Voice of the Industry

Mergers & Acquisitions in the payments industry: the Q2 roundup of 2019

Tuesday 6 August 2019 08:38 CET | Editor: Melisande Mual | Voice of the industry

We have depicted a new wave of mergers and acquisitions in the payments industry – the time is ripe for B2B and B2C payments innovation

Earlier this year we have outlined a retrospective of the major mergers and acquisitions in the payments space, highlighting the importance of building new partnership models, adding capabilities to products and services, and expanding footprints in a bid to create an innovative environment.

Large payment companies such as Payu, Visa, Mastercard, and Stripe build upon their value proposition and acquire companies that complement their “Fintech or Paytech as a Service offering” including: local payment methods (cross-border payments capabilities), B2C and B2B payments, payins, payouts, compliance, fraud and risk management, FX, banking, and e-wallets.

Consolidation once again

vspace=2PayU has completed the acquisition of Wimbo in the second quarter of 2019, shaping its payments strategy in one of the highly regarded regions when it comes to innovation: India. Now the company has acquired iyzico, a Turkey-based fintech startup specialized in digital payments services and receipt system management. But how much potential do the ecommerce businesses in Turkey have? At present, 31.39 million of people buy online in Turkey, with an additional 6.72 million users expected to be shopping online by 2021.

Yet only 5% of SMBs in Turkey have an online sale presence. At the same time, considering that in 2016 only 2% of SMBs in Turkey sold products online, one may expect an ongoing growth. Moreover, Turkey has been making significant efforts to create an efficient digital commerce environment, with help from Turkish Ministry of Trade. Besides strengthening its presence in Turkey, PayU also aims to be a connection between Turkey and other European countries and Africa, to boost the cross-border commerce in local currencies as well.

Recently, PayU also acquired a majority stake in Red Dot Payment, a PSP covering Southeast Asia. Investors in the region have a high instance of confidence knowing that by 2025, the value of the internet economy in Southeast Asia is estimated to reach USD 200 billion, and the ecommerce sector is poised to exceed USD 100 billion. It is a digitalized growing market, with a cosmopolitan population so ecommerce players out there should consider partnering with global PSPs.

Payment processing solutions provider Nuvei Corporation (formerly Pivotal Payments) has announced the acquisition of SafeCharge,vspace=2 and beyond their plans of combining services to address geographies and verticals, and to complement their technologies, what is truly remarkable is the sum of the acquisition: USD 899 million. All one can notice is that SafeCharge is likely to take advantage of this move, as Nuvei has currently solid roots into the North American market, which should enable SafeCharge to expand its footprints into a great market. On the other side, Nuvei has the chance to develop a presence in Europe.

With the PSD2’s SCA just around the corner, companies are looking to help other businesses to meet the regulatory changes in this respect. The payments technology company Stripe has acquired Touchtech Payments, an Ireland-based startup that helps banks to manage Strong Customer Authentication. As mentioned in a TechCrunch coverage, the acquisition brings a sea change for Stripe, which has been built on connections with merchants, while Touchtech interfaces with banks and others that handle card payments – so for the first time, Stripe is developing a service that is not primarily focused on merchants but on banks.

Local payments opportunities – eyes on Latin America

vspace=2Local payments are still a trend in the industry, and PPRO seized the opportunity to meet this trend even more by acquiring allpago, a PSP for Latin America, thus supporting ecommerce businesses and other payment providers to accept all relevant local payment methods. PPRO aims to leverage allpago’s knowledge and technology into its local payments methods to meet the great demand of shoppers for local payments. The company is also very much focused on the alternative payment methods, however, they still need to bear in mind that buying online doesn’t necessary means paying online, as in Latin America BOPIS is a common practice, via either cash or vouchers. Nevertheless, one should also look at the benefits that this partnership will bring for merchants, especially for those that are interested in opening businesses in one or more Latin American countries. An established PSP in the region such as allpago can assist merchants from a regulatory and security perspective, also opening new doors for merchants working with PPRO.

Industry collaboration - new acquisitions by Visa and Mastercard

Back in March 2019, Mastercard acquired Ethoca, a collaboration-based technology company that enables card issuers, merchants and online businesses to fight chargebacks. Approximately three months later, Visa acquired Verifi, a company focused on minimizingvspace=2 fraud risk and eliminate chargebacks. So one can’t help noticing that two competitors have bought each other two companies that in turn, are also competitors. Visa is also looking to leverage Verifi’s capabilities to complement its own risk management in an attempt to reduce ecommerce fraud.

At the surface, this move which is similar to Mastercard’s has a lot of sense – after all, the credit card networks have a role to play in the chargeback cycle, being the link between the issuing bank and the acquiring bank. With the intelligence that Verifi holds in this matter, Visa can monitor transactions while making sure the whole process is a seamless one. But the question is, do merchants working with Verifi have something to say here? Are they willing to share their insights with the credit card network? The same question applies to Mastercard. I believe it’s still a subject of discussion.

Visa has also finalized the acquisition of Earthport, a cross-border payment services company. Visa aims to help its clients to enable both individuals and organizations to send and/or receive money through bank accounts worldwide. Moreover, the company seeks and 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.

Mastercard made another acquisition in the second quarter – the company bought Vyze, a financing technology company for retailers. At this point, there is not that much to comment on this deal, however, one may emphasize 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 now, Mastercard may also become a partner for merchants and lenders.

As a concluding observation

In the next quarter, it is likely to see continuous M&A driving, that will contribute to consolidation and to the quest of Big Paytech companies to grow their value proposition in both cross-border and omnichannel payments.

There is a remarkable increase into B2C international commerce as well, now that the technology offers speed, security, and convenience, and the marketplaces continue to grow and facilitate commerce for both SMEs and consumers.

And for all of these, the industry needs data, technology, risk management strategy, compliance, a lot of market research, and on top of all, knowledge. Therefore, all actors may benefit from solid partnerships, and what should one look into for the future, is not only the impact on profitability, or the challenges on integration, but also the impact over the whole industry as it stands. So let’s watch this space further.

About Anda Kania

src=/images/anda-kania-thepaypers(4).jpegWith 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, B2B payments, cross-border payments, payment methods
Countries: World