Discussion with FIS’ Gary Norcross on the Evolving Payments Market
We had the opportunity to speak with Gary Norcross about FIS’ payments strategy. Mr. Norcross is President and Chief Operating Officer (COO) of FIS, a position to which he was named in 2012. As COO, Norcross is focused on the steering and execution of the company’s global business strategy.
FIS is the world’s largest global provider dedicated to banking and payments technologies, serving more than 14,000 clients in over 100 countries. Under Norcross’ leadership, FIS has ranked consistently among the industry’s leading financial technology providers, including the No. 1 position in the 2012, 2011, 2008 and 2007 FinTech 100 rankings, an annual list of the top financial technology providers in the world, published by IDC Financial Insights, American Banker and Bank Technology News.
In this Q&A format, we cover major trends in the payments market, the continued effects of Durbin, and EMV.
1. What do you see as the major trends and themes in the payments market?
A traditionally stable industry, the payments marketplace has experienced significant – and accelerated – change in the last few years. The emergence of new payment alternatives, such as mobile and P2P payments, is providing the end consumer with new alternatives to conduct their payment transactions. Increased regulatory change is also a significant trend as institutions are looking to create new revenue streams to offset the impact of recent regulations on interchange and traditional payment models. These trends and themes are driving significant innovation and increased competition which is challenging the traditional paradigms throughout the payments industry.
2. Can you describe the competitive dynamics surrounding debit networks, and NYCE in particular, in the wake of Durbin?
Regulatory change within the payments industry is certainly on the rise and the Durbin Amendment is probably one of the most significant pieces of regulatory legislation to impact debit networks in recent years. A key directive within the Durbin Amendment requires institutions to provide dual network alternatives for signature and PIN transactions. This directive has actually translated into a nice increase in clients and transaction volumes for our NYCE® Payments Network in 2012 over 2011 as institutions have rushed to address this new dual network requirement. And payment scheme providers such as VISA® have been aggressive in rolling out new pricing offerings and strategies (PAVD) to recover some of that lost fee volume.
With increased regulation as a backdrop, we’re seeing more competition and innovation in the payments industry and FIS™ is taking a leadership position in pushing more innovation across the payments landscape and leveraging our collection of assets in broader ways. A great example of that is the recent announcement of our PayNet real-time payment authorization and settlement network which offers real-time transaction processing for any non-card-based form of payment and provides an attractive alternative interchange model that enables financial institutions to generate revenues.
Increased industry change and competition is actually driving FIS to be more innovative and we are excited about our future in the payments industry.
3. How has the shift in consumer banking preferences away from traditional bank channels impacted FIS?
Clearly over the last decade we have seen a significant shift in the ways consumers prefer to interact with their financial institutions. Fortunately, FIS in the late 90s and the early part of this century chose to diversify our solution set to encompass what has now become the broadest product suite in the industry. During this period, we’ve seen a shift of consumer usage away from some of the traditional banking channels such as brick and mortar branches to more virtual and self-service channels such as the internet, call center and, increasingly, mobile channels. FIS is well positioned to help institutions navigate this shift and “right channel” transactions from one channel to the other and we believe this expertise will be critical as institutions look to re-engineer the financial services business model.
4. What has FIS focused on from a product perspective over the last few months? In particular, how do your foresee PayNet differentiating FIS from its competitors?
At FIS, we consistently invest 5 to 7% of our total revenues back into our solution set each and every year. We are continually trying to drive increased innovation – not just for short-term results – but with a focus on the long-term growth of FIS. A great example of this is our PayNet real-time payments network. We see this as a huge differentiating opportunity for FIS. Many organizations are trying to solve emerging payments through various mechanisms. With PayNet, FIS has taken the industry’s first step of consolidating non card-based payment types and leveraging a common good funds payment settlement framework to authorize real-time payments between any payment mechanisms. We’re able to accomplish this because of the breadth of our integrated, value-added payment solutions and our demonstrated ability to deliver upon our rich legacy of payment innovation for card processing, payment networks, payment processing and ePayment solutions.
Combining all of these capabilities into a holistic network has allowed us to leverage those assets and deploy an innovative solution throughout the market. We think there is tremendous opportunity in the next three to five years and are very excited about the benefits that PayNet can provide our clients by lowering their costs through decreased fraud and global real-time payment transaction execution.
5. How have elongated deal cycles affected your sales strategy?
Clearly since the economic collapse of 2008 we have seen a slower recovery in the economy than what many originally projected. We also experienced, as you state, an elongated sales cycle for a few years after the collapse. FIS is in a unique position because we offer the industry’s most comprehensive payments portfolio combined with extensive BPO and consulting capabilities that help our clients outline a pragmatic payments strategy. By strategically focusing on integrating our extensive payment assets with each other and with our core banking assets, our clients can drive greater efficiencies, increase customer profitability and derive a greater share of the customer wallet. This approach has resonated well in the market and differentiates FIS from other providers in the industry.
We’re confident in our sales strategy and believe it’s still the right strategy for us to achieve our growth goals.
6. How is FIS approaching EMV?
EMV is a hot discussion topic in the United States but EMV is not a new topic for FIS because we’ve been offering EMV capabilities outside of the U.S. for years. For example, our BASE2000 card solution has been EMV certified in Canada since 2005 and earlier this year we introduced the FIS Travel EMV Card, which is a new EMV-compliant prepaid card targeted specifically to consumers who travel abroad.
From a U.S. debit network perspective, the U.S. payments industry is trying to determine how to deploy EMV to support debit instruments in a way that complies with both U.S. regulations and preserves the interests of all constituents including financial institutions, merchants, processors, networks – and most importantly – consumers. We’re helping to shape the future of EMV within the U.S. by actively engaging in the industry forums that are driving those conversations.
So as EMV moves from a point of conversation to a requirement within the U.S., FIS is confident that we can maintain and even build on our leadership position because of our experience in developing and delivering EMV-oriented products and services for our international clients.
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