Dive Brief:
- Global payments processor Fiserv has agreed to pay $650 million to acquire the ownership stake of core banking software firm Finxact that it doesn't already own, it said Monday in a news release. A spokesperson for Fiserv declined to comment on the size of the existing Fiserv stake. A Finxact spokesperson deferred to Fiserv on that question.
- Jacksonville, Florida-based Finxact's 140 employees and the company's CEO, Frank Sanchez, will join Fiserv, a Fiserv spokesperson said, without specifying Sanchez's new role. Sanchez founded Finxact with his brother Michael Sanchez in 2016, according to the company's website.
- The transaction is subject to regulatory approvals and other closing conditions, but is expected to be completed this year, Brookfield, Wisconsin-based Fiserv said.
Dive Insight:
Buying Finxact’s cloud-native banking system will allow Fiserv to accelerate its digital banking strategy and offer clients more modern and personalized account processing and payments offerings, the payments giant said.
Finxact could add $20 million to $25 million in annual revenue for Fiserv, Baird Equity Research analysts estimated.
The acquisition expands and streamlines Fiserv’s digital offerings "by bringing together Finxact’s highly flexible and scalable [application programming interface]-first capabilities with the comprehensive digital financial solutions portfolio and expertise of Fiserv," Fiserv CEO Frank Bisignano said in Monday's news release.
The plan to purchase Finxact continues a trend that has seen Fiserv, over the past couple of years, sharpen its services while swallowing smaller fintechs.
Last fall, Fiserv acquired New York-based BentoBox, a digital marketing and commerce firm that helps restaurants connect with diners online; terms of that deal were not disclosed. Fiserv also completed purchases of Pineapple Payments and Ondot Systems last year.
Fiserv acquired First Data in 2019 in a $22 billion deal. Among the stakes Fiserv inherited in purchasing First Data was an investment in Finxact, according to American Banker.
"Our initial investment in Finxact was as First Data as part of a funding round in January 2019," a Fiserv spokesperson said by email. "Fiserv made an additional investment in Finxact in 2021."
Fiserv's ownership stake in Finxact before Monday's proposed deal was probably less than 20%, according to the Baird analysts.
For his part, Sanchez, Finxact's CEO, said Monday, "We will be better positioned to serve a far greater number of institutions, of all sizes, when combined with the breadth and depth of Fiserv capabilities" at a time "when banking is undergoing transformative changes."
Sanchez's track record indicates he's familiar with handling acquisition interest from bigger names. Prior to Finxact, he was a co-founder and chief technology officer at digital bank ZenBanx, which was acquired by SoFi in 2017, according to Finxact's website.
He and his brother also founded bank software company Sanchez Computer Associates, which was purchased in 2004 by Fiserv competitor Fidelity National Financial, now known as Fidelity Information Services, or FIS. Frank Sanchez worked for FIS from 2004 to 2011, serving in roles that included global director of research and development as well as president of enterprise banking and retail solutions, according to the Finxact website.
