FIS-Worldpay $ 43 milyar ngahiji skala tanda pasti penting pisan dina pamayaran

The closure of a $43 billion deal between FIS and Worldpay last week – the biggest deal in the payments M&A space to date – is a sign that consolidation pressure is building in the space.

“With the introduction of instant payments, electronic payments have exploded,” says Jerry Norton, vice-president, financial services, at IT and business process services company CGI.

“But to gain market share, payment providers require scale. One of the quickest and cheapest ways of doing this is to acquire or merge with a company as opposed to developing new and expensive technology themselves.”

Just two days before the FIS-Worldpay merger was finalized on July 31, payments and technology company Fiserv and US financial services company First Data finalized their merger for $22 billion.

And in June, online payments giant PayPal acquired iZettle for $2.2 billion after the deal was cleared by the UK’s Competition and Markets Authority.

In August, Mastercard announced the $3.2 billion purchase of the real-time payments unit from Nets Group – the biggest acquisition for the company to date.

Global payments revenue grew 11% year on year to $1.9 trillion in 2017, according to McKinsey. The firm forecasts that the sector will now grow to $2 trillion by 2020 and $3 trillion within five years.

According to the World Payments Report published by consulting and technology company Capgemini with BNP Paribas, the boom is driven by developments in emerging markets.

Russia, India and China had double-digit growth in non-bank transactions, while developed-market growth remained steady, at 7%, between 2015 and 2016.

The development of cloud services and the greater use of APIs means that scale is not the only factor in terms of consolidation, says Harry Newman, head of banking at Swift. Developments in technology will also drive companies to merge with technology companies that complement their own offering.

“Scale remains important and over time we expect to see further consolidation, particularly over the long term,” he says.

Alison Wilkes, head of banking and payments for Europe at FIS, says: “Payment platforms need scale to move into a new geography or to offer new products and services, and partnering with another payment company is often the best way to do so.

“In our case, we believe that FIS and Worldpay complement one another, allowing us to offer a broader range of products to our combined clients and we will see more consolidation in the sector.”

According to investment bank FirstCapital, in the last quarter of 2018, payments registered the fastest quarter-on-quarter growth in M&A in the financial services sector at 30.8%, although the sector only accounted for 11% of the total M&A deal count.

PwC’s 2017 global fintech report found that 56% of financial institutions put digital disruption at the centre of their corporate strategy and 82% of respondents expect to increase fintech partnerships between 2018 and 2023.

As new and nimble fintechs gain market share in the payments space, financial services incumbents continue to grapple with legacy technology and struggle to innovate in terms of their treasury solutions.

As a result, banks employ payment platforms directly or on some occasions acquire them to process transactions as opposed to developing payments technology internally.

“Banks don’t really have payment-processing capability anymore – they conceded this ground following the financial crisis, so now new platforms have the opportunity to build scale,” says Norton at CGI.

“And if you believe it’s a race to the bottom, banks probably don’t want to be in this space because it doesn’t make money. They are happier selling overlay items such as including e-invoicing and request to pay products. They aren’t interested in developing the mechanisms, but rather choose to add value where they can.”

Last August, Barclays bought a minority stake in European online invoicing company MarketInvoice.

Royal Bank of Scotland, which opened its merchant acquiring service NatWest Tyl in May, sold 80% of its share in Worldpay in 2010 before selling its remaining stake in the company in 2013.

“I’d assume RBS will wrap additional products around Tyl,” says Norton. “It’s early days, but in the current context, banks are continuing to explore value-added business related to payments.”

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