In 2019, the payment industry experienced a record number of mergers and acquisitions, driven by factors such as expanding into the Chinese market, achieving synergies, and diversifying beyond card payments into account-to-account solutions. Significant deals included acquisitions by major players like FIS, Visa, and PayPal, highlighting a shift towards enhancing value-added services and adapting to a competitive landscape. As 2020 approaches, these trends are expected to continue shaping M&A activities and industry growth.

1. Payment Industry 2019 Retrospective
M&A
Payment Industry 2019 Retrospective
M&A
Luc Gillain
Partner FinFlag
December 2019

2. Payment stakeholders use acquisitions for multiple reasons. This year, the focus was on:
• Penetrating the Chinese fortress;
• Delivering synergies;
• Further expanding beyond cards with account-to-account solutions; and
• Strengthening the added-value services portfolio.
Let’s have a look at each of them …
2019 has been an exceptional year
M&As in the payment industry
reached a record high in 2019.
The holiday season is approaching fast. Before enjoying a break, it is time to take a look at 2019, another
incredible year in the payment industry: mergers, take-overs, partnerships, launch of new initiatives,
entrance of new players, Open Banking and PSD2 and much more. 2019 has definitely been a very rich and
dense year!
You might ask “Why a retrospective?” Because “history is repeating itself.” Looking back to the past is usually
a good way to prepare for the future. So revisiting 2019 business strategies and major directions can give us
some interesting indications for 2020.
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3. The recent developments
demonstrate some openings
from the Chinese authorities
and, if followed through,
might be the preamble of new
and interesting developments
in 2020.
1. 2019: the year the Chinese wall broke down
China has been quite hermetic to non-Chinese payment players; the market being dominated by a
few players such as China UnionPay as well as the eWallet providers AliPay and WeChat Pay.
Foreign travelers could not use these payment platforms if they did not have a Chinese bank
account.
Mastercard and Visa have been trying to get a license for many years, having to partner with
China UnionPay for access to the country’s payments network. Still beginning of 2019, Mastercard
was declaring to “plan to apply for a bankcard clearing license in China.”
So, some recent news came as a real epiphany moment
Finally, in November, the Chinese payment platforms WeChat Pay
and Alipay announced they can now support foreign credit and
debit cards. By integrating the foreign card number into the wallet,
they enable overseas cardholders to link their accounts to WeChat
Pay and Alipay for payments and services in China.
First, PayPal surprised the payment community
with the acquisition of a 70 % stake in GoPay, a
Chinese online payments firm, being the first
foreign company to gain a Chinese payment
license.
Second after PayPal to enter the Chinese payment market, Wirecard
announced in November it will gradually acquire the Beijing-based Allscore
Payment Services. This acquisition comes with both an acquiring license and
the capability to issue payment cards in China.
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4. 2. Deliver synergies
In the payment processing business, the year started fast with the
announcement of 3 consecutive major deals: FIS acquired Worldpay
($42.9 B), Global Payments bought TSYS ($26.1 B) and Fiserv
acquired First Data ($22 B).
These acquisitions, while allowing the respective acquirer to enrich
their offering, demonstrate the need to achieve further synergies
into the very competitive processing industry which has been
recently disrupted by startups like Adyen, Stripe, and Square.
3. Expand beyond card: Account-to-Account
In the account-to-account segment, incumbent payment networks were very active in 2019,
announcing several deals to further build their capabilities to move beyond cards, demonstrating
how important it is for them to diversify.
2019 new year’s eve was still very fresh in our minds when
Mastercard and Visa engaged in a battle for x-border money
transfer networks.
After several rounds of outbidding, Visa took hold of Earthport
(£247M), a UK cross-border account-to-account payment
organization, to further expand and scale its Visa Direct’s solution.
Mastercard swiftly turned to another player in this area. Transfast, a global cross-border account-
to-account money transfer network, complements its existing assets, Mastercard Send and
HomeSend, “with Transfast reaching 90 % of the population and over 90 % of the world’s bank
accounts,” according to Mastercard.
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5. After the acquisition of Vocalink in 2017, Mastercard announced, during the summer, the
acquisition of the Danish account-to account payment processor Nets (€2.85B), complementing
the bill payment acquisition of Transactis (May 2019).
The former acquisition builds on the partnership with P27, announced a bit earlier in June, to
deliver real-time and batch payments to Nordic markets.
P27 is a platform of six banks out of Nordics (Danske Bank, Handelsbanken, Nordea, OP Financial
Group, SEB and Swedbank) which aims to establish a single pan-Nordic payment infrastructure for
the 27 million inhabitants of Denmark, Sweden, Norway and Finland.
While not an M&A transaction, it is worthwhile to mention Amex’s
launch in October 2019 of its own account-to-account solution, called
“Pay with Bank transfer”.
All these activities around Account-to-Account as well as the processing mergers in
section 2 reflect the convergence of bank-based and card-based payment solutions,
underpinned by a trend that will see both rails merge at one point in time.
4. Strengthen the Added-value services portfolio
On the value-added services, 2019 was also very busy.
Most of the payment industry players are looking to diversify their revenue streams to
become less dependent of the historical pure processing fees which are dropping to a
low-end, commodity-like pricing.
A reflection of this evolution is to be seen in Mastercard Q3 2019 earning release, where “Other
Revenues,” including value added services, grew at 33%, more than double of the other revenue
sections, in line with Mastercard’s declared ambition to grow its non-processing fees up to 40 %
of its total revenues in the near future.
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6. Beside its Chinese surprise, PayPal made other interesting
moves. In March, PayPal announced it will invest $750 million in
the Argentinian e-commerce company MercadoLibre with the
objective to create “unique and valuable payment experiences”
for the customers.
With the acquisition of Honey, a shopping discount & deal-
finding browser, PayPal made a daring and pricey ($4B) move to
extend its presence, beyond payment, into the customer
shopping journey and so avoid competition at the check-out.
Similarly, Mastercard made an investment in this important
segment with SesionM, a loyalty programs integrator, though
at a far lower price tag. Mastercard made several other
smaller acquisitions to fuel its value-added solutions with Vyze
(point-of-sale financing company); Transactis (bill-pay
platform) and Ethoca (Security/Fraud prevention).
Visa didn’t stay calm either. It added several assets
including Verifi (a risk and chargebacks company);
Rambus’ Smart Card Software Company (token
services and ticketing businesses) and Payworks
(payment gateway software for the Point of Sale).
Not to be outdone on its core offering, i.e. travelers value-
added services, American Express was very active too with
assets to further improve customer experiences:
LoungeBuddy, a booking app for airport loungers; Pocket
Concierge, a firm similar to OpenTable which helps book in-
demand restaurants and Resy, a digital restaurant reservation
booking and management platform.
Honey
Mercado
Libre
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7. 5. Some other noteworthy deals
Beside the above four categories, with a non-exhaustive list
of deals, some other deals in the payment industry are still
worthy to be named.
In February 2019, Western Union decided to divest its US bill
pay business, Speedpay, selling it to ACI Worldwide for
$750M.
Interestingly, Ripple, the blockchain cross-border start-up,
announced in June 2019 a first investment of $30M into
Moneygram, an US incumbent money transfer player which
faces increased competition from newer rivals, including
Ant Financial which was blocked from buying MoneyGram
and which decided to build its own blockchain-based cross-
border remittance service.
Elavon, 4th largest acquirer in Europe lately announced, in
November, the acquisition of Sage Pay (£232M), the UK-
based payments gateway, further extending Elavon’s market
share in the UK and Ireland.
Finally, a few significant deals from the digital giants
impacting the payment industry:
• Google acquired Fitbit ($2.1B), including FitbitPay which
allows users to pay with a Fitbit wristband or
smartwatch;
• Grab, the Southeast-Asian ride-hailing firm, which has
developed its mobile payment app, GrabPay, acquired
the Indian iKaaz, a mobile payments platform offering a
consumer-focused mobile wallet product;
• Uber acquired, in $3.1 billion deal, Dubai-based Careem,
including its digital payment platform Careem Pay.
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8. 6. End note
In 2019 we have witnessed a record year in M&A in the payment industry. The underlying trends
which led to this situation are not going to fade away anytime soon.
In 2020, I expect an expansion in new markets, scale and consolidation, and the development of
new capabilities to remain strong M&A drivers.
Other factors such as the ever-evolving payment landscape, the expected growth of the payment
industry, and the profitability of the sector will be other strong drivers for M&A activity.
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9. December 2019
About FinFlag
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Payment Processors, Payment Schemes, Governmental Bodies and Merchants
We offer a comprehensive range of services going from business strategy, to technical implementation,
including market entry analysis; product innovation, development & proof of concept; digital payment
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