Ingenico's $1.7 billion deal to buy Sweden's Bambora will reduce the company's reliance on brick and mortar retail while arming it for battle in the highly competitive market for digital commerce and payments.
"Ingenico realizes that its true competitors for its future growth are not Verifone and [First Data's] Clover, but Braintree and Stripe," said Michael Moeser, director of payments at Javelin Strategy & Research.
Stripe, one of the most well-known companies in this market, has rapidly accumulated more than $9 billion from investors that are drawn to its ability to help merchants build a checkout interface for their websites. That's allowing the company to simultaneously make moves in Europe and Asia, and target new use cases such as the providing payroll services to companies that use a high number of contractors.
PayPal spend nearly $1 billion to acquire Braintree in 2013, an acquisition that had a huge impact on PayPal's overall diversification. Braintree operates the popular Venmo P-to-P transfer app, and it has also reported substantial growth in app-driven commerce in the past couple of years.
"The industry seems to be consolidating around the idea of a single source for payment capabilities, probably driven by the demand for an omnichannel and cross-border capability that's being demanded by merchants of every size," said Thad Peterson, a senior analyst at Aite Group. "The payment industry is adapting functionality to address the radical shift in e-commerce."
Ingenico's digital strategy is already well underway, so the Bambora deal should accelerate this transformation. Earlier this summer, Ingenico hired former Visa Europe CEO Nicolas Huss to be Ingenico's executive vice president of strategy and performance."Bambaro's acquiring platform is very reliable, the functionalities are very good and we can bring this technology to other markets very quickly," Huss said.
Huss praised Bambora's strong onboarding performance, with 90% able to get online within a day.
"The online aspect of Bambora's technology is very important," Huss said. "That makes a big difference. Their approach is very simple. They have an an all in one product."
Ingenico also recently hired former Verifone executive Jennifer Miles to lead omnichannel strategy, and has lured clients such as Five Guys to adopt mobile ordering as an in-store line buster. Its e-commerce unit has also attracted business in airline e-payments.
The company has made other deals to quickly ramp up its technology.
"Ingenico has been leading the trend of consolidation in merchant services," said Zil Bareisis, a senior analyst, noting Ingenico's Ogon, easycash and GlobalCollect acquisitions, "all of which add payment processing capabilities, especially in e-commerce and online payments."
Software development kits and application programming interfaces have become the go-to tools that allow established companies to connect to an innovative new world of retail technology, enough for both Visa and Mastercard to extend development tools of their own and host developer events to attract users.
"To continue to survive and be successful [Ingenico] must grow through acquisition that delivers market or e-commerce enabling capabilities," Moeser said. "If it can find both, that would be great, but unfortunately that is an unrealistic endeavor."
Bambora offers products designed for fast upgrades, APIs for merchants and partners, and toolkits for online payments, card tokenization, payment profiles and onboarding for sub-merchants.
"It's not just about scale, but about breadth and depth too," said Gareth Lodge, a senior analyst at Celent. "There's an explosion of options, so big vendors will want to ensure they can offer everything to everyone."
Bambora recently expanded in North America, following its earlier acquisition of Beamstream, a multi-channel payment technology provider that has a 25% market share in Canada.
In a release, Ingenico said the deal should increase Ingenico's revenue growth by as much as 2% annually and earnings per share by about 5% in 2018.
That's a solid boost that will help Ingenico address the decline in the market for traditional point of sale terminals. The dominance of Amazon and general growth of digital shopping are causing brick-and-mortar models to lose the attention of a tech-savvy consumer base.
"Businesses that have been hard-wired to serving the physical retail store point of sale struggle to achieve organic growth," Moeser said. "So in order to grow their businesses they need to make inorganic moves such as acquisitions," he said, pointing to Vantiv's acquisition of WorldPay, which was also announced this month."As more commerce goes digital it's forcing businesses to reach, such as Walmart buying Jet.com to gain e-commerce know-how and Amazon buying Whole Foods to gain infrastructure."
In the case of Ingenico, it was facing the reality that most new clients or upgrades to existing clients were happening in the cloud, Moeser said.