Two giants in the financial services and payment technology sectors have announced a major merger. Fiserv Inc (NASDAQ: FISV) said in a press release that they had entered into an acquisition agreement with First Data Corp (NYSE: FDC) in an all-stock transaction worth over $22 billion.
Although these two companies are relatively unknown to consumers and retail investors, much of the financial technology that underpins Wall Street and retail investors stems from these firms. Both Fiserv and First Data provide a variety of technology services to merchants, banks, and other financial institutions such as credit and debit card transactions. While this sector has long remained a lucrative, if not obscure area, many new fintech start-ups are pressuring the older, more mature companies into taking measures to keep their market share secure. This major merger in many ways underscores this change.
“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” said Fiserv CEO Jeffery Yabuki. “We admire First Data for its excellence in merchant acquiring and global issuing services, and the tremendous progress they have made under Frank’s leadership. We expect this combination to catalyze and support an enhanced value proposition for our collective clients and their customers.”
Some of the largest banks in the country rely on technology from First Data and Fiserv. Both Wells Fargo and Bank of America partnered with First Data to provide merchant services to their commercial banking clients. However, as new payment options for merchants continue to enter the marketplace, traditional providers have had to contend with competitors in a manner that previously wasn’t an issue.
“You have all these macro factors conspiring to change the way people and businesses move money and information…things that we aren’t aware of yet that will come up,” added Yabuki. “We don’t want to be constrained.”
According to The Wall Street Journal, some analysts estimate that the new combined entity would allow the companies to offer complementary services to their existing customers. Overall, the company plans to invest a further $500 million into merchant solutions and payment technologies over the next five years, while cutting $900 million in expenses during the same period.
In response to the announcement, First Data shares surged 21.1 percent today, while Fiserv’s stock dropped around 3.3 percent.
Fiserv Company Profile
Fiserv, Inc. (NASDAQ:FISV) enables clients worldwide to create and deliver financial services experiences in step with the way people live and work today. For 35 years, Fiserv has been a trusted leader in financial services technology, helping clients achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and insights and optimization. Fiserv is a member of the FORTUNE® 500 and has been named among the FORTUNE Magazine World’s Most Admired Companies® for five consecutive years, recognized for strength of business model and innovation leadership. – Fiserv
First Data Company Profile
First Data (NYSE: FDC) is a global leader in commerce-enabling technology, serving approximately 6 million business locations and 4,000 financial institutions in more than 100 countries around the world. The company’s 22,000 owner-associates are dedicated to helping companies, from start-ups to the world’s largest corporations, conduct commerce every day by securing and processing more than 3,000 transactions per second and $2.4 trillion per year. – First Data