Document Analysis NLP IA
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Summary (IA Generated)
Some consolidation is afoot among the payments behemoths of Europe, as they continue to go head-to-head with smaller, newer fintech companies eating into their market dominance by adapting faster to changing spending habits, while also looking to capitalise on economies of scale.
Today Worldline, a financial services company that provides everything from in-store point-of-sale terminals through to online payments, data analytics, banking and fraud protection, announced that it would acquire Ingenico, the huge point-of-sale terminal provider that controls 37% of the market globally, in a cash and share deal that gives Ingenico a valuation of €7.8 billion ($8.6 billion at today’s rates).
The first is that the shift in payments and spending habits to more digital platforms has meant an increasing amount of fragmentation in the payments space, with each player getting a cut of the transaction: this means that a company doing business in this area needs economy of scale in order to make decent returns.
The second is a bigger theme of consolidation among larger players in part to better compete with the long tail of smaller and more fleet-of-foot fintech companies that have found a lot of traction in this new wave of commerce.
The combined company will have 20,000 employees across 50 countries with 1 million merchant and 1,200 financial institution customers, and Worldline said it expects combined pro-forma 2019 net revenues of €5.3 billion out of the deal.
Although both work in online payments and related frontiers in commerce, the size and scale of being a legacy player means that Worldline has worn some of those evolutions awkwardly.
On the part of Ingenico, the business has been profitable — today, it has some 30 million terminals installed worldwide and works with 550,000 merchants — but growth has been slowing with gradual shift away from brick-and-mortar shopping towards online purchasing.
Specifically, consumers and those making and selling goods and services are using a number of new channels that have taken the focus away from traditional retailers, leading to a rise of new competitors that include smaller fintech startups (see: Stripe and Adyen), tech platform operators (see: Google Pay and Apple Pay) and e-commerce behemoths (see: Amazon and Alibaba).
“Over the past decade through several transformational acquisitions and partnerships, we have repositioned Ingenico as a key player of the payment ecosystem,” said Nicolas Huss, CEO of Ingenico, in a statement.
“In a fast moving global payment market in which scale matters, the combination of Ingenico with Worldline is completely aligned with our strategic vision.”
Catching up with changing tides is not only about increased competition from many fronts; it’s also the strong theme of economies of scale that come out of digital transactions: in an ecosystem that often has a number of components, with each getting a cut of a payment, a company needs either to control more links in that chain of processes, or handle an ever-bigger amount of transactions — ideally both — in order to make strong returns, and that is also playing a big theme here.
This is a landmark transaction for the industrial consolidation of European payments, highly value creative for all our stakeholders and for the shareholders of both companies, and which ambitions to reinforce the role of Europe within the global digital payment ecosystem.”
There has been a larger wave of consolidations in the payments and wider fintech space in Europe, which have totalled some €83 billion since 2013 (now over €90 billion with this deal).