January 17, 2019

2 fintech old-timers are coming after Square with a $22B partnership

Fiserv and First Data merged in a $22B deal, and now they’re poised to compete with payment companies like Square, Paypal, and Ant Financial.

Fiserv, a fintech company that processes credit card swipes for banks, purchased its payment rival First Data in a $22B deal. 

Fiserv and First Data may not be household names, but once their payment-processing partnership is complete, the combined company plans to take on hugely hyped heavyweights like Square.

The merger heard ’round the Midwest

Both Fiserv (based in Wisconsin) and First Data (based in Atlanta) are old, but accomplished.

Fiserv, which makes systems that help banks process and track digital payments, is 35 years old. First Data, which caters to merchants by offering point-of-sale systems to customers like Lyft, is 48.

Now, despite First Data’s $17B in debt from a 2007 buyout, the 2 companies make perfect payment partners to challenge the newer end-to-end payment systems.

Circling around Square

Since companies like Square (10 years old) and Ant Financial (5 years old) have rolled out payment solutions for bankers and merchants, other payment platforms have felt pressure to consolidate.

By combining forces, Fiserv and First Data’s new company (which will retain Fiserv’s name), will become a threat based on its sheer size: First Data tech is used by 6m vendors alone (for comparison, 2m vendors were using Square at the end of 2017).

It’s too early to know if the partnership will pay off

The combined company expects to save $900m over the course of the next 5 years and plans to spend $500m to build out its “merchant solutions and payment technologies” over that same period. 

While First Data’s stock rose more than 19% after the merger announcement, Fiserv’s stock fell around 7%.

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