Since the announcement of Worldpay’s merger with Vantiv there has been a glut of bids for payments companies, coming from in-market competitors, credit card companies looking to enter the sector and private equity firms.
Since then, a series of mergers have been announced.
UK-based Paysafe is on course to be purchased outright by Blackstone and CVC Capital Partners in a £2.9 billion deal. Paysafe has separately said it is planning to buy Merchants’ Choice Payment Solutions to boost its US business.
Worldline has been particularly active, snapping up competitors. It has made a definitive agreement to acquire online payments provider Digital River World Payments and Baltics-based processor First Data.
In a statement, Worldline laid out its ambition to complete several other acquisitions by the end of the year to expand its presence across Europe.
Meanwhile, French payments company Ingenico is to acquire Sweden’s Bambora for €1.5 billion. The move will increase the availability of Ingenico in the Nordics, Australia and North America.
Not every company seeking new exposure to growth and value in the sector is looking to make a full acquisition. Private equity group Permira has bought a minimum stake of 10% in online payments start-up Klarna.
Ripe for change
The source close to the Worldpay deal said at the time of the announcement that the payments industry was ripe for change.
“Look at any major, global sector and there has to be a move in response to the changing scale of an industry,” the source said. “There are more companies becoming global; they need their payments processors to match their scale.”
It states its New Payments Architecture will be “the most radical change to the payments industry since the 1960s”. Payments channels have dramatically evolved in the past decade, with the rise of e-commerce and instant payments putting strain on existing channels.
The industry has a number of divisions across how payments are made and is greatly fragmented. The recently announced spate of mergers and acquisitions can be seen as going some way in attempting to remedy this.
In an equity research note from July, Goldman Sachs looked towards greater consolidation in the industry.
It cites economies of scale, pushed by the industry being largely made up of country players that lack it. Tech differentiation between the incumbents and new start-ups will likely speed up the rate of change as older technology has to be upgraded to compete.
The rising number of commerce channels available to customers, who are expecting flexibility between their online and offline purchase options, is also likely to drive focus on solutions with a single integrated customer experience. Further into this, the complexity created by rising use of e-commerce and its demands on cross-border payments increasingly calls for providers with a range of capabilities.
Although there is strong industrial logic for consolidation, deals need to happen for more than speculative reasons and payments companies need to make sure they keep all stakeholders – including shareholders, customers and regulators – happy.
As the Worldpay merger looks to be completed, it is reported the company will maintain its international headquarters in the UK, after initial suggestions it could move overseas.
There might be a secondary listing of the company’s shares on the London Stock Exchange, after it was initially stated Worldpay would be delisted in London, although Vantiv would continue to be listed on the New York Stock Exchange.