plays rearguard action against ecommerce competitor FiServ’s acquisition of Worldpay’s main contender First Data.

Both companies expect their merger will generate an additional $500 million annually in extra revenue and approximately $400 million in savings. FIS is also projecting a bump in annual growth between 6 to 9 percent over the next three years. Worldpay is one of the largest payment players in the e-commerce industry and has solid cross-border capabilities – especially when handling cross-Atlantic transactions. This will allow FIS to sell those processing services to its banking customers.

Not surprisingly, the most important tool in the company’s collection is its software. Payment processing companies must either partner with a plethora of providers or invest in coding their own applications. The most popular ecommerce organizations have figured out how to successfully tailor their services to suit merchants of all kinds. The only way to grow is to buy.