Information technology (
) services and systems provider
) recently announced that two of its subsidiaries,CheckFree Corp
andCashEdge Inc, have filed a patent infringement suit against
Fidelity National Information Services Inc.
) and its subsidiaryMetavante Corp.
As per the case filing,Fiserv subsidiaries complained that
Fidelity andMetavante's products and solutions violateFiserv's
intellectual property that processes inter-bank account-to-account
fund transfers, payment instructions and electronic biller
Fidelity acquiredMetavante in 2009, thereby merging two of the
largest core transaction processing service providers together,
resulting in significant cross selling opportunities.Metavante
acquisition expanded the scale of Fidelity's core processing and
payment capabilities, and added comprehensive trust and wealth
management processing services as well as theNYCE Network to the
company's existing electronic fund transfer (
The acquisition catapulted Fidelity to the position of leader in
the bill-pay processing market traditionally served by a handful of
players includingCheckFree (acquired byFiserv in 2007), Online
Resources andiPay Technologies. The acquisition madeFiserv a direct
competitor of Fidelity.
We believe that the lawsuits reflect increasing rivalry between
Fidelity andFiserv . Over the last 12 months, Fidelity andMetavante
have developed a strong track record of serving regional banks,
community banks and credit unions. On the other hand,Fiserv
continued to expand its consumer payment footprint by signing 114
electronic bill payment clients and 48 debit clients during the
third quarter, which reflects its strong product portfolio, in our
However, we believe that enhanced operating efficiency has been
the primary reason for Fidelity's ever-growing banking clientele.
Currently, increasing consolidation, tightened regulations, lower
interest rates and liquidity crunch have forced the U.S. banks,
particularly small banks, to look for ways of diversifying their
operations in a cost effective way. Fidelity's low-cost platform
has emerged as a messiah for these institutions in recent
Over the last few months, a number of banks from different parts
of the country have chosen Fidelity's solutions. Recently,
Fidelity's banking and payments technology solutions were chosen by
more than 80 financial institutions. Banking institutions such
asCoreFirst Bank & Trust, First National Bank of Omaha,
People's United Bank and Marquette Bank also opted for Fidelity
solutions. We believe that a steady flow of new banking customers
will boost Fidelity's top-line growth going forward.
We also believe that the widening client base will improve
Fidelity's competitive edge againstFiserv Inc.
in the financial and payment solutions segments going forward.
However, the uncertainty surrounding the outcome of the lawsuit
will remain an overhang on Fidelity in the near term.
We maintain our Neutral recommendation on Fidelity over the long
term (for the next 6 to 12 months). Currently, Fidelity has aZacks
#3 Rank, which implies a short-term Hold rating (for the next 1-3
FIDELITY NAT IN (
): Free Stock Analysis Report
FISERV INC (
): Free Stock Analysis Report
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