How FIS-Worldpay deal invigorates the digital ID movement
Dumping passwords in favor of interoperable, flexible identity is an evolution as bumpy as it is necessary. FIS and Worldpay’s combination stands to create tools that can smooth this road.
FIS is active in digital and federated ID, and can add Worldpay’s merchant acquiring and e-commerce technology to its authentication strategy. The combined company can also act as an influencer among the corporations and governments that are building new identity technology to accommodate digital commerce and financial inclusion.
“We’re not the only ones solving that problem. There are a lot of people trying to,” said Bruce Lowthers, chief operating officer of integrated financial solutions at FIS. “We feel we have a solution on the market that allows us to expand our efforts significantly.”
FIS’ $43 billion deal for Worldpay opens lots of doors, such as data sharing between banks and fintechs, scale to counter other acquirers and fintechs, bank-led merchant acquiring, and the means to push into cash-heavy emerging markets.
These efforts require a focus on user experience for business and consumers, as the combined company tries to erode the friction that accompanies faster processing, digital commerce and cross-border transactions. FIS’ ID technology, built in partnership with Equifax, includes device ID, geolocation data, identity profiles and pattern analysis to be more responsive to market changes, technology development and user demands.
Worldpay uses many of the same innovations to secure its transactions. The combined company can extend consumer-level security to business transactions as well as enhance moves into new markets that are warming to digital transaction technology, such as India and Brazil.
The tie-up provides another set of global brands to the digital ID mix. There are more than 120 nations with digital passports, and nations such as France and Canada are developing digitized national systems. Big companies like Mastercard and Microsoft are collaborating on digital identity; and CULedger and Barclays are among the financial institutions reaching beyond their networks and traditional client bases to build coalitions to promote new authentication methods.
Many of FIS and Worldpay’s plans involve cross-border markets, open development and new products that work across issuing and merchant acquiring. All of these strategies could benefit from identity and fraud prevention being less cumbersome. Digital ID is considered an important step towards opening new markets, given the lack of existing infrastructure, and Lowthers anticipates a collaborative push toward modernized identity risk.
“The global community is getting smaller by the day. We’re seeing cross-border transactions happening at a higher rate, and there’s a requirement that these payments be frictionless,” Lowthers said.
The FIS-Worldpay deal provides a clear benefit to FIS' digital identity strategy, according to Julie Conroy, a research director at Aite Group, noting Worldpay's e-commerce presence and FIS's federated digital identity product.
"While federated digital identities are nascent, especially in the U.S. market, there are a variety of players that are working on solutions here since our current username and password paradigm is so badly broken," Conroy said. "The additional intelligence that and reach that Worldpay brings to bear could be a big asset to FIS' existing digital identity efforts."
FIS and Worldpay also hope to use their massive scale to reduce costs and streamline processes. By combining digital identity technology with other elements of digital processing, there is an opportunity improve fraud detection and thus the waste that goes with fighting fraud. Writing for PaymentsSource, Bolt CEO Ryan Breslow contends more money is spent fighting suspect payments than is lost to actual suspect payments, a result of a lack of integration of the different tasks tied to shopping, merchant acquiring risk, and payment processing.
“Fraud reduction also has to reduce false positives,” Lowthers said. “There’s a dynamic where consumer expectations for user experience are bleeding over into their work lives. We have assets to bring to bear for both issuers and acquirers that allow them to accelerate digital products to market.”