FIS Sees Demand as Banks Shift to Digital Ahead of Worldpay Stake Sale

FIS Global posted second-quarter earnings results ahead of its pending sale of a stake in Worldpay that showed increasing demand from banks to digitize their services and capture accounts.

The company’s earnings materials detailed that Banking and Capital Markets posted 2% organic revenue growth tied to its Banking Solutions offerings.

On a conference call with analysts to discuss results, CEO Stephanie Ferris said banking clients “are really focused on deposits” and engaging with end customers across channels, including digital. Banks’ net new account activity has been up, especially in the wake of the Silicon Valley Bank collapse earlier this year, which has been driving FIS’s organic recurring revenue growth in that segment.

Ferris took note of the financial service industry’s “secular shift towards digital that has permeated money movement broadly defined across banking and capital markets and supports our normalized rate of growth.” For banks to enable that money movement, there’s the ever-present need to embrace next-generation cloud-native technology with modernized digital user interfaces.

“The competitive lines are blurring as upstart FinTechs, global technology companies, and even retailers encroach on the traditional banking landscape with digital-first offerings,” she told analysts.

The rising interest rate environment is creating increased competition for deposits. Banks are also in need of RegTech in the face of new capital and other mandates from lawmakers.

“We’re seeing consistent demand for balance sheet and treasury management solutions and expect that momentum to continue,” said Ferris.

Flagship Business

“As we think about banking, it’s really our flagship business, and we serve both the largest financial institutions in the world … through the regionals down into the community banks,” said Ferris later on the call.

The larger banks have significant tech stacks and are consuming a different range of FIS products than smaller outfits, and Ferris said for the community banks, “we are primarily the IT and ops shops for those folks. We’re running everything from soup to nuts.”

Chief Financial Officer Erik Hoag said that backlog has remained stable and is underpinning revenue growth. Worldpay revenue increased 1% organically with “similar sub-segment trends” seen within FIS.

During a question-and-answer session with analysts, and asked about key trends within banking, Ferris said that banks are examining how to gather deposits digitally or through their branch networks — or by setting up digital banks.

Asked on the call about FedNow, management said that as banks are testing and certifying for the faster payment service, there are roughly 115 banks in the FIS pipeline ramping up efforts to be connected to, and use, FedNow.