FINTECH MEGADEALS: How FIS-Worldpay, Fiserv-First Data, and Global Payments-TSYS will reshape the payments landscape
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Mergers and acquisitions (M&As) in the payments industry reached a record high in 2019. M&A deals spiked from $31.8 billion in H1 2018 to a total of $116.6 billion in H1 2019, per Dealogic.
Three deals made up the majority of funding activity: Fiserv bought First Data for $22 billion, FIS acquired Worldpay for $43 billion, and Global Payments scooped up TSYS for $21.5 billion. Of note, although these deals didn't close until the back half of the year, Dealogic includes the activity in H1 2019's total, when the deals were presented; Dealogic's deal values also differ slightly from the closing values.
The inking of three deals of this magnitude in such a short period highlights an important development in the payments space — the need to consolidate. Startups like Adyen, Stripe, and Square have disrupted the industry, solving friction points for consumers and businesses. Amid the new status quo, incumbent payments firms are struggling to meet their customers' demands, which is forcing them to team up and consolidate to better serve their clientele.
In the Fintech Megadeals report, Business Insider Intelligence explores the key drivers that are fueling consolidation in the payments space. We then take a closer look at the three biggest payments acquisitions we've seen so far this year, and discuss each player's business model; evaluate the strengths, weaknesses, opportunities, and threats of each merger; and highlight the industry importance of the three deals. Lastly, we evaluate what consolidation in the fintech industry will look like in the future.The companies mentioned in this report are: Adyen, FIS, Fiserv, First Data, Global Payments, Payoneer, Square, Stripe, TSYS, and Worldpay.
Here are some of the key takeaways from the report:
- Payments is arguably the most mature segment of fintech, and the industry has been disrupted by digitally enabled and innovative solutions from new entrants for a long time, likely because there are multiple friction points for consumers and businesses
- The need for consolidation in the payments space is being fueled by four drivers: changing client demands, competition from startups, increased pricing pressures, and low margins in the space.
- All three of the megadeals — Fiserv and First Data, FIS and Worldpay, and Global Payments and TSYS — were partly defense plays from incumbents to combat competition from agile startups in the space, as well as to increase their transaction volumes to better accommodate low margins and fees.
- M&A activity in fintech will continue and start to involve smaller players, with acquisitions being more targeted at areas with many friction points.
- Explains the reasons behind consolidation in the payments space.
- Highlights the three megadeals that were struck in the first half of 2019.
- Evaluates the strengths, weaknesses, opportunities, and threats that each merger offers for the companies involved.
- Outlines what the future of consolidation in payments and fintech will look like.
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* This article was originally published here
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