Two of the world’s largest and most sophisticated payment providers have joined forces as Florida-based FIS has announced it will acquired Clear2Pay, based in Brussels, for approximately €375 million.
The addition of Clear2Pay will bolster FIS’ global payments capabilities across all geographies through the addition of new payments managed services and payments processing utilities that will enhance its abilities to deliver differentiated enterprise payments solutions, the company said in its announcement.
Both companies have been critical of the existing ACH payments network in the U.S.
In response to a request for comments by the Federal Reserve Banks, Elena Whisler, director of product management at Clear2Pay, wrote that “the ability to innovate is a critical component of a successful payment system. Currently, the US payment system is faced with the need to change to meet business needs, but cannot do so without a major shift in how the payment system is run. As we all approach this shift, we should keep in mind that the ability to innovate rather than optimize existing practices is critical for any future solution.”
The company has been involved with major payment system shifts around the world, she added, including SEPA, UK Faster Payments, G3, and Australian payments innovation.
“We feel that while market forces and competition will continue to force the United States payment system to evolve, improving the timeliness of change and accelerating adoption of faster payments can come from a combination of regulatory events and incentives.”
This acquisition could speed up that process.
FIS isn’t waiting for the Fed to act; its payment network, called PayNet, offers real-time funds transfer using the EFT rails which operate for ATMs and debit cards. Peter Gordon general manager of PayNet at FIS, says the company will have 500 banks on the network by the end of the year when all of its banking core systems will be able to handle real-time transactions.
In a recent report on payments systems, Gareth Lodge, senior analyst for banking at Celent, the financial technology analyst firm owned y Oliver Wyman, noted that “PayNet from FIS and Sprig from Co-Operative Financial Services both offer real-time payment systems today, and there are several others that plan or claim to have solutions as well.”
If the payment heavyweights in the US — the major banks which dominate NACHA — continue to fight the Fed on moving to real-time payments, they would leave the way open for private industry players.
“…while the US is deliberating over what to do with real-time payments, a nonbank network, PayNet from FIS, is already up and running,” wrote Lodge in a recent report. “Currently, it’s using infrastructure sold to banks and they are selling to banks; how long before a system targets the end user directly?”
For individuals, payments disruption appears in products like PayPal, Square and various methods of using mobile phones to pay, like at Starbucks. Underlying that is a banking payments infrastructure that in the U.S. is more than 30 years old. Later this month the Chicago Federal Reserve will host a two-day conference on what to do with the payments system. The Federal Reserve Banks have recommended moving to a whole new infrastructure, while admitting there is not a business case — ROI — for the banks to do so. ( will have more on that next week.)
Largely out of sight of retail users, payments is a key focus for bankers.
“The payments domain is one of the fastest-growing segments within the financial services industry and is a strategic growth and investment area for FIS,” noted Gary Norcross, president and chief operating officer, FIS. “Many institutions are struggling to adapt to the evolving global payments landscape…This strategic acquisition demonstrates our commitment to delivering the technologies and assets that will enable our clients, especially large and global institutions, to realize a truly modern payments environment.”
The FIS announcement said that Clear2Pay “is recognized as one of the most innovative players in the payments technology domain and has a strong blue chip client base of top global financial institutions in Western Europe, Asia Pacific and the Americas.”
This should make SWIFT's Sibos conference in Boston even more interesting.
