Voice of the Industry

Mergers & acquisitions in the payments industry: From 2019 to 2020 - Part 1

Monday 6 April 2020 08:01 CET | Editor: Anda Kania | Voice of the industry

Who’s Who in Payments 2020

A retrospective of major mergers and acquisitions from 2019 to 2020 and the trends revolving around the business strategies

Who’s Who in Payments 2020

Industry players are partnering, investing in, and acquiring other businesses to keep up with the changing ecosystem that continuously upgrades itself. In order to have a clear picture of the greatest deals and the rationale behind them, we have decided to break down and analyse some of the most significant mergers and acquisitions in the payments space, to share with our readers our view on what they mean for the current business environment, and how they tie in with the current trends. We have extracted five trends that contribute to an organic growth of the whole industry, which seems to go beyond payments:

1. The major card schemes are diversifying their traditional business models and move into account to account payments (banking payment rails);

2. Consolidation – incumbent payment providers strive for control of a greater portion of the payment ecosystem;

3. PSPs are moving up in the value chain;

4. PSD2/SCA regulation becomes a trigger for strengthening capabilities;

5. Global expansion into strategic markets, either established or emerging.

Trend #1 card schemes are diversifying their traditional business models

The heyday of card networks might fade, as alternative payment methods emerge – at a global level, alternative and local payment methods seem to overpower credit card payments. We now see Visa and Mastercard, which are the leading card schemes, investing into account to account capabilities.

Mastercard has acquired Nets’ Account-to-Account Payment business. With this acquisition, Mastercard seeks to strengthen its account-to-account real-time payments capabilities. According to the company’s statements, this deal also integrates the technical assets and partners added to Mastercard’s bill payment capabilities through the acquisition of Transactis.

Visa, instead, has acquired Plaid, a technology platform providing fintech tools to digital financial apps and services, the best-known being Venmo, and to banks as well, to help consumers to connect their financial accounts with their apps. Visa wants to stay relevant in the fintech world by upgrading its capabilities for both FIs and consumers, and Plaid has a major role to play in this matter.

Visa has also finalised the acquisition of Earthport, a cross-border payment services company, which was initially subjected to a Mastercard’s purchase. Visa aims to help its clients to enable both individuals and organisations to send and/or receive money through bank accounts worldwide. Moreover, the company seeks to further expand Visa Direct’s portfolio of use cases, including funds disbursements, peer-to-peer payments, cross border payments, marketplace payouts, and bill payments.

Cross-border payments are still discussed at many levels, whether we are talking about B2B, B2C, or P2P payments. Mastercard has caught on to this dynamic environment and has closed a deal to acquire Transfast, a global cross-border account-to-account money transfer network. Besides complementing Mastercard’s payment solutions, the company aims to address the issue of fees to offer a different perception to the cross-border payments and how costly they can be.

Trend #2 Consolidation – incumbent payment providers striving for control of a greater portion of the payment ecosystem

By consolidation, companies are obviously looking to cost synergies as well, as in removing costs in duplicate functions. In addition, there could be a component of revenue synergies by cross selling new services as well as by providing access to new markets and additional customers.

Fiserv buying First Data has been one of the major events in the acquisition landscape, as two big players have combined their capabilities to create an end-to-end payments platform from issuance to acceptance. This move aims to provide for both payments and financial services, including account processing and digital banking solutions; card issuer processing and network services; ecommerce; and integrated payments. There has been a lot of discussion around Fiserv’s acquisitions regarding the outcomes over banks, which might result in fees, extra costs and operational challenges, yet for merchants, this merger might be a lucrative move. Servicing capabilities for Fiserv clients will increase significantly, providing the advantage of negotiating prices for new capabilities, as Krista Tedder of Javelin states in her article published in The Paypers.

FIS has decided to give a boost to its payment solutions by acquiring Worldpay. Both companies are looking to stay ahead of the competition by offering enterprise banking, payments, capital markets, and global ecommerce capabilities. Worldpay is a player in the ecommerce and POS industry, with strong roots in the UK and US, while FIS provides financial services technology, with a focus on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions.

In order to align with the continuous growth of the US bill pay market (which has driven increased consumer adoption of digital payments), the move to real-time payments, and digital subscription billing, ACI Worldwide has acquired the Western Union’s Speedpay. The companies’ goal is directed towards a unified bill payment platform designed to unlock new cross-border and cross-currency payments opportunities.

In the first quarter of 2020, Worldline and Ingenico Group have announced that they have agreed upon a business combination where Worldline would launch a tender offer for all Ingenico shares. Worldline seeks to provide a combination of online and in-store merchant services for both SME and global merchants. Moreover, the company plans to expand footprints by offering cross-border payment transactions acquiring.

Trend #3 PSPs are moving up in the value chain

In order to achieve growth, broaden their services to merchants, and save costs, PSPs move up in the value chain. They have started to add acquiring capabilities, develop payment methods, and offer lending solutions to merchants. For instance, Payu, a PSP offering services in growth markets, offers credit to customers not covered by traditional banks.

We have seen some interesting acquisitions in the digital lending space. Mastercard bought Vyze, a consumer financing solution for businesses. At this point, there is not that much to comment on this deal, however, one may emphasise some facts and follow-ups of this agreement. Vyze connects merchants with multiple lenders, allowing them to offer their consumers a wide range of credit options both online and in-store, and Mastercard may now also become a partner for merchants and lenders.

In India, PayU’s consumer lending businesses LazyPay and PaySense merged their business operations to build a consolidated digital lending platform in the country. PayU’s digital credit platform will enable third parties such as banks, and alternate lenders to co-lend, and will also enable borrowers to access credit. The credit demand in India is projected to be worth USD 1.41 tln by 2022, and there is also a significant rise of digital lending fintechs, so one could say PayU’s movement is well thought out.

This editorial is also featured in our Who's Who in Payments 2020 – Complete Overview of Key Payment Providers, a report presenting a comprehensive overview of the key solution providers in the payments space, as well as educational insights into the size of the market and the development of the payments ecosystem.

About Anda Kania

Who’s Who in Payments 2020 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.


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Keywords: acquisitions, payment rails, cross-border payments, fintech
Categories: Payments & Commerce | Payments General
Countries: World
This article is part of category

Payments & Commerce