Fiserv's $22B purchase of First Data marks one of the largest acquisitions in the fintech industry (FISV)

US fintech solutions provider Fiserv has announced it will purchase payment processor First Data in an all-stock deal for $22 billion, marking one of the largest acquisitions within the fast-growing fintech industry, per The Wall Street Journal.

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Fiserv and First Data provide a range of technology solutions to banks, merchants, and other businesses. Fiserv, a core banking vendor with a client list of 12,000 financial institutions (FIs), offers services including processing credit and debit card transactions for banks. Meanwhile, First Data provides payment processing and technology to over 4,000 FIs. The companies anticipate the deal will formally close in the second half of this year.

The deal will allow the two firms to offer more integrated services while pushing back against the threat from fintechs.The consolidation of Fiserv and First Data makes sense as the firms largely offer complementary products and services.

The deal will enable Fiserv to broaden the suite of products it offers to its existing clients, including account processing and digital banking solutions. First Data also offers a range of fintech solutions, including Clover, its point-of-sale (POS) product for middle-sized merchants that competes with Square.

Clover and other brands owned by First Data will now have backing from a company with vast resources and reach, while Fiserv can integrate these offerings into its core business. As a result, the consolidation of these two firms will enable them to bolster their services against competition: Fintechs like Square and Adyen have increasingly pushed into the market in recent years, threatening the revenue source of legacy players like Fiserv and First Data.

The deal highlights a growing trend of consolidation were seeing in financial services. Already this year we have seen considerable consolidation within the fintech industry. Most notably, Plaid, a US fintech unicorn that develops technology to enable consumers to connect their bank accounts to other financial services providers, acquired competitor Quovo in a $200 million deal.

Meanwhile, Spanish banking giant BBVA is rumored to be eyeing a potential acquisition of UK-based neobank Atom by exercising its existing right to buy the remaining shares in the company, which it holds a 40% stake in.

As incumbent FIs look to stave off competition from fintechs, and fintechs, in turn, build on their early success by scaling their operations, partnerships, mergers, and acquisitions offer an avenue for these firms to realize their business needs. We expect to see this trend of consolidation within the financial services industry intensify further in the year ahead.