Thursday, 4 September 2014

FIS's takeover of Clear2Pay: what’s the story?

Brussels, home of Clear2Pay
The pool of independent companies in the payments processing space has shrunk yet again, with Clear2Pay being taken over by US fintech giant, FIS. The official announcement, of course, praises the €375 million acquisition, with Clear2Pay stating that ‘the combination of these two companies will be uniquely qualified to deliver true payment systems convergence’. Which translates into plain English as FIS will have an even larger portfolio of payments systems and solutions, some complementary, some competing.

Clear2Pay’s Open Framework Platform (OPF) is an assembly of various systems that stem from different sources and geographies. The vendor positions it as a complete payments hub covering end-to-end payments of financial institutions, and has onboarded a number of large customers, benefitting from a trend among big banks a few years ago to build huge payment hubs. Many embarked on multi-million dollar initiatives with Clear2Pay’s OPF – Santander, Commonwealth Bank of Australia, Societe Generale, Royal Bank of Scotland, BNP Paribas among them – but the outcomes of these are yet to be publicised (and in most cases, reached). As such, the OPF user list looks impressive, but it is difficult to quantify the value of these projects for Clear2Pay and its new parent.

FIS’s ample portfolio of products in the payments space is also a result of acquisitions. Major ones here include a 2009 takeover of rival US vendor Metavante (which brought the Cortex debit card solution) and a 2013 acquisition of mobile banking and payments provider, mFoundry. It also attempted to buy Misys and its range of payments solutions in 2011, but this fell through. FIS now positions its conglomeration of products as an all-encompassing payments hub.

Where does Clear2Pay fit in here? One may argue that it will have the might of a parent the size of FIS behind it, but at the same time it might just become a small cog in a large FIS machine. And as for the market in general, there will be fewer options to choose from.

The vendor’s co-founder, Jürgen Ingels, commented that he was ‘pleased to see such a positive development for our people, our clients and the industry’. The IBS take on this is that it is still too early to tell on either of these fronts. The job of integrating the two companies will require working out how the solutions fit together and overcoming the cultural differences between a US and a European company.

Clear2Pay’s joining a larger corporation follows similar moves by rival vendors Alaric (bought by NCR Corporation in December 2013) and Distra (acquired by ACI Worldwide in 2012).

As for the Clear2Pay founders, Michel Akkermans and Jürgen Ingels, they will be glad to have finally found a buyer. Talk of Clear2Pay being up for sale has circulated the market for quite some time. In 2012, for instance, Infosys reportedly came close to buying it: due diligence had been carried out but the deal was not finalised. The following year, as the rumours of the enduring attempts of Clear2Pay to find a new owner would not cease, the vendor issued a statement in October saying that selling the company was not part of its ‘focus on building the company out further’. Recently, Clear2Pay’s marketing department commented to IBS that the ongoing publicity around the alleged sale was because ‘the Belgian press simply avidly follows the fortunes of Michel and Jürgen’.

Ingels is ex-Dexia, where he specialised in helping start-ups. Akkermans previously founded a Belgian regulatory reporting company, FICS, which was subsequently sold to S1 Corporation (now also part of ACI Worldwide).

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