Of late we’ve been reading headlines of players in the
payments industry— big and small— coming together to form mergers. And a market
specialist has a theory for this;
“The rapid shift to digital transactions and the
search for high-end business software is driving most of these consolidations.”
wrote Ian McDonald, a research analyst at Janus Henderson Investors in a report
on Seeking Alpha.
This year alone, we’ve seen several acquisitions. Two
of the most noteworthy saw;
- Fiserv Inc take over First Data
Corp. in a deal worth a whopping $22 billion; and,
- Fidelity National Information Services
Inc. acquire Worldpay Inc. in a transaction valued at twice the First
These billion-dollar deals have left expert observers
who used to view payments processing as a slow business watching in awe.
However, payment is also going digital, more so e-commerce, which is changing
payments from a postscript to a matter of concern, according the analyst.
market is digitizing at a faster pace with e-commerce slicing a larger share of
the consumer wallet,” says McDonald. “This
means that the sector can now generate more useful data that can be used to
help get more clues into consumer behavior. What’s more, the data can be increasingly useful
in the fight against fraud.” He says.
payment sector is split into two groups
As a result, and in a bid to specialize in their
various offerings, firms in the payments industry are grouping themselves into
two categories, says McDonald;
- Group 1: Consists of processing firms
looking to boost data analytics and expand their bottom line.
- Group 2: Companies like PayPal Holdings Inc. and Square
Inc. eager to upgrade software and offer more user efficiency. Established
companies e.g., Global Payments Inc., that have focused efforts into acquiring
independent software sellers also fall here.
The main inspiration for both groups is the growth of
digital processing and the cumulative trove of data payments processing can
“The potential of an increasing amount of digital and online
business transactions, as a portion of overall customer spending is magnified
by the trove of data obtained from payments making it a possible revenue stream
instead of a necessary expense.” Says the market specialist.
Hopefully these mergers will streamline the payment
industry as a whole and lead to innovations and inventions that will help solve
the various problems the sector still faces.
Bio: Electronic payments expert Blair Thomas is
the co-founder of high-risk payment processing company eMerchantBroker. He’s
just as passionate about helping retailers get high
risk merchant accounts as he is with traveling
and spending time with his dog Cooper