Fiserv (tkr: FISV), FIS (tkr: FIS) and Global Payments (tkr: GPN) need to re-tool their product and service portfolios to better compete with modern Fintech platforms such as Square (tkr: SQ), PayPal/Venmo (tkr: PYPL), Stripe (private) and others. Tech giants Alphabet (tkr: GOOGL), Amazon (tkr: AMZN) and Apple (tkr: AAPL) also loom large in the Payments space.
Outside of internal product development (not a strength for the legacy payments players) and partnerships, Fiserv, FIS and Global Payments have several acquisition-related options to consider:
Pursue acquisitions of modern fintech firms. Such deals could be for 100% of the outstanding equity or partial equity stakes (Visa, tkr: V executed partial equity stake deals with both Plaid and Stripe). Prospective deals would be richly-valued and would carry significant cultural risk. Cultural risk can be mitigated with partial equity stakes, particularly if deals are constructed with a put option.
Further consolidation among the legacy players. This is the obvious option and would be easiest to pursue from a Board approval standpoint. These companies know each other and share similar cultures. Would more of the same improve growth prospects / drive the innovation engine? Probably not. Such deals are more likely to delay the inevitable. Would the Biden Administration accept further consolidation among the group? Unknown.
FISV, FIS and GPN could pursue acquisitions of smaller fintech firms. Below are a handful of examples of payments-centric fintech firms. The full landscape of public and private payments-related firms includes approximately 100-200 companies globally.
