the financial industry, according to the website of the Golden Contract Coalition, a consortium formed about a year ago that includes leaders of community banks.
Due to this “vendor oligopoly”—as founding members of the Golden Contract Coalition wrote in a news release announcing its launch—some community banks and credit unions have for years been “unable to develop and deploy the same cutting-edge, customer-facing services as those produced by larger national banks.”
The Coalition complains of exorbitant fees Fiserv and other technology providers charge when two or more banks come together through a merger or acquisition and need to integrate their software infrastructures. The Coalition seeks to level the playing field by banding together and encouraging member institutions to use a standardized contract for IT vendors. Fiserv and a couple of its competitors responded to some of the Coalition’s criticisms in a Forbes article published shortly after it was formed.
Despite the opposition, many analysts believe Fiserv is in a position to continue its strong run. Koning says the company has “massively outperformed” the expectations of industry observers and is one of the only companies in the S&P 500 stock market index that has reported a double-digit percentage increase in earnings per share each year over a 30-year stretch. He acknowledges that the declining number of banks and credit unions represents a “modest headwind” for Fiserv. With fewer financial institutions operating, they have more leverage when negotiating pricing and other contractual terms with technology providers like Fiserv. But ultimately, Baird analysts write in their research note, they “like Fiserv as a steady compounder.”
The Monitise acquisition, bringing with it global exposure and mobile payment technology, may be a sign that Fiserv is looking to counter that headwind with moves to new markets and lines of business.
