The new year started with a Bang and we were literally spoilt for choice in picking the most interesting deal announced over the last few weeks. The $22bn First Data acquisition by Fiserv obviously stood out and not just because of the price tag. Then there was the Visa offer for Earthport. Knowing that cross-border volumes are increasingly relevant for payment schemes (both Visa and Mastercard reported growth rates in cross-border activity alone between 10-20% during the last reporting period), we were in a sense fortunate not to pick this particular deal either. At the time of writing Mastercard put a 10% premium on Visa’s bid and although Earthport’s Board has now recommended the Mastercard deal, it is still unknown whether there will be another counter-bid.
The deal that we wanted to focus on is different. We looked at the acquisition of US-based CenPos by Elavon as a deal that confirms our view of the merchant acquiring world in that the actual payment acceptance functionality and/or technology is moving towards an integrated, software-based platform business. Merchants increasingly look for a wider product proposition and see the payment acceptance ‘only’ as part of a wider service offering to support their overall businesses. CenPos sells an intelligent payment platform that helps merchants streamline their payment processes and combines this with segment-specific offerings (e.g. CenPos has a specific proposition for car dealers). Whilst the focus of CenPos is still on payments processing, we believe that this is the first step of Elavon to integrate payment acceptance into a wider platform offering. The industry has been talking about smart POS and smart platforms for some time now but we are really seeing now a shift away from selling a terminal – physical or virtual – to a much more enhanced business optimisation solution in which payments are an enabler for streamlining a variety of business processes. This is not just an integration of payment data with data analytics and loyalty but goes further than that to include integration with supply chain and logistics, automatic reconciliation of card payments with back-office accounting, etc. Especially smaller merchants are looking for a solution that helps them to run their business more efficiently. Merchants are not looking to buy silo solutions that don’t ‘talk’ to each other. This leads to platforms or app store type of solutions of which there are quite a few available already. A merchant can pick and choose from a wide range of applications the ones most relevant to its own business. Being able to intelligently process payments and handle transaction data will become one of the most critical drivers to make those applications work together. In that context, Elavon’s acquisition of CenPos looks like a smart but also a very timely bit of business.
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