As Amazon.com’s market share grows, retailers are feeling the pressure. They aren’t the only ones. Vantiv’s acquisition of Worldpay is putting the squeeze on payment processing companies in much the same way.
On Wednesday Vantiv agreed to pay 7.7 billion pounds ($9.9 billion USD) for Worldpay Group PLC, both payment processing companies. This move will greatly increase Vantiv’s presence in the e-commerce, online retail market.
Vantiv is the largest merchant acquirer in the U.S. and usually focus’ on large chains. In fact, over 50% of Vantiv’s revenue comes from the big guys. This move is different. The acquisition of Worldpay Group brings many smaller online retailers into the mix. A strategic move as Vantiv has struggled in the past to gain footing in the e-commerce marketplace. So, who is Vantiv’s biggest competitor when it comes to e-commerce? JPMorgan, who processes payments for… you guessed it- Amazon.com. Worldpay was an obvious move. In fact, JPMorgan had also considered acquiring Worldpay but to beat out the low margin offer Vantiv made would have cost JPMorgan too much.
The payment processing marketplace is continually shrinking in with large processing companies combining. A couple months ago CardConnect Corp was purchased by First Data, both payment processing companies. Last year Global Payment Systems Inc acquired Heartland Payment Systems Inc and Total Payment System Services offered to buy out TransFirst.
We live in a world of conglomerates and tightening markets. Though this seems bad smaller companies there may be a silver lining. Interestingly, it seems that when payment processing companies grow big they cherry pick and fight for larger customers and get away with higher prices and reduced customer service for the rest. They won’t fight for the small-mid size companies because they’re too focused on the larger fruit of the proverbial sales tree. This is the saving grace for the lesser sized payment processing companies and retailers alike. Small-mid size processing (merchant services) companies can focus on smaller business’, getting competitive delivering a price and a level of customer service that none of the conglomerates can offer. So, what is the benefit of going with a huge processing company? Probably nothing unless you are big enough for them to care about you.