Fidelity National Information Services Inc (FIS - Analyst Report) continues to add community banks to its strong clientele. The leading banking and payments technology solutions provider recently announced that its core banking solutions platform has been selected by a number of community banks, including Ohio-based Valley Central Savings Bank, Texas-based AccessBank Texas and West Virginia-based Calhoun County Bank.

Fidelity’s core banking solution platform has been a game-changer for these small community banks. The shift to Fidelity’s platform has enhanced their ability to process files within a short span of time, thereby facilitating cost management and further focus on customer service.

Enhanced operating efficiency has been the primary reason for Fidelity’s ever-growing banking clientele. Currently, increasing consolidation, tightened regulations, lower interest rates and the liquidity crunch have forced U.S. banks, particularly small banks to look for ways to differentiate their services in a cost effective way. Fidelity’s low-cost platform has emerged as a savior for these institutions in recent times.

Apart from community banks, large financial institutions have also chosen Fidelity’s solutions. Over the last 12-18 months, Fidelity’s banking and payments technology solutions have been chosen by more than 80 financial institutions, which include First National Bank of Omaha, People’s United Bank and Marquette Bank. We believe that a steady flow of new banking customers will boost Fidelity’s top-line growth going forward.

Moreover, the expanding client base will boost revenues in the Financial Solutions division, offsetting the sluggish growth in the Payment solutions group and any negative impact from its European operations. Financial solutions revenue increased 7.0% year over year to $538.9 million in the first quarter of 2012.

We believe that Fidelity’s strong customer base will provide it a competitive edge against major rivals such as Fiserv Inc. (FISV - Analyst Report) in the financial and payment solutions segments. The increasing international exposure, particularly in the emerging economies of Latin America and the Asia-Pacific, a diversified product portfolio, cost synergies from acquisitions and a loyal customer base are other positives driving its growth over the long term.

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

We maintain our Neutral recommendation on a long-term basis (for the next 6 to 12 months). Currently, Fidelity has a Zacks #3 Rank, which implies a Hold rating (for the next 1-3 months).