Voice of the Industry

Mergers & Acquisitions in the payments industry: a quarterly roundup

Wednesday 10 April 2019 09:25 CET | Voice of the industry

The Paypers presents an overview of the most important mergers and acquisitions from the Q1 of 2019

Many deals have been closed throughout 2018 in the payments industry, and based on the latest events that made headlines in the first quarter of 2019, the ecosystem is more and more looking for consolidation and collaboration. Either we are talking about takeovers or mergers, solution providers have grasped the need for a strong combination of capabilities to fight the current challenges, which now consist of meeting customer expectations, fighting sophisticated fraud, expanding their footprint into new geographies, and innovating as much as possible in order to compete for the upper hand.

The consolidation of the payments ecosystem

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 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.

FIS has decided to give a boost to its payment solutions by acquiring Worldpay (which is a combination of Vantiv and WorldPay Group - Vantiv acquired WorldPay in 2018). 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.

If we step back a little, we will be able to see the bigger picture here: FIS’ and Fiserv’s acquisitions of Worldpay and First Data has created two fintech and payments giants. After all, both companies have bought two of the largest acquirers in the world. Analysts believe that both deals will result in expanded capabilities and portfolios offered to merchants and banks. On the other hand, although these mergers are looking to consolidate the payments industry, they are also paving the way to even more competition and potential challenges. All these companies involved will strive to offer added value to cardholders, banks and merchants, however, before that, they must be agile enough to speed up product innovation in order to fully leverage capabilities, and this is a space to watch, for now.

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.

Cross-border payments are still discussed at many levels, whether we are talking about B2B, B2C, or P2P payments. Mastercard has caught on to the 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 critical issue of costs and fees, removing the concept of expensive cross-border payments, while offering more transparency.

It is highly noticeable the difference of opinions when it comes to who’s benefiting of these mergers, but the end goal is definitely the one of improving the payments ecosystem, by streamlining the omnichannel experience and the cross-border transactions processes, and by further developing the front-end methods that consumers use to make payments.

The consolidation of fraud and risk management

A well-known acquisition in the fraud prevention space this year was, by far, the one made by Mastercard when they have bought Ethoca. This move is favourable in the chargeback management context, as Ethoca is known in the industry for their collaboration-based technology that enables card issuers, merchants and online businesses to fight against chargebacks. Mastercard has acquired several fraud prevention companies in the last two years - NuData and Brighterion in 2017, Oltio startup in 2018, and besides Ethoca, in 2019 it has also acquired TRANSFAST, a cross-border payments network provider, facilitating P2P, B2B and B2P transactions. At any rate, Ethoca’s services are an add-on for the current Mastercard’s anti-fraud capabilities.

Neustar, a company offering real-time information services, has selected the authentication and fraud prevention company TRUSTID in a bid to provide phone-centric anti-fraud, risk and authentication solutions for call centres. Neustar provides information and analytics for the Internet, telecommunications, entertainment, and marketing industries. Their risk management strategy includes compliance, operational and fraud intelligence. TRUSTID is focused on securing telephony transaction platforms by delivering customer validation technology for the telephone channel. The company validates the identity of a caller and provides true physical security for remote banking and other remote telephony based commerce. Cybercrime at call centers is still present, and TRUSTID believes the knowledge-based authentication is no longer a reliable solution to accurately identify a user as being legit. Moreover, the prevalent data breach incidents call for more powerful solutions to prevent them.

In the identity verification space, the acquisition of IDology, and ID verification and fraud prevention provider by GBG – an identity data intelligence company - is notable, the two companies combining their services to better validate and verify identities while meeting compliance of customer onboarding. GBG has made its largest purchase so far with IDology, but the company also bought consumer onboarding and identity verification VIX Verify in 2018, to strengthen their technology.

Expanding footprints

Apart from expanding and developing capabilities, companies are also looking to expand their business into new markets, either emerging or developed. Since LATAM has become a popular emerging market given the development of local payments and ecommerce, companies have grasped momentum and started to extend in Latin American countries. For instance, in Argentina, Advent International (a global private equity investor) bought a 51% stake of Prisma Medios de Pago, and in Brazil, First Data bought Software Express and TNS bought mobile communication company Link Solutions. Overall, in LATAM, 80% of ecommerce sales are made using local payment methods. Moreover, a high premium has been put on financial inclusion in this region, so there is no wonder that solutions providers are tapping into LATAM by acquiring companies that have toeholds in this market.

India remains a sought-after market, with PayU planning to buy online payments company Wibmo. As for Central Europe, Nets, which is a Nordic payment service provider, has acquired the Poland-based online payment service provider Dotpay/eCard.In Europe, Ant Financial has bought the UK-based payments company WorldFirst, this being the most significant overseas deal since the company’s US expansion – in 2016 Ant Financial bought US-based EyeVerify and in 2017 it bought MoneyGram. The Alibaba Group’s subsidiary believes Alipay and WorldFirst complement so as to offer better payment services to smaller businesses.

In the end, mergers and acquisitions have switched perspectives – they are no longer a “big fish eats little fish” scenario, yet a collaboration that takes months and even years to plan, negociate, deal and then market. So who knows what 2019 might have in store for us?

About Anda Kania

With a high interest in the latest news of the payment and fraud industry, Anda has used her position of senior editor at The Paypers to discover and analyze the hottest topics and to discuss with the top thought leaders in the domain, in order to get the pulse of the fraud and digital identity industry. With a Master’s Degree in International Relations and National Security Studies, Anda is in a constant search for the upcoming trends and the best way to comprise it in words for our readership.

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Keywords: mergers, acquisitions, First Data, Fiserv, FIS, WorldPay, PSPs, ecommerce, fraud management
Countries: World