EXCLUSIVE: “Reaching For the Stars” – FIS in ‘The Fintech Magazine’

Technology giant FIS took a bold approach to delivering innovation for customers four years ago, which is simultaneously helping populate the fintech universe with successful startups. We talked to four key FIS insiders about the strategy

In April 2020, just as the pandemic took a vicious hold on economies across the world, financial technology company FIS bet big on innovation. Its then newly created corporate venture investment division was given $150million to target promising startups, putting it at the forefront of the fintech-financing scene.

It had a specific focus on the fields of artificial intelligence, automation, analytics, security, distributed ledger technology and financial inclusion, and the goal was to target smaller companies that could contribute piece-by-piece to the overall portfolio of services that FIS was able to offer, enabling an agile and responsive approach to meeting specific customer requirements.

FIS further committed to partner with these companies, using complementary areas of strength, to help those entrepreneurs fulfil their long-term growth ambitions. Four years down the track, and the first of the companies to benefit from the FIS strategy is now the most successful fintech in Africa.

“As the fintechs grow in their role, so will FIS”

Johnny Moreland, VP Sales, FIS

Indeed, payment infrastructure provider Flutterwave, already a unicorn, recently revealed it was preparing for an IPO. The investment in Flutterwave in 2020 was closely aligned to another major acquisition by FIS, which had happened the previous year, in as much as it opened the door on Africa to FIS’ then recently acquired merchant processor WorldPay.

The deal allowed WorldPay to leverage Flutterwave technology to process domestic payments there. As it turned out, the WorldPay/FIS merger didn’t pan out; FIS sold its majority stake in February this year, but the FIS/ WorldPay/Flutterwave colab had proved that this ecosystem-building strategy was sound. And, going forward, FIS is focussing on those smaller investments to unlock bigger potential long-term.

“The vision is a number of selective acquisitions,” said James Kehoe, chief financial officer at FIS, at a recent UBS Investors Conference. “We’re trying to speed up the development cycle, and by that I mean we would buy a combination of very strategic assets that either bring a product or people capability to speed-up the development.”

A recent example of that is FIS’ acquisition of Bond, a company that offers enterprise-grade embedded finance solutions, and helps brands integrate financial services, from bank accounts to credit cards, so that these services can be flawlessly offered to customers as part of the emergence of banking-as-a-service (BaaS) business models. To make a success of this model, scalability is key and that’s what becoming part of the FIS portfolio gave Bond, says  , co-founder and, following Bond’s acquisition, now EVP of Atelio by FIS, the new platform that leverages existing FIS technology to offer banking-as-a-service ‘building blocks’ for financial institutions, businesses and software developers.

“We have customers now that are publicly listed companies, using our platform to reach audiences that they were not able to before,” says Ng. “Being part of FIS really opens up the opportunity for us to engage with financial institutions themselves who have ambition to drive embedded finance as part of their revenue and their strategic ambitions.”

“Being part of FIS really opens up the opportunity for us to engage with financial institutions themselves”

Roy Ng, Bond

For those involved, this doesn’t only represent a change to the way Bond does business, and the services that FIS is able to offer, but a more fundamental restructuring of how these services and capabilities are brought to customers in the market.

“It’s a really attractive value proposition that no other player in the industry can offer,” says Ng. “FIS is bringing the merchant side, the issuing side and the banking side all together.”

FIS has made a dozen or so similar investments over the past four years. Pre-seed and early-stage investments are always high stakes, but FIS derisks them by working closely with the FIS Accelerator. A flagship, 12-week mentoring programme for early-stage companies (generally created in the previous 18 to 24 months), applications are open for it’s ninth year.

Flutterwave, Neural Payments and Themis are notable graduates.

“They get a lot of different mentoring, they get to speak to a lot of our customers and understand and test some of the ideas,” says FIS Accelerator lead Tatyana Kratunova of entrepreneurs’ experience on the programme. “We support with funding for proof of concepts and we really look at what are the right use cases that we could align on as the future of innovation. We look at what it means for our customers, how we can ensure they can have the right technology to progress their own businesses, and we look at the connectivity of the overall ecosystem for that.”

This approach yields two core benefits.

Firstly, it increases the scalability of solutions from providers who may otherwise be limited by the specificity of their application or by their small size. FIS’ support enables smaller providers to scale up their capacity to match their customers’ needs. In addition, rumblings from the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency in the US hint at increasingly intense regulation making its way towards the fintech sector.

“We have a strategic partnership team that walks with the companies throughout their stages of investments and funding”

Tal Sigura, FIS Venture Investments

This may mean that fintech companies who have never had to deal with this kind of scrutiny need to comply fast, or else risk having their services shut down. In this scenario, being able to rely on an experienced, compliance-minded organisation like FIS can provide a further boost to scalability.

“The difference in our strategy over the last couple of years is in pushing our services more directly to the frontline – servicing those fintechs directly, in conjunction with the services that we’re providing to the banks as well,” says Johnny Moreland, VP of sales at FIS. “They [the fintechs] are concerned that as they grow their user base, their systems [aren’t] going to be scalable to handle the transaction volumes that they need. The breadth of our services brings infrastructure to support them in their growth… whether that’s call centre support or card production or card processing – all the things we’ve had in the market for more than 50 years.

“Our ability to deliver those services on a consistent basis is what they’re looking for. And then FIS benefits from the relationships that we’ve expanded into the ecosystem.

“Our mantra is to be able to service companies that are servicing the end users on the front end. And as the fintechs grow in their role, so will FIS.”

The second core benefit is that it allows FIS customers to mix-and-match different features, products and solutions from within FIS’ own ecosystem, allowing financial institutions to deploy gradational updates to achieve the most desirable featureset. This ecosystem-like structure represents a more fundamental re-imagining of how banking services are evolving.

A 2022 report by EY doubled down on predictions it had been making since 2020 for the potential of API-based applications to allow financial institutions to ‘move out of the traditional bank perimeter, embedding themselves in the value chains of other industry domains’.

Such is the promise of this approach, that one report by Grand View Research estimated the banking-as-a-service market to be worth as much as $19.65billion in 2021, with expected CAGR growth of 16.2 per cent from 2022-2030.

“We support with funding for proof of concepts and we really look at what the right use cases are that we could align on as the future of innovation”

Tatyana Kratunova, FIS Accelerator

FIS frames its own portfolio of services along similar lines, promising the ability to ‘incrementally modernise their bank and services’ as part of FIS’ BaaS provision. For Tal Sigura, head of FIS Venture Investments, the importance of this path is clear.

“This year we’re focussed on the Atelio business and three pillars come to mind: embedded finance, automated finance (accounts receivables, accounts payables), and fintel (financial intelligence).”

Sigura posits four key mandates in ensuring the continued success of FIS’ strategy: “The first one is knowledge, helping founders and operators solve their biggest challenges. The second is product integrations, and making those introductions to the right partners. The third is our customers: we like to facilitate introductions to the right fintechs or banks. And lastly, it’s the investment ecosystem. We like to introduce our founders to the VCs and corporate venture capital. Our strategic partnership team walks with the companies throughout their stages of investment and funding.”

Then, to make sure that everybody in the ecosystem feels part of something bigger, there are the FIS Fintech Hangout networking events that rotate around US cities and bring together the entire community, informally – cool events designed for a crowd of forward-thinkers, helping to stimulate even more opportunities for growth. In acquiring or working alongside cutting-edge startups with promising applications, FIS is shaping not only its own supernova future but that of countless new fintech stars

This article was published in The Fintech Magazine Issue 32, Page 10-11