Fintech provider Fiserv said today that it will purchase payment processor First Data Corporation in a massive $22 billion deal, and the transaction will come with a hefty investment in innovation.

The combined company will look to “extend differentiation through innovation and integration” using proven integration capabilities and enhanced innovation funding, according to an investor presentation. The combined venture will make an innovation investment of $500 million over five years, to be funded, in part, from cost synergies.

The investment will tackle “digital enablement,” advanced risk management, e-commerce, next-generation merchant solutions and data-focused solutions, the companies said. The companies project combined annual revenue of $14.6 billion. 

Together, the new Fiserv is expecting $900 million of annual recurring cost synergies, from duplicative overhead, streamlining operations, enhanced operational efficiency and process improvements. That savings will come within five years of the transaction’s closing, expected during the second half of 2019.

The companies said they will be able to provide a wide range of payments and financial services, including account processing and digital banking solutions; card issuer processing and network services; e-commerce; integrated payments; and the Clover cloud-based point-of-sale solution.

The consolidated company will continue as Fiserv and will be headquartered in Milwaukee, Wisc., the companies announced. Jeff Yabuki, president and CEO of Fiserv, will be chairman and CEO of the combined company. Frank Bisignano, chairman and CEO of First Data, will be president, COO and a director of the combined company.

Fintech Twitter blew up after the deal was announced. There were a lot of holy cows, plenty of predictions, and some mild profanity.

Mike Dudas, founder and CEO of The Block, a crypto publication, called it a “bonkers large deal.” To put things into perspective, he later tacked on the fact that payment startup Stripe is currently valued at $20 billion (less than what Fiserv is paying for First Data).

https://twitter.com/mdudas/status/1085544096004009984

James Wester, research director for IDC Worldwide, said the providers of conference swag will ultimately suffer.

Regarding Fiserv/First Data, at some point in a decade or so, there will be one massive booth for one "payment provider" at industry conferences. Industry consolidation must be hard on providers of conference swag.

— James Wester (@jameswester) January 16, 2019

A source told Bank Innovation that while the new Fiserv would be a behemoth, it does not mean the demise of other technology providers.

“Deals of this size are all-consuming,” the source said. “On the surface, this looks great, but if competition can stay focused, they can make up ground against” Fiserv as it works to complete the massive integration.

DISCLOSURE: Fiserv is the technology partner of INV Fintech, this company’s sister accelerator.