What the Worldpay-Vantiv mega merger means for the payments industry

The merger of UK payments giant Worldpay and US firm Vantiv was finally agreed this week on 9 August, valuing the UK business at £9.3 billion. The joint entity will be capable of processing around $29 billion (£22 billion) in global payments.

The marriage will see Worldpay bring its increasing momentum in online sales and e-commerce payment solutions together with Vantiv, a heavyweight in credit card payments processing and point-of-sale terminals, although Worldpay also has a sizeable point-of-sale payments business too.

So what does this merger mean for the hugely lucrative payments industry?

Key sticking points during negotiations were securing UK employment and in how the balance of power will look at the mega payments firm after the merger. In terms of leadership, the firms have agreed that Worldpay CEO Philip Jansen will be co-CEO with Vantiv's CEO Charles Drucker, who will also be executive chairman. That is a corporate structure worth keeping an eye on.

Next there is the issue of UK jobs, as Worldpay employs 1,200 people in the UK, according to Reuters, and the merger is said to bring $200 million in operational savings according to the two firms.

This was a similar concern when another of the UK's biggest tech firms, ARM, was sold to Japanese company SoftBank earlier in the year. These concerns led to Softbank promising to create 1,700 UK jobs as part of the takeover.

The similarity between those deals extends to valuation, with Worldpay chairman Sir Michael Rake admitting that the falling value of the pound post-Brexit "killed" any plans the firm had to be an industry predator.

Playing second fiddle in this deal only confirms that. Vantiv shareholders will own a majority 57 percent stake in the combined group, with Worldpay investors holding the other 43 percent.


This deal signals further consolidation in the payments industry, as firms look to achieve global scale and seek to dominate the online payments space.

Brendan Miller, principal analyst at Forrester, told Computerworld UK: "Over the last few years Vantiv scooped up Litle and Co., Mercury Payments and Moneris. Global Payments acquired Heartland Payments last year and First Data has made several acquisitions as well.

"This particular acquisition is noteworthy due to its sheer size and the global component. As processing margins compress and as more retailers and merchants look to expand ecommerce operations cross-border, I expect to see more global consolidation over the next few years."

Vanity and Worldpay will also have to work hard to hold off new competitors who have grown up in the world of online payments and APIs, like Stripe, Braintree and Adyen.

Read next: Which is the right online payments solution for your startup? Stripe vs Braintree vs Worldpay vs Adyen

"[These companies have] built their platforms from the ground-up over the past five to ten years, giving them the advantage of not having legacy technology debt, which provides them more agility," Miller said. "The emerging competitors typically have a simpler integration path that nets multiple geographies for a client, the downside is they may not have all the functionality or geographic coverage a mature player has."

Penny Gillespie, research vice president at Gartner goes one step further. Gillespie told Computerworld UK: "In fact, the boom could be just beginning if we examine what customers are seeking, which also means that this acquisition could be as simple as Vantiv acting in response to customer demands for simplicity and part of its greater strategy to move toward 'one-stop payment shopping' for its customers."

In short, netting enterprise clients has been a challenge for the smaller, online-focused payment solution vendors, and Worldpay/Vantiv will want to be the payments solution for its clients, whether that is in-store or online.

Copyright © 2017 IDG Communications, Inc.

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