[ad_1]
Dive Brief:
- Mega payments processor Fidelity National Information Services may be impacted by an expanding bank crisis in that it derives between $20 million and $25 million in annual revenue from each of Signature Bank and First Republic Bank, according to Baird Equity Research. Signature Bank was shuttered by New York regulators last week and First Republic shares plunged Monday after federal regulators took over Silicon Valley Bank on Friday.
- Payoneer Global and Bill Holdings were among the payments players that had deposits at Silicon Valley Bank, according to disclosures by those companies. The federal government said over the weekend that it will protect depositors beyond the typical $250,000 Federal Deposit Insurance Corporation protection.
- Other payments companies reacted to the contagion, with expense management firm Brex offering to provide loans to impacted companies and digital payments firm Stripe saying it doesn’t have “direct exposure” to SVB, but was suspending payouts to accounts at that bank to safeguard customers’ access to funds.
Dive Insight:
In addition to the impact on Fidelity National Information Services, also known as FIS, the Baird analysts said that they expected processor rival Fiserv might also have lesser exposure to SVB. Both companies provide payments processing and technology services to banks.
For FIS, the spreading bank crisis could have a combined $50 million impact to annual revenue, but that still accounts for less than 1% of overall FIS revenue, Baird analysts said in a research note to clients Monday. The investment research firm also sought to dispel concern by noting that FIS is not significantly beholden to any one client. “We believe FIS is well diversified among its client base,” Baird analysts said in the note. FIS didn’t respond to a request for comment.
The Baird analysts said Fiserv might have limited exposure to the SVB situation, potentially $15 million to $20 million of its annual revenue. “It appears that (Fiserv) provides core processing for Silicon Valley Bank (based on job postings),” Baird analysts said in a separate Friday note to clients. Fiserv didn’t respond to a request for a comment.
Companies with direct exposure to SVB included Payoneer and Bill Holdings, but both companies sought to downplay the impact. SVB serviced many venture firms and their portfolio companies.
Payoneer, which is now publicly-traded, has raised significant capital from venture firms in the past, including $180 million in 2016. “Of the Company’s approximately $6.4 billion in total cash balances as of December 31, 2022, less than $20 million is held at SVB,” Payoneer said in a Friday regulatory filing. “The vast majority of Payoneer’s cash balances are held across more than 10 global systemically important banks.”
At Bill Holdings, the company said in a press release on Friday that it had taken money out of the bank in recent days. While that company also acknowledged having funds at SVB, it said that “the significant majority of our corporate cash and processed payments are with numerous large, multinational financial institutions.” The company also said it had ”redirected payments to be made through SVB to one of our multinational bank processors” and that it’s no longer using SVB to process payments for customers.
Although the big card network companies have close relationships with the banks, Baird predicted it was unlikely that the banks’ credit risk would be shifted to Visa or Mastercard. “While that is possible, it’s a long shot since banks are taken over with a new bank taking the credit risk,” Baird said in a Sunday note to investors.
Noting that SVB is seen as a financial bedrock of the tech world, Tal Kirschenbaum, CEO of the payments monitoring software firm Ledge, explained how the situation could impact fintechs. Fintechs “that rely on SVB for their core business and have built their product on top of SVB’s payment rails, using their payment rails to move funds, might face significant limits on their ability to operate,” he said by email. “This will have ripple effects across the ecosystem, affecting mission-critical services like payroll vendors, accounts payable or accounts receivable automation, working capital solutions, and health insurance vendors.”
In an indication of how such banking crises spread, Kirschenbaum also issued this warning: “It is critical that companies act fast to address these challenges and minimize their exposure to risk.”
At the same time, another payments player pinpointed the crisis as an opportunity of sorts. Brex said it would offer emergency financing to fintech startups seeking to meet payroll and operational funding needs. The company said it would work with third-party capital providers to make money available by this week, offering a link where startups could request the funds.
“Brex will review accounts as quickly as possible, and release emergency funds into customers’ Brex Business accounts upon approval,” the company said in the Friday press release.
The Electronic Transactions Association, which represents payments players in the financial ecosystem, backed up the moves by federal regulators to shore up the system. “It is crucial that our banking system be resilient and secure,” a spokesperson for the association said by email. “This weekend’s response by federal and state banking regulators worked to achieve these two goals.”
[ad_2]
Source link