ACI will celebrate its 50th anniversary next year, something of a novelty for a firm that describes itself as a fintech innovator. It will however have plenty to celebrate. Its ambition is simple to summarise, trickier to execute. That is, to be the global standard for intelligent payments orchestration across an enviable client base now and in the future.
The theme of ACI Worldwide’s 2024 Analyst Day on 12 March was carefully curated to describe the opportunities presented by the rapidly changing payments ecosystem. And a series of presentations from the firm’s C-suite set out in detail just how ACI Worldwide will use its position in the market to take advantage of those opportunities.
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Global commerce relies on ACI. Its payment software solutions handle billions of transactions, enabling the movement of trillions of dollars, every day. Its bank, biller, and merchant customers are leaders in their industries. Real-time payments and other discontinuities in the market are creating a strategic modernisation imperative for these customers. Banks are at the forefront of this imperative, critically examining their payment infrastructures with the future in mind.
A key strategic priority for the firm is to build a cloud-native, multi-tenant payments hub that drives intelligent payments orchestration. It will connect its proven products and new products to the hub. This will provide customers a straight-forward, lower-risk migration path.
The key takeaway for investors of the analyst day was the drive for significant growth with 7-9% revenue growth expected in 2024.
ACI Worldwide by numbers
ACI’s software and services enable the movement of money from one place to another. It describes its value proposition as Intelligent Payments Orchestration. That means it enable its customers to move money in a smart, effective, and efficient way. Global commerce relies on ACI: it plays an important role in the global payments ecosystem.
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By GlobalDataBy numbers, it serves all ten of the world’s largest financial 10 institutions by asset value. It has customers in 94 countries. It supports 26 regional or national instant payment schemes and 10 central infrastructures. 400 participant banks rely on its real-time solutions. Its fraud detection and prevention solutions protect approximately 30% of all real-time payments. Some 80,000 of the largest enterprise retailers in the world rely on ACI. Customers include six of the top 10 global merchants, as ranked by the National Retail Federation. Its merchant solutions offer 800 direct connectors through a single API. ACI Payments handles $200bn in bill payments annually. And it serves approximately 3,000 billers.
What has changed since the last analyst day?
Debbie Guerra, chief product officer, leads ACIs’ product management organisation, focussed on strategically deploying its products to maximise growth and profitability.
With over three decades of experience incorporating payments, fintech, consulting and IT services, she joined ACI in 2009 from First Data.
At the time of the last investor day some four years ago, the firm focused on real-time payments, merchant, and ACI Speedpay. While it has enjoyed success in all three areas, it is now turning its focus to a massive opportunity in its banks business. Banks need a way to modernise the complex systems and processes they have built up over decades.
Guerra tells EPI that ACI Worldwide is now expanding its target market to include “mid-tier” financial institutions with between $50bn and $250bn in assets.
‘This is a new addressable market for us’
The Serviceable Revenue Opportunity (SRO) in banks and intermediaries is estimated at approximately $2bn-$2.5bn today and is growing at approximately 9% annually to hit approximately $3.5bn-$4.5bn by 2028. Guerra says that the market is moving away from the delivery of discrete software solutions toward integrated orchestration solutions or payment hubs. The payments hub space is expected to grow approximately 2-3x faster than other solutions and be more than 50% of the market by 2028. The market for ACI’s payments orchestration hub, which also incorporates consumer banking account-to-account payments, is growing at around 20-25% CAGR until 2028. By evolving its focus from Tier 1 customers to also include the “upper end” of mid-market sized banks ($50-$250bn in assets) represents a new addressable market for ACI.
2028 target: to double its Serviceable Revenue Opportunity
Building a cloud-native, multi-tenant payments hub will allow customers to migrate to new products in a lower-risk way. Guerra says that ACI will make the most of this position and that means doubling its SRO by 2028.
The payments hub will connect other solutions quickly, and it will be integrated with ACI’s Payments Intelligence solutions. She adds that ACI is uniquely positioned to deliver the technology and process benefits, while minimising risk. And of course, its merchant and biller customers want the same intelligent payments orchestration.
Associated enhancements include keeping up with regulatory and compliance requirements and improving customer experience. ACI’s payments hub will include consumer payments for Card Issuing, Merchant Acquiring and ATM driving for self-service banking, particularly spanning authorisation, capture, clearing, and settlement.
ACI’s payments hub features and benefits
It will embed ACI’s rich and differentiated payments intelligence and enterprise fraud management solution in the payments hub as combatting fraud is an integral capability. The payments hub solution offers services that each area of the bank can access, but from a common technology platform, offering unique opportunities for banks to modernise while addressing total cost of ownership challenges. And the payments hub features a robust partner ecosystem that will expand value-added services and fintech engagement across the hub, opening paths for new monetisation opportunities
One key characteristic of ACI’s payments hub vision is that it is cloud-native across multiple cloud environments. It will enable acquisition of ACI’s solution based on customer preference: Relationships with top players across the cloud ecosystem – Microsoft, AWS, and IBM Red Hat – ensure that the payments hub solution can offer a critical option to accelerate cloud transition. For banks that want to continue to operate on premises, ACI will support with Cloud Native tooling.
ACI’s focus on intelligent payments orchestration plays a key role in the value it delivers to its direct biller customers via ACI Speedpay. It drives net revenue growth, optimising interchange and payment decisions across the payments ecosystem.
Another area where intelligent payments orchestration is critical is in its merchant segment. ACI serves more than 450 large direct merchants and many of the largest retailers globally. It supports more than 80,000 merchants indirectly through payment service providers that white-label its payment orchestration platforms. Guerra says that ACI’s global reach of connectors is unrivalled.
By offering payments orchestration that can deliver multiple acquiring routes, ACI can help merchants best manage cost, but also can differentiate from competitors that are individual acquirers who bundle their standard solutions for their customers. Solutions span global e-commerce payment orchestration, merchant fraud detection and prevention, and omni-channel payment orchestration
“Our unique value is our embedded infrastructure that powers all aspects of the global payments ecosystem, from central and commercial banks to merchants, billers, and many players in between.”
ACI: unique fraud and payments intelligence
In 1998, ACI began delivering AI competencies as part of its enterprise fraud solutions for banks, leveraging neural networks developed originally by Nobel Prize winner, Dr. Leon Cooper. Since then, with the impact of years of learning, rigorous governance, advances in technology and the efforts of its experienced data scientists, ACI developed and received a patent for its AI-enabled incremental learning solution that uses AI. The result is that its fraud models learn and adapt over time, driving the efficacy of its real-time fraud decisioning and the life span of its models.
ACI forecasts significant growth in the unique fraud and payments intelligence total addressable market. It is well-poised as it repositions its payments intelligence solutions more directly in the market and also expand its reach, as payments intelligence becomes an integral component of its payments hub.
“The continued threat of fraud and financial crime puts such a focus on the needs for effective payments, intelligence, fraud detection, and prevention. And that is a growing issue and area of concern for so many of our customers. And it requires not just basic capabilities, but really AI-enabled robust solutions that can outpace the challenges that we see occurring.”
Specifically, ACI expects to see associated revenue growth from these solutions reflected in each of its three segments.
Guerra concludes that ACI has excellent growth opportunities across all three of its business segments where it provides intelligent payment orchestration solutions that meet its customers’ needs. The challenge now for the business is to deliver on its goal of being the global standard in payments and money movement.
Debbie Guerra, chief product officer, ACI Worldwide, speaks with EPI editor Douglas Blakey
