Major acquisitions in the payments industry – 2020 retrospective (part I)

This article outlines the noteworthy mergers and acquisitions in the B2C payments industry, addressing two drivers: new strong links in the value chain and the accelerated digital transformation

The payments industry has been very operative this year despite the pandemic. While having the increased competition in mind, payments players have availed themselves of the opportunity of exploring the rapid transition to digital transactions and new markets, to consolidate their position in the value chain and further gain market share. The first part of the overview displays the most visible mergers and acquisitions in 2020 in the B2C payments space, and their rationale, by addressing two directions: consolidation of omnichannel capabilities and disruptive technologies.  

According to Yann Sénant, Managing Director at BCG, the value of M&A (payments) deals in 2019 was USD 123 billion, and in 2020, the market registered a decrease – comparing the values from H1 2019 and H1 2020, we notice a decline from USD 113 billion to USD 21 billion. In addition, according to Global and Financial Services M&A Report Financial Adviser League Tables 2020 from Global Data, the value of M&A deals in the banking and payments sector was of USD 376.8 billion, a 22% decline rate compared to 2019. The current numbers are not surprising – businesses have been careful what they spend their money on, yet the growth of ecommerce and contactless payments, and the race for more innovation made a lot of players to grasp new opportunities that emerging trends and technologies could bring for years to come.

The size of digital payments market

According to MarketsandMarkets, the global digital payment market size – which includes payment processing, payment gateways, payment wallets, POS solutions, and fraud management – is expected to grow from USD 79.3 billion in 2020 to USD 154.1 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 14.2% during the forecast period. The accelerated digital transformation means an accelerated adoption of contactless technologies for P2P and C2B payments, and a growing demand for faster transactions. At the same time, more online transactions and ecommerce purchases mean an increased processing volume. Payment processing solutions market size exceeded USD 60 billion in 2019 and it’s likely to register gains at over 20% CAGR between 2020 and 2026 with a value projection of 140 billion. These numbers show a competitive market where businesses rise to new heights by developing new payment services.

Building up new (and strong) links in the value chain

One of the most discussed events in 2020 was Worldline’s merger with Ingenico Group. Worldline is one of the largest European players in payment services with pro forma revenues of USD 5.3 billion in 2019, and both companies have strong roots in the European market, with dozens of companies in their back purchased over time. The mail goal of this merger is to combine Worldline’s coverage of the payment value chain and its expertise in cross-border acquiring with Ingenico’s global exposure to online commerce.

Looking to consolidate its position in other sides of Europe, enable more local payments (and perhaps strengthen the partnership with Czech Republic-based Komercni Banka), Worldline has also acquired a majority stake in GoPay, a well-known payment gateway in Eastern Europe, with multiple payment methods.

Another company on ‘shopping spree’ this year is Nexi, an Italy-based organization providing card issuing and merchant acquiring services. They first merged with SIA, a payment technology provider operating in the same country. The companies plan a diverse set of services, namely digital payments acceptance services for merchants of all sizes, omnichannel solutions, issuing and management of cards to mobile payments apps, B2B digital payments solutions to Open Banking, as well as clearing and trading services for the main Italian and international institutions.

Approximately one month later, Nexi announces the merger with Nets, a , provider of digital payment services and related technology solutions established in the Nordics. Going back to Marco Fava’s expert view, behind this merger there is an ambition to exploit growth potentials of attractive but still underpenetrated European markets.

In an expert opinion shared with The Paypers on both Worldline-Ingenico and Nexi-Sia mergers, Marco Fava, Managing Director at CleverAdvice, outlines the upcoming opportunities for these players and the markets they operate in, but also the challenges that may lie ahead. Worldline and Ingenico merger could bring a lot of innovation in the payments space, however, over the long run, both companies would be focused on operational efficiency in a way that might make innovation a subsidiary priority. Marco also observes the difficulties the Nexi-SIA-Nets group may meet, as investments in SIA network-related services could be reduced, which would impede a smooth integration.

Verifone, a global provider of payment and commerce solutions mostly focused on payment devices, made the 13^th acquisition this year with the monetization platform 2Checkout. In 2017, Avangate bought 2Checkout and merged their subscription management solutions. Verifone seeks to tap even more the subscription-based businesses with the products offered by 2Checkout, and considering the growth of this industry this year, they must have assessed some good follow-up results.

Fintech-as-a-Service company Rapyd that offers local payment methods has acquired Korta, a payment card service provider. In an interview with The Paypers, Rapyd’s CEO Arik Shtilman elaborated the strategy behind this acquisition: the decision came as a result of customers’ demand that wanted card acceptance in Rapyd’s portfolio. Now the company offers credit and debit card acceptance across Europe, which also means a strengthened position on this market.

Checkout.com made its first acquisition with ProcessOut, a France-based startup offering smart routing for international payment solutions. For those less familiar with smart payment routing, this is the best approach for a merchant working with multiple PSPs to be able to use the most relevant one for a single transaction. According to ProcessOut, in order to take full advantage of smart routing, it’s important to understand which transaction parameters they can play with to choose which PSP to use or to optimize a transaction for a specific PSP. For Checkout.com, the acquisition was seen as a good opportunity to add this capability to their offering.

After closing a deal last year by acquiring SafeCharge, in 2020, Nuvei a Canada-based financial service company that provides its clients with payment technology solutions bought Smart2Pay, offering one API to get access point for over 200 local and global payment methods for merchants, PSP and banks. Nuvei’s goal is to further expand footprints in high growth digital commerce market , and to enable multiple payment methods for its current and future merchants. In December 2020, Nuvei made the second acquisition – they bought Base Commerce, a provider of integrated payments solutions to expand their product capabilities.

Fiserv has announced three acquisitions this year: 1) Merchant Pro Express, an Independent Service Organization (ISO), that provides processing services, POS equipment and merchant cash advances to companies in the US 2) Bypass Mobile, a mobile solutions company for sports and entertainment industry 3) Ondot, a company providing a digital card services platform to banks and other financial services. Fiserv seeks to boost services for merchants and banks, and the company is probably foreseeing a quick recovery for events in a post-vaccine era, hence the selection of Bypass Mobile that is mainly focused on commerce solutions for sports and entertainment venues, food service management providers and national restaurant chains.

This year also marked the fusion of two payment methods in Germany, the biggest European market: Paydirekt took over its competitor Giropay. Both online payment services have a similar ownership structure. DZ Bank, Deutsche Bank and Commerzbank are involved in Paydirekt. Giropay, in turn, belongs to the Sparkassen-Finanzgruppe, and Postbank that in turn belongs to Deutsche Bank. It would be interesting to see the progress of this merger and whether the new enforced Paydirekt will be able to become a preferred online payment method among German users, considering that PayPal has currently over 26 million users in Germany, while Paydirekt has only 3.5 million. According to Giropay, they are reaching around 45 million users at present, so Paydirekt may no longer lag behind PayPal.

Digital transformation calls for enhanced contactless payments capabilities

Apple has upgraded its portfolio with Mobeewave’s technology, which turns a smartphone into a POS. Samsung has reached out first to Mobeewave, in October 2019 for a partnership. The companies planned to roll out to retailers NFC-enabled devices with an incorporated Samsung POS app. While the plan wasn’t to limit the service to Samsung Pay only, but to make it compatible with Google Pay and Apple Pay as well, this new deal with Apple might keep contactless payments via iPhones only. By cancelling the collaboration with Samsung, Mobeewave has virtually turned down the possibility of creating a holistic contactless payments platform, but the rumour-mill hasn’t delivered any reason behind this decision, nor the next steps regarding Apple’s acquisition. 

Planet Payment, a company offering payment processing and multicurrency solutions, has acquired 3C Payment, a tokenized payment solutions company, the ultimate goal being to combine the best of both worlds that these PSPs can bring to the table. Planet and 3C Payment are focused on industries and businesses that need to accept local payment methods such as Alipay, WeChat Pay, and UnionPay, in addition to global schemes such as Visa, Mastercard and American Express. This acquisition means that businesses can now work with one partner and use a single payment platform to accept payments whether their consumers are paying in-store or online. As a short background, Planet was acquired in 2017 by Fintrax Group, a Dynamic Currency Conversion, credit card processing and POS technology company, which was bought in 2015 by the investment firm Eurazeo.

The bottom line

The rapid growth in digital transactions will continue to play an important role in decisions that businesses could make with regards to any acquisition plan. A new wave of consolidation may be further driven by disruptive technologies and customer demand.

The ecommerce and m-commerce innovation has been gaining ground since last year. Following the social media trend among consumers, companies are likely to eye mobile payments and fintech apps, and startups with technologies that enable merchants to sell products omnichannel, including via social networks and instant messaging. Traditional PSPs will further merge with or acquire revenue driving ecommerce acceptance providers to future proof their business model. Under the contactless payments umbrella, the NextGen POS technology will meet a great interest this year if in-store commerce will revive. Apple made its move with Mobeewave, so we can expect other BigTechs to follow their example and buy startups that enable software-based tap-to-go payments, and that can build large POS terminal networks.

About Anda Kania

Anda is doctor in Political Sciences, currently exploring her research skills to discover the latest trends in the payment and commerce industry. Anda has used her position of senior editor at The Paypers to analyse the hottest topics, and to discuss them with thought leaders in order to get the pulse of the payments environment.