Fiserv aims at fintechs with First Data merger

Fiserv announced Jan. 16 it is purchasing First Data Corporation in an all-stock deal valued at $22 billion. The transaction is expected to close in the second half of the year.

Serving some 12,000 financial institutions around the world, Fiserv, based in Brookfield, Wis., controls more than one-third of the U.S. core banking market. Atlanta-based First Data is a leader in the payment services business, with 4,000 financial institution clients and more than 6 million merchant locations.

With most of their products and services complementary rather than overlapping, the two companies say a bigger post-merger Fiserv will be able to offer many new services. For example, First Data’s merchant account enrollment capabilities can be integrated into Fiserv’s digital banking solutions, resulting in new products for both merchants and financial institutions.

Analysts have weighed in on the deal. On the one hand, experts say a bigger company will find it difficult to respond quickly enough to market demands to compete with fintechs gaining prominence in the lending and banking space. On the other hand, other experts say the combination of credit expertise with merchant services has tremendous potential. A bank might be able to make nimble credit decisions with the kind of merchant payment data currently controlled by First Data.

One American Banker article focused on Square and its Square Capital division, which provides merchant credit based on the transaction data it collects by facilitating credit card payments for small companies.

While fintech lenders have attracted the attention of bankers, it is unclear how deeply they are cutting into traditional bank business. Fintechs typically offer small business owners quick decisions on loan requests, but their credit usually costs more than a standard business loan from a traditional bank.  

Following the close of the transaction, the combined company expects to invest an incremental $500 million over five years to create improved or new products and services.

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