Any thought that Visa Inc. was the least bit interested in dipping its toe into merchant acquiring quickly dissipated when the card brand decided to sell an online merchant portfolio it inherited from a purchase two years ago to Global Payments Inc.
Industry observers unsure about Visa’s intentions were scratching their heads in April 2010 when it said it would acquire CyberSource Corp., a payments processor and fraud prevention technology developer based in San Francisco (see story). Included in the deal was CyberSource’s online merchant portfolio.
By buying that portfolio, Visa in effect put itself in direct competition with acquirers of Visa transactions, Zil Bareisis, a London-based senior analyst for research firm Celent, tells PaymentsSource.
“Most of us in the industry expected that Visa would divest that part of CyberSource at the right time and focus on the processing services instead,” Bareisis says.
That right time apparently has come. Executives for Atlanta-based Global Payments told analysts during a fiscal second-quarter earnings call Jan. 5 that a deal to acquire CyberSource’s portfolio of 9,000 online merchants from Visa would be completed this quarter (see story)
Executives from both CyberSource and Visa declined to comment further to PaymentsSource regarding the portfolio sale. A spokesperson for CyberSource would only provide an e-mail statement from Visa saying: “This agreement enables CyberSource to focus on its core business of providing comprehensive payment management services to merchants.”
The sale to Global Payments reinforces a trend in which card brands, especially Visa, are spreading their wings to provide services “that get them closer to the customer,” Bareisis says. For example, Visa's new consumer-oriented digital wallet V.me stresses more of a technology-based service designed to compete with the likes of Google Inc. and PayPal Inc. instead of banks, Bareisis notes.
Visa announced its development of the V.me digital wallet last spring (see story).
A desire to obtain security technology to support its ventures into mobile payments clearly fueled Visa’s initial purchase of CyberSource, but company intentions regarding marketing and branding for mobile-payments technology became clearer late last year when it revealed the V.me name for the digital wallet (see story).
Monitoring Visa acquisitions and sales of the past few years provides a case study on why the payments industry has been changing so rapidly, one analyst says.
“When a company like Visa gets involved in a wide scheme of alternative and mobile payments, it makes you think a lot about what’s happening in the industry,” Paul Martaus, a merchant-acquiring consultant based in Mountain Home, Ark., tells PaymentsSource.
At its core, Visa is a brand-management company with the most successful brand in the market, but the company expanded its core competencies into mobile technologies with the CyberSource acquisition, Martaus says.
However, Visa selling the company’s online merchant portfolio to Global Payments makes sense for both companies, he adds.
“Why would Visa want to be in the acquiring business, as opposed to advancing mobile technologies and processing?” Martaus asks. With companies like Google and PayPal seeking to capture more of the mobile-payment market, especially the merchant advertising revenue dollars, Visa has to make strategic moves that reinforce its intention to remain a formidable foe, or possibly a partner, Martaus suggests.
Meanwhile, Global Payments has to fight for every merchant-services account it can obtain in what will become an even more competitive business as PayPal and others look to possibly eliminate traditional payment processors, Martaus contends.
Global Payments did not reveal specific details of the CyberSource portfolio acquisition during last week’s conference call.
However, David Mangum, Global Payments chief financial officer and executive vice president, told analysts the processor was “not alone” in its pursuit of online merchant accounts.
“We’re going to be the best partner to CyberSource that we can,” Mangum stated. “There’s lots of other institutions and processors who would like to do the same thing, but we believe that we are going to be very responsive and we’re hoping our relationship with them expands.”
In addition, Global Payments executives cited the company’s need to bolster its ecommerce presence.
The company’s ecommerce merchants historically have operated brick-and-mortar locations, too, but the CyberSource portfolio represents 9,000 specific to an online presence, Jeff Sloan, Global Payments president, said during the call.
The acquisition represents “a very big step in the right direction” for Global Payments to get more ecommerce business, Sloan added.
Executives reminded analysts that Global Payments already processes some of the accounts in the portfolio and that CyberSource is a customer.
And continuing to work with CyberSource will be important for Global Payments moving forward, said Paul Garcia, Global Payments CEO.
“We have the benefit of CyberSource technology in the future, and that will be a key to a lot of wins for us in securing new business,” he told analysts.
Martaus sees both Visa and Global Payments benefiting from the portfolio transaction.
“These are two incredibly well-run companies that know what they want to do and how they intend to go about doing it,” Martaus says.
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