Fidelity National Information Services, Inc. (FIS) entered into a multi-year IT managed service agreement with Beneficial Bank of Philadelphia. As per the terms of the agreement, Fidelity will be providing technological support and help manage its IT operations, including desktop support, inventory management and server operations.
Beneficial Bank wanted to utilize its resources in business operations, increase operational efficiencies and at the same time reduce costs by outsourcing the company’s hardware support services including servers, network, desktop support and telecom to Fidelity. This will help the bank to improve its customer support services and reduce turnaround time.
The demand for new technology is constantly on the rise in the banking industry. Banks are consistently trying to improve operations and consequently the demand for outsourcing some of the non-core services and adopting software as a service (SaaS) offerings has increased.
Fidelity’s offerings are expected to make it easier for mid-tier banks to launch new and competitive products quickly and in a cost effective manner and enable them to serve customers better.
FIS has made it clear that the company wants to focus on its core banking and financial institution business. Previously, FIS finalized a deal with Bank of America Corp. (BAC) to sell its electronic benefits-transfer business, which is expected to fetch more than $200 million. These are some of the ways adopted by Fidelity to help banks and other financial institutions.
We believe that Fidelity’s commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base will drive growth over the long term.
On the other hand, increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business and uncertain regulatory environment are the primary headwinds, in our view. Additionally, new offerings from competitors such as Fiserv (FISV) and Global Payments (GPN) pose challenges for the company in the near term.
Currently, Fidelity has a Zacks Rank #3 (Hold).
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