Macroeconomic challenges are driving merger and acquisition opportunities for payment firms
The ongoing economic uncertainty is driving an uptick in merger and acquisition deals in the payments sector globally. According to a report from Strawhecker Group, a total of 66 mergers and acquisition deals were completed in H1 2022, when compared to 59 over the same period in 2021. This trend is expected to further continue in H2 2022, as the global macroeconomic environment continues to pose various challenges for payment firms. While larger payments firms are seeing this as an opportune time to further strengthen their position in the sector by acquiring a payments-related startups that are facing a decline in valuation, others are entering into mergers and acquisition deals to expand their product portfolio and geographical footprint. For instance,
- In July 2022, GoHenry, the United Kingdom-based payments firm which offers prepaid cards to kids, announced that the firm had acquired Pixpay, the French startup focusing on teen-focused prepaid card offerings. This acquisition is part of the firm's strategy to expand its geographical footprint in Europe. Along with France, Pixpay is also operational in Spain, where it launched services in November 2021. While in the United States, GoHenry built its presence from the ground up, the acquisition of Pixpay indicates a different approach that the firm had adopted to expand in European markets.
- In August 2022, Rêv Worldwide, the international Fintech firm, announced that it will acquire the consumer business arm of Netspend from Global Payments. This acquisition, in partnership with Searchlight Capital Partners, is expected to close in Q1 2023. Since its inception, Netspend’s consumer business has processed billions of dollars of cardholder purchases and has a retail partner network of more than 130,000 locations where customers can load their debit and prepaid cards. This acquisition will allow Rêv Worldwide to further expand globally by leveraging the strong network of Netspend.
- In August 2022, Jack Henry & Associates (Jack Henry), a payment processing service provider in the United States, announced that the firm had entered into an agreement to acquire Payrailz. This acquisition will enhance the payments-as-a-service strategy of Jack Henry, as the next-generation digital payment capabilities offered by Payrailz will be integrated into the payment ecosystem of Jack Henry. For Payrailz, the acquisition will enable the firm to build a market reputation and provide smarter payment experiences.
- In August 2022, Sabre, the United States-based firm which offers a range of payments and commerce solutions for travel-focused businesses, announced the acquisition of Conferma Pay which is based in the United Kingdom. This acquisition will give Sabre better control over its payment processes. Notably, Conferma Pay enables the travel indu”stry to move to virtual cards, wherein each business traveler purchases things with a separate virtual number. Consequently, virtual cards offer more secure authentication compared to traditional processes.
- In February 2022, Revolut India, the Indian arm of the global giant Revolut, announced the acquisition of Arvog Forex, the international money transfer firm. Notably, the acquisition is part of the firm’s strategy to launch remittance services for Indians in 2022. Furthermore, this acquisition will also enable Revolut to further expand and bolster its presence in the growing payments ecosystem in India.
As payments firms continue to expand their product suites, look to serve more customers, and expand their geographical footprint, the trend of mergers and acquisitions in the payments industry is projected to further accelerate in Q4 2022 and beyond. Notably, macroeconomic factors such as rising interest rates will also present buyout opportunities for larger payment firms globally. All of these factors indicate that the current economic uncertainty and global macroeconomic challenges are one of the key drivers fueling the mergers and acquisition activities in the global payments market.
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