Because of the changes that mobile will bring to the point of sale, the payments industry can expect to see acquisitions, consolidations and investments in that market over the next six to 12 months.
Several companies specializing in point-of-sale technology will make moves to consolidate with bigger companies, or position their technology for sale, says John Guzzo, managing director in the financial technology and services group for investment bank Berkery Noyes.
More companies are following the trend in which consumers are adopting other ways to pay at the point of sale, Guzzo says.
That trend results in more merchants using point-of-sale tablets and mobile-based payment systems in hopes of increasing efficiency, boost sales and improve the customer experience at a retail location, Berkery Noyes says in its quarterly trends report.
Such a forecast falls in line with the point of sale trend Berkery Noyes noted last July after payments mergers and acquisitions dropped 50% between the first and second quarters of 2013.
The industry faced no such lull in the third quarter, with, eBays acquisition of Braintree Payment Solutions for $800 million representing the highest value transaction. EBay is planning to integrate Braintrees online and mobile payment processing platform with its PayPal division, in an effort to continue growing PayPals mobile business.
The eBay deal stood out amongst the payments industry M&A activity, which saw a 142 % increase in the third quarter over the previous quarter with a total of 29 deals. The activity for the quarter represents a 16% over the third quarter of 2012.
Berkery says the largest financially-sponsored deal in payments during the quarter was CVC Capital Partners acquisition of a majority stake in Skrill Group for $800 million. CVC bought its stake in the British online payments company from a unit of Investcorp, the parent company of PaymentsSource publisher SourceMedia.
Other noted deals included Total System Services Inc. buying NetSpend, WorldPay US Inc.s acquisition of Century Payments Inc., ACI Worldwide purchasing Official Payments Holdings Inc., and TransCard LLC acquiring PayPartners.
In 2014, Berkery Noyes also expects a lot of consolidation or acquisition activity regarding governance, risk and compliance in payments.
You will see GRC coming up a lot in the next year, because fraud prevention and data protection in payments will continue to grow, Guzzo says.
Overall, the payments industry is positioned for a lot of deals and investments in the final months of 2013 and into 2014.
Payments has very strong proprietary technology vendors, but they lack the sales and distribution forces, so they look to align with larger payments companies, Guzzo says of a common industry scenario. An ancillary benefit of that is those channel partners are likely buyers, he adds.
Payments represent a highly competitive market with new entrants and new companies going to market with new products on a consistent basis, Guzzo says.
Such a playing field lends itself to a proactive process in which smaller payment vendors engage in strategic meetings, particularly for larger companies to weigh acquiring a company instead of partnering, Guzzo says.
A seller has to clearly articulate objectives to a potential buyer about what he would like to see the owner do to both grow the business and meet the objectives of the seller, Guzzo adds.