As e-commerce has boomed, Fidelity National Information Services has seen the amount of money it makes from processing online payments surge.
Now, as competition in that space heats up, the Jacksonville-based fintech giant has rolled out new technology that it says more accurately detects fraudulent charges. Cutting down on the number of valid transactions that are incorrectly blocked as fraud, the company says, will boost the bottom line of both FIS and the merchants it serves.
FIS's new solutions come as the company increasingly emphasizes its merchants business, which is one of its three primary focuses — banking and capital markets being the others. This shift in focus can be seen in documents filed with the U.S. Securities and Exchange Commission, which show the share of the fintech company's annual revenue coming from merchant solutions increasing from 18.8% to 32.4% between 2019 and 2021. In the second quarter of 2022, it increased to 35%.
The company's merchant solutions growth is also aided by its auspicious July 31, 2019 acquisition of global merchant acquirer Worldpay for $43 billion. In an Oct. 22, 2019 press release, the company boasted about the newly combined entity's ability to "penetrate the high-growth, global e-commerce market faster through Worldpay's expertise and ability to accept hundreds of payment types and currencies and FIS' reach."
At the time, of course, it had no idea just how much that global e-commerce market was going to grow. Few, after all, predicted COVID-19, let alone the shift toward e-commerce it would force.
FIS certainly realized the extent of the growth by March 2022, however, when the company released a report projecting that the global e-commerce market will grow more than 50% through 2025, to reach over $8 trillion in transaction volume.
So as more and more money shifts online, FIS has been rolling out solutions to stay at the forefront of that e-commerce boom.
The company's newest offering is Guaranteed Payments, which it released in June in partnership San Jose, Calif.-based software company Signifyd.
Online merchants are generally liable for fraudulent transactions on their sites, making it vital to block things like stolen cards. But blocking too aggressively leads to lost revenue. Signifyd says far more revenue is lost from blocking legitimate purchases than is saved by blocking fraudulent ones.
What Guaranteed Payments offers is an increase in transaction approval rates by 5% to 7%, said Nicole Jass, senior vice president of product at FIS. If a fraudulent transaction does go through, FIS eats the chargeback.
“You’re not [just] paying us to stop the fraud; you’re really paying us to get the good transactions through and to make the right decision,” Jass said.
Many of the larger merchants that work with FIS also work with its competitors and measure their transaction approval rates against each other “daily, if not hourly,” to see which is providing higher approval rates, Jass said.
Based on those measurements, she said, traffic is directed toward or away from FIS or its competitors, which include Dutch payment company Adyen, Irish-American SaaS company Stripe, and especially Brookfield, Wisconsin-based fintech Fiserv.
This is why products like Guaranteed Payments are “of huge strategic importance for [our] e-commerce business,” she said. “Part of our huge plan is just to grow our e-commerce volume.”
Moreover, while one could simply pay to use Signifyd's product on its own, Jass added, the fact that it's already fully integrated into FIS's payment flow is a huge value add, as manual solutions integration into financial technology can often take months.
Guaranteed Payments isn’t FIS's first product designed to increase transaction approval rates. Worldpay released a solution called AuthMax in June 2018, which was also made to increase debit and credit card approval rates for U.S. e-commerce merchants. It accomplished this, Jass said, by sending or suppressing certain data elements — such as zip codes, addresses and other information — to issuers.
"Maybe it's a zip code or a full address, and the consumer enters it wrong, so there's over-emphasis on it," Jass said.
Incorrectly entered data points like these are often marked as fraudulent and blocked, inconveniencing all involved without actually preventing fraud.
FIS also started a pilot for a separate product, AuthMax Preferred Customer, in Q4 2021, which it had in the market in Q2 2022. Recognizing that fraudulent activity on a given card often leads legitimate transactions — like recurring subscription payments — to be denied on those cards, FIS created a product that helps those legitimate transactions go through for certain reliable cardholders, such as for those that have been consistently paying a recurring fee on time.
“If you lose your card … you probably still want your Netflix, even though your physical card has been compromised,” Jass said.
And the e-commerce market continuing to grow, FIS doesn't look likely to slow down its merchants solutions focus anytime soon.
"Global e-commerce continues to be our fastest growing business, consistent with our strategy," FIS President Stephanie Ferris said on the company's Aug. 4 quarterly earnings call. "We spent the past several years investing to bring forward the next generation of fintech solutions. The market is recognizing our shift."
