Zacks_Analysts' Blog : Fidelity Boosts Clientele - Analyst Blog

Fidelity National Information Services Inc (FIS) recently announced a partnership with Bridgeport, Connecticut-based People's United Bank, a subsidiary of People's United Financial, Inc.

People's United Bank boasts a wide network of 375 branches and provides commercial and retail banking, and wealth management services in Connecticut, Massachusetts, Vermont, New York, New Hampshire and Maine. The bank expects to integrate Fidelity’s mobile financial services platform into its newly launched mobile banking channel.

Fidelity’s mobile solutions enable banking customers to perform transactions quickly and easily from their mobile devices through text, mobile web and downloadable applications for smartphones. We believe that the addition of mobile services will expand People's United’s customer base going forward.

Mobile commerce and banking have been on the rise over the past few years, particularly driven by the increasing adoption of smartphones and tablet devices. According to a study by Javelin research, 58% of all U.S. adults with mobile phones are expected to use mobile banking by 2014.

Yankee Group believes that there will be more than 500 million mobile-banking users globally by 2015. As per the latest survey report, 27% of all respondents use mobile banking, much higher than m-commerce (13%), mobile coupons (11%) and mobile payments (9%).

Analysts believe that in North America and Europe, mobile banking is developing into an extension of online banking, as mobile usage continues to accelerate globally. According to ABI Research, banking institutions will be the major users of mobile financial services, as these services would help to increase customer loyalty at lower costs, further helping penetration.

We believe that Fidelity’s superior banking solutions will continue to attract banking and financial institutions. Most recently, Fidelity’s banking and payments technology solutions were chosen by more than 80 financial institutions. In the past few months, institutions such as First National Bank of Omaha 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.

Fidelity’s commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base will drive growth over the long term. Expansion into emerging markets such as Brazil, India and China will also help organic revenue growth over the long term.

However, increasing consolidation in the banking sector, a challenging environment for the company’s Payments Solutions business and an uncertain regulatory environment are the primary headwinds, in our view.

We maintain our Neutral rating on a long-term basis (for the next 6 to 12 months), primarily due to increasing debt and intense competition from Fiserv Inc. (FISV), Alliance Data Systems Corp. (ADS), Global Payments Inc. (GPN), MasterCard Inc. (MA) and Visa Inc. (V).

Currently, Fidelity has a Zacks #3 Rank, which implies a short-term Hold rating (for the next 1-3 months).