2018 is a big year for mergers and acquisitions in the payments and fintech industry.
Players have become increasingly aware that ‘a merge with or acquire’ approach is an efficient way to keep pace with the dynamic industry changes, constantly-evolving technologies and also address opportunities or challenges brought by the digital revolution.
In a nutshell:
“Mergers and acquisitions (M&A) is a general term that refers to the consolidation of companies or assets through various types of financial transactions. M&A can include a number of different transactions, such as mergers, acquisitions, consolidations, tender offers, purchase of assets and management acquisitions.”
As reported by Financial Times citing data from Dealogic, a financial markets platform, M&A initiatives have hit a record high this year, especially in the payments technology space: 102 transactions representing USD 46 billion from January to June, versus last year’s USD 32.9 billion. What do these statistics reflect?
The rapid industry progress has led to developments of solutions that not only change the way in which we perceive payments, but also bring a whole new light to the entire market. Innovation is among the most sought-after outcomes, mature companies stand ready to leverage their capabilities at scale and gain more and more market share. On the other hand, digital payments and eCommerce are attracting new entrants to the payments space and this brings competition to new levels. As a result, the sector is highly fragmented, but it also presents good consolidation opportunities which enable players to optimize resources, expand geographically, gain access to new technology and/or gain market reach through value-added services in order to remain relevant.
“Big shifts in technology are forcing companies across all industries to be creative and forge more strategic combinations. Adding in economic tailwinds and a continuing strong financing environment makes the current robust M&A market unsurprising.”
The recent fintech ‘shopping‘ spree
If it seems like there’s been a flurry of acquisitions by PayPal recently, it’s not your imagination. In the May-June interval, PayPal made no less than 4 acquisitions: Hyperwallet and iZettle, 2 financial technology companies; Jetlore, a predictive marketing platform and Simility, a fraud prevention platform.
As already stated by CEO Dan Schulman in an interview, the company will not pivot away from this strategy any time soon. In fact, it plans to spend as much as USD 3 billion a year on buyouts, in a bid to extend its existing range of services, deliver more value and become a “one-stop solution for global commerce”.
In a strategic move, Danish payments platform Nets has also announced that it extends its geographic presence in Europe by acquiring Polish online payment service providers Dotpay/eCard. The company reported that “with this acquisition it gains access to the sixth largest country in EU by inhabitants with a growing economy, solid growth in eCommerce volumes and high growth potential through cash to digital payments conversion”.
In May this year, Belgian payments apps Payconiq and Bancontact agreed to a merger in order to better position themselves as a mobile payments provider in the country. During the same month, Adobe entered into an agreement to acquire eCommerce platform Magento Commerce for USD 1.68 billion.
How fast will all these acquisitions and mergers be integrated and work seamlessly? Will all the other players keep pace and improve their competitive edge? It remains to be seen.
What is next?
Such a trend in the payments industry has pointed to the fact that whoever you are, it is not easy to go it alone and be successful.
On the other hand, bringing efficient solutions to the market requires participation from multiple players as well as both consumer and merchant adoption, making it difficult for just one player to dominate.
Time will tell which players will become successful and (if) universally accepted. The market is growing and we can expect more newcomers, but also a higher degree of consolidation, not only by mergers and acquisitions, but also by partnerships between different payment players.
Adriana Screpnic, Content Marketing Specialist, G2A PAY