Total System Services (TSYS) and Global Payments are the latest merchant services and payment processing technology giants to announce the completion of a merger transaction, one that is part of an ongoing consolidation trend among giants not only in the electronic payments space but also in the financial technology sector. Earlier this year, Fiserv merged with First Data Corp., and Fidelity National did the same a few months later with the acquisition of WorldPay.
TSYS is a Georgia company with annual revenues averaging $4 billion; it has a presence in 13 countries and manages about 13,000 employees. Global Payments is similarly engaged in payment processing technologies and has a payroll of about 11,000 employees, but it has a larger international footprint in 32 countries. Both companies are listed on the New York Stock Exchange, and their business models present many similarities, thus making this merger transaction very even in financial terms. The $21.5 billion deal was largely welcomed by analysts who follow the merchant services industry because it will increase competition between a handful of payment processing giants.
Both companies have indicated that this merger will help them save about $300 million per year; this cost savings largely represents cutting down on competitive marketing campaigns, but a more significant aspect of this move is related to the technological improvement of the merchant services offered by the companies. TSYS may have an edge in terms of software solutions, but Global Payments is known for its greater ability to acquire merchants around the world, particularly small business operators. This combination of business models is interesting because it suggests that these two companies could go after the market share of competitors such as PayPal and Square, which have been aggressively pursuing micro companies.
With digital payments moving beyond the legacy of MasterCard and Visa card transactions, this is a sector that is ripe for innovation and dominance. The large acquisitions and mergers seen this year suggest that major players are seeking to establish a leadership stake, and they are willing to spend significant amounts of cash in doing so. Needless to say, these companies are also keeping an eye on the rise of cryptocurrencies; for the time being, they present a nice business opportunity in terms of processing, but they could also become a different kind of competitor in the future.
The new chairman of the joint company, Troy Woods, is convinced that the merger means that the new company will become a “payments powerhouse” with which to contend. It is evident from his remarks that Woods is excited that the new company will become a leader in credit card processing and e-commerce solutions.
