A pair of American fintech and payments solution providers have separately confirmed strategic reviews that may result in divestments of some business functions.
In reporting quarterly earnings in August, both FIS and Fiserv say they may shed some services in areas where they struggle to compete as top performers.
During her second-quarter earnings conference call on 4th August, FIS CEO Stephanie Ferris announced what she termed, “an evaluation of strategic alternatives relating to select products that we’re actively managing within our Capital Markets segment that may not fit the strategic profile of our overall business.”
Jacksonville, Florida-based FIS provides treasury management software along with Total Issuing, AI and payments solutions.
In his own Q226 earnings call two days later, new Fiserv CEO Takis Georgakopoulos noted that the company has built a largely successful integrated model for customers. However, the wide-ranging palette “does not mean we should be building everything that our clients are buying from us,” he said, promising to act “with urgency” on “a meaningful shift” that is “a top priority for me.”
Ongoing challenge
The moves demonstrate the ongoing challenge that corporate treasurers face in keeping track of which of their services will be run by large legacy banks, fintechs or consortia, and whether big banks could ultimately acquire their fintech partners.
At Fiserv – a global fintech and payments company based in Milwaukee, Wisconsin – the new chief executive wants to focus on areas where customers say the company can be a top option.
“We will dispassionately assess how our products compare to best in class and whether we have the right to win in each,” stated Georgakopoulos, who was promoted to CEO in June and is under pressure from activist shareholders. “If we do, we will double down and make sure we execute. And if we don’t, we’ll evaluate the full range of actions to maximise shareholder value while making it imperative to ensure that we don’t do anything that causes disruption for our clients.”
Fiserv CFO Paul Todd confirms that units may be sold off.
“We continue to be focused on divesting and pursuing alternative ownership structures for businesses that are not foundational to our strategy or where we believe we are not well positioned to execute,” Todd said during the earnings call.
During the Q&A segment of that call, an analyst suggested that Fiserv’s debit network may be more valuable to a large bank. Georgakopoulos acknowledged that the network could be an element of the re-evaluation.
“Obviously, the debit networks will be part of that review,” Georgakopoulos said, declining to address specifics. “We have two debit networks. They’re critical to our clients. They’re important to our business, but that will be part of the review.”
Strategic fit
FIS’s Ferris emphasised that her company’s Payments and Total Issuing Solutions divisions are growing more profitable. She said the company is not considering a full sale of the Capital Markets segment.
“Within the Capital Markets portfolio … there are several products that don’t strategically fit with our business,” Ferris explained. “And what I mean by that is they may not serve that set of large financial institutions, or they may be products that don’t meet the strategic fit of what we’re trying to accomplish, like risk management solutions or we have some data analysis products that we may not sell to that existing LFI base or … isn’t within the natural solution ecosystems we’ve really focused the business around.”
The main goal in any FIS divestment is not necessarily cost savings, which may be limited, CFO James Kehoe noted.
“It’s tough because the businesses are all highly integrated in the core infrastructure…. I think we need to take decisions that are creating the right portfolio to drive back quickly to sustainable mid-single-digit growth in the Capital Markets business,” said Kehoe.
