Fidelity National Information Services, better known by its abbreviation FIS, employs more than 55,000 people worldwide and provides payment processing and banking software, services and outsourcing of the associated technology globally. By any standard FIS qualifies as a big organisation. It has over 20,000 clients in more than 130 countries, is in the Fortune 500 and generated $9.3 billion in revenue last year.

The acquisition of SunGard put FIS in the number one position by size to offer a comprehensive and deep range of enterprise banking and capital markets capabilities in the financial industry worldwide.

Bruce opened up our discussion with the SunGard acquisition “We are now, post-acquisition of SunGard, the largest fintech in the marketplace. In the IT and tech space, as you well know, when a merger takes place you don’t often find out whether it’s been a happy marriage for a long time. Even in the financial space, it can take a while before the synergies that are always hoped for in a merger to take place.

“Take the Mastercard and VocaLink deal for example – a cards processor buys a payments infrastructure solutions provider. Some asked what are they going to do with it? The answer is that sometimes the buyer has no clear what they will do with it despite the fact that it seemed like a good fit at the time. Then they find overlaps and it doesn’t look so good. But in this instance, with the SunGard acquisition, we can now service the full lifecycle of financial services. It was a good buy which is proving very valuable and already delivering for us.”

Deep and wide

The sheer breadth and depth of the services FIS can bring to its clients across financial sectors are enormous – the company covers institutional, wholesale and retail banking but also corporate and infrastructure services. Jennings says: “What the Sunguard acquisition brought us was the ability to be part of the conversation in almost every sector of financial services.

Sunguard had strong infrastructure services around their Telemach platform and their treasury management systems, Jennings says. “So, when you look at our new combined offering it’s a real strength – now that doesn’t mean to say that we are the best at everything – but it does mean that we have an opinion, a capability and a view across the entire financial supply horizontally and vertically. I think this is a real differential in the marketplace. And a lot of organisations see it.

He continued: “We’ve gone through a couple of cycles with a couple of financial customers recently where we have seen that they are buying for tomorrow, not for today. They are recognising that consolidation around financial services in the supply chain is going to happen. It has happened in every other market and every other segment across transportation, across health where the smaller players are going to slowly disappear. Now If I had the prediction abilities of Bill Gates I would be able to tell our customers exactly where the market is going but I don’t, and they don’t either. But they know this shake-out is going to happen.”

However, anyone who is worried about the future would be calmed by Jennings’ quiet and confident assessment of the short-term perspective. “We are going through a period of exclusion, but I think scale does matter and does count. We are exceptionally well positioned from a macro point of view to service our customers and also attract some new brands into the fold as well.”

Bundling services to add value

FIS is doing some interesting things around bundling says, Jennings. “Bundling is interesting,” he claims: “If you think about it in terms of transactions you reconcile payments, you reconcile payment accounts, you reconcile people, you reconcile data – reconciliation is very generic. Now Telemach, which came with SunGard, is a platform which, if we plug in to our portfolio and add the services which came with the acquisition of Clear2Pay, delivers real value as a bundle.”

“What we can do is start to produce a real end-to-end product on a hosted basis that enables value. As an ex-consultant – I worked for Yorkshire Bank and Clydesdale for ten years in their transformation strategy department –  one thing you are always asked if they are going to bring a new solution or service into my department is – ‘what am I going to switch off?” It’s essential.”

“One of my old Scottish colleagues used to say: ‘Is there never an opportunity when you bring in something new for me to switch something off?” So, when we are looking at the question of bundling for our customers let’s ask the question – examining the banking landscape of our customers – what platforms can they turn off? What intellectual property can they not own anymore since they’re already doing it? And that’s the maturing of this space from providing components on a run-time basis to providing an end-to-end solution. For example, payments as a service – that is on everyone’s list including API Gateways, anti-money laundering, securities, switching – clients want the full infrastructure on a high-availability platform, and they are often consuming it on a per-payment basis.”

Will the last data centre in town switch off the lights, please?

Jennings says: “When you take that as a function of scope suddenly the bank says – ‘I can switch that off, and I can switch that off, and I can switch that off. And at every tender every bank is asking ‘Can you host it?’  It’s amazing – they all ask it. They don’t often do it but they all want to have an option on hosting. And that is in every single market. We are moving strongly to the hybrid model with private and public cloud platforms in use”

What Jennings is saying is very important. It is that quantitive moment when a dream – that eventually even mission-critical data and transaction processing can move to the cloud – has been reached in the minds of the banks. It will still take a long time to achieve but all over the globe, the sound of banks and finance houses switching off their legacy systems and bulldozing their data centres to sell off the land can be heard.

As Jennings says: “What is driving hosting is that in the traditional marketplaces, where outsourcing was seen as a good thing, there are now big question marks over it or it’s been done to death. For example, if you go to North America where the appetite for hosting over there is under question with the Patriot Act coming in. So, it comes down to the topic of a run, but there are so many different angles but it is now the case that banks and finance houses are desperate not to run their own stuff if they can at all make that happen. The maturity of that availability to supply that 2x9s 3x9s 4x9s is being challenged.”

With our Sunguard products now we can provide any type of service level – internal service level agreements (SLAs) at 4x9s – private networks at even higher levels if you want it. But the ability of some other providers to be able to deliver the type of high service-level as a given that the big banks expect is not yet there. That supply chain needs to go through another iteration of maturity. Real high-availability banking services.

We want a real-time environment for a real-time bank

Jennings says real-time is on everyone’s priority list: “So from the run piece, everyone wants to talk about how they connect to their customers and then everyone is talking about real time. It’s that type of strapline that everyone is talking about banking ‘in the moment’: ‘I want a real-time payment; I want a real-time decision; I want a real-time account; I want everything done ‘in the moment.’”

“At the moment everything is done on a batch basis – ok some of the cores are done in real time but they’re all scratching their heads saying ‘What way am I going to go here? I can upgrade my existing core which means I have to stop my bank for three years while I fiddle about in the guts of ny bank. I can launch a brand new brand and do parallel and drive those segments – or I can get someone else to do it for me and migrate it out to an outsourced service.  For everyone, I talk to who wants to upgrade their systems there are others who want to launch a brand new brand. There is no cookie-cutter solution – CTOs or CIO have to think hard – there are so many options that it’s both a challenge and an opportunity.

Operating across Europe – the Brexit conversation

He says: “The Brexit conversation is causing a wee bit of a problem for us regarding the uncertainty in the marketplace. We will work through that – it looks as if we’ve got a couple of years now before anything significant happens. In some ways, I think it helps with a conversation around the problem of sovereignty. So, we speak to a bank in France, Holland or Germany and they say – we’ve got an existing service and it’s running out of London and we can’t-do that anymore’ so we ask them ‘Where in the rules does it say you can’t-do that anymore? It’s post-Brexit, but you don’t know the rules post-Brexit – they haven’t been agreed yet. They just need to set up an instance in Europe. So, there is that violent reaction without any factual basis.”

“We also see the situation where regions with no legacy infrastructure can leapfrog the stages of development of banks that have to replace all the old kit, and end up ahead of them. The analogy I would use is telecoms in Africa. You don’t see any landlines – they’ve all got mobiles. We got a request from a big African bank – with over 25m customers – for an overhaul which is simpler to do because the systems they have are very basic. So, we are seeing new emerging brands in the emerging markets. They will take 5 to 10 years down the line to emerge but they are coming out. As long as these new challenger banks are powered by a brand the customer trusts they will thrive – it makes it easier for me jump on board. And I repeat – it doesn’t need to be a bank. People will buy financial services from a non-bank – the figures show this. This is where the big retailers such as Google and Amazon – and trusted brands like Tesla – have an advantage, as long as they are a brand associated with innovation, customer insights, disruption, these brands under PSD2 can provide real services customers want.”

Making customers sticky

Jennings says that all clients want to make existing customers sticky rather than having to go away and win new ones. “As I said – mobile and other clients are jumping into a new market. A lot of telecoms companies we are working with say ‘we have a consumer experience how can we broaden it’. And the regulators are trying to shake everything up. PSD2 will definitely open up new models of banking. These business models are not new – Yorkshire Building Society did it in the past with back-office processes for other companies, and the process will ripple out”.

Jennings believes that the work which the banks are doing through APIs will drive an increased level of openness. However broad the changes have been so far there are many different models still to be born – from the back-office to the customer. HSBC has just launched the aggregating model through the APIs – which is interesting – an existing bank that has decided to open up its data for the benefit of its customers.

Will the High St banks drive consolidation in the market? Metro bank has only 1m – so far and has not delivered on its first promises of rapid growth. There will be no considerable shift away from the big banks, but the field is opening up for the customer of all banks. Jennings says: “I’m excited. Are we ready to guide organisations through this process of change – yes – since we see conscious growth in our progress and our capabilities. We see strong traditional banks and interesting newcomers. We are in a good place to guide people through a real push for strong real-time payments – it is an exciting time to be in financial services –”

BOX OUT

Jennings finished our interview with a summary of FIS’s priorities:

  1. Hosted services have to be aligned to the value chains of banks and have to change the ownership pattern – outsourcing is so yesterday -and FIS has the widest portfolio of products to make hosted services a success. Hybrid is the way forward at the moment.
  2. Integration capabilities are now mature enough to open up the old ‘closed shop’ processes – which is good for new entrant banks and extremely good for consumers since it will give them choices and the regulators should encourage them to do it more
  3. Consumers still need to have a trusted brand or trusted value statement to persuade them to use more diverse financial services – they don’t have to be delivered by the old traditional big banks –  there must be a secure brand that will encourage new products and services.

 

by IBS Intelligence
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