Fiserv's acquisition of First Data has paid off in a big way

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Fiserv recorded almost $3.7 billion in internal revenue in Q4 2019, growing 5% year-over-year (YoY), per the company's earnings release.

First Data, which Fiserv acquired for $22 billion in a deal that closed in July 2019, contributed 61% of the total company's internal revenue in the quarter - worth over $2.2 billion - and grew 6% YoY. With First Data driving both Fiserv's revenue and growth in Q4 2019, it's set up to be a core part of the business for years to come.

Fiserv appears set to find new short- and long-term revenue opportunities thanks to the acquisition. The company believes it's on track to bring in at least $100 million in revenue synergies in 2020, Frank Bisignano, Fiserv COO and former First Data CEO, said on the company's earnings call.

Being able to combine First Data's offerings, like Clover - which increased its annualized gross payment volume (GPV) by over 40% YoY, according to Fiserv CEO Jeff Yabuki - as well as both firms' processing capabilities and existing relationships should enable Fiserv to attract new clients and cross-sell to existing ones. And because these potentially complementary solutions already exist, and the combined company already has relationships with a number of firms, it shouldn't take long for Fiserv to realize the revenue from these opportunities.

Importantly, Fiserv appears to still be looking for more revenue synergy opportunities, which will be key to its long-term success now that it's brought in First Data. Yabuki noted that as First Data and the original portions of Fiserv spend more time operating together, they're finding more potential synergies, resulting in the company reportedly having a still-growing list of over 80 different opportunities. Once Fiserv takes advantage of all the low-hanging fruit from its First Data acquisition - which may include simply selling one firm's relevant solutions to an existing client of the other - it will need to keep finding more ways to leverage its combined capabilities, and it may be on its way to doing that.

As the payment firms that recently made major acquisitions begin to operate in conjunction with their purchases, it's paramount that they leverage all of their capabilities to avoid the issues that led them to make such acquisitions.

Firms like Fiserv, FIS, and Global Payments brought in other firms in an effort to consolidate, keep their offerings relevant to clients, and handle the payment industry's digital transformation. Simply cross-selling and combining solutions will boost their performances in the short term now that they've made the acquisitions.

But if they fail to use their combined tools to innovate and find new revenue opportunities, they may find themselves making new big-ticket acquisitions down the line because they might again face shifts in the industry and new competitors that require them to quickly add new capabilities and revenue opportunities. So, working together to identify such new processes and solutions should be a top priority for these firms in the early days after their acquisitions.

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