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Competition among payment processors forces another merger to create a new payment powerhouse


  • Overview of the merger between Worldline and Ingenico
  • The new entity post-merger of the two firms
  • Road ahead of the payment industry as competition intensifies

 

The global payment processors and solution market has grown rapidly over the years, from a total revenue of $1.1 trillion as of 2007 to a total revenue of $1.9 trillion as of 2018, with Asia, especially China, playing a major factor in the growth. The market is expected to reach $2.7 trillion as of 2023, as per report studies by Mckinsey. As smaller and newer fintech companies enter the space, breaking into the market dominance by the larger players, consolidation has become a more prominent strategy for sustenance with even the payment behemoths of the industry are turning to it as a strategy. The latest merger between two of Europe’s leaders in the payments and transactional services, Worldline and Ingenico is one such example and this merger is catching much attention because it is going to create a new giant in the payment industry landscape. Worldline, one of Europe’s top payment firm has announced that it would buy its domestic rival Ingenico (another payment giant of Europe) in a transaction valuing Ingenico at $8.6 billion (7.8 billion euros). The new acquisition as per Worldline, will create the fourth largest payment service company worldwide with an estimated net revenue of 5.3 billion euros for 2019. As per statement by Worldline, the deal will also enable the new combined firm to save costs of 250 million euros over the next four years. Under the terms of offer, there are two offers which includes a primary offer, where the Ingenico shareholders would receive 11 Worldline shares and €160.5 in cash for 7 shares of Ingenico. This primary offer will represent a 24% premium based on Ingenico’s last one months weighted average share prices. Worldline also offered a secondary offer where 56 of Worldline shares will be offered for 29 Ingenico shares, which would mean an offer price of €123.1 per Ingenico shares, as of January 31st, 2020.

The new combined entity post-merger will enhance the business profile of Worldline and consolidate its position within the payment business landscape, with 20,000 employees across 50 countries with 1 million merchants and 1,200 financial institutional customers. The merger will also create an extensive geographical reach – from reaffirming its position across Europe further, while expanding to the US market and also reinforcing Worldline’s exposure to the Latin America and Asia-Pacific, providing a massive commercial advantage to offer easy cross-border payment transactions. Additionally, the merger would enable Worldline into some of Ingenico’s unique solution in Travel, Health and e-commerce complementing the already existing business line of Worldline in Hospitality, petrol & luxury retail. As per the press release by Worldline, the new entity will account for 20% of Europe’s financial service market share.

As competition intensifies in the payment industry with the new wave of companies from the likes of companies such as India’s Paytm, America’s Stripe and UK’s Checkout.com, the older players have been under pressure to cut back costs, strengthen their digital offerings, update their technology and in many cases consolidate to stay ahead of competition. In 2019 itself there have been a series of massive consolidation among the industry giants in their quest to stay relevant and ahead of its competition. Some prominent merger and acquisitions in the payments industry during the last year includes transactions such as Global Payments merging with Total Systems Services creating a $40 billion payment giants, while Fidelity National Information Services buying payment processor Worldpay for approximately $35 billion, and Fiserv also joining the consolidation trend by buying First Data in a $22 billion deal.

Looking forward, as digitization increases and an increasing number of individuals accessing the internet along with the evolution of smartphones, all these factors will continue to drive the growth of the industry as consumers shift towards digital payments from cash. Also, with the non-traditional players, from the likes of leading retailers and technology companies, having set very high bars for the payment services industry to create a more simple and better experience, more disruption in the payments space is further expected. Further, since the payments business is a business which plays in volumes for profits, consolidation seems like a viable strategy and the recent mergers also suggest so, therefore, more pressure among the current incumbent who do not participate in the recent surge of consolidation may indeed be felt more strongly.

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