First Data seems to be building a Mobile Platform while it grows Prepaid, POS, Merchant biz Globally

First Data acquired six companies since 2008 with a total disclosed value of $1,100m (for 3 deals). The acquisitions were in the field of transaction processing, mobile marketing, merchant acquiring, POS terminals, and prepaid cards. While the generic reasons behind the acquisitions were to offer better solutions, bring down costs, take on competition, drive innovation and expand network.

A deeper insight into First Data’s M&A deals reveals the following trends:

  • Mobile Marketing: First Data acquired Perka Inc. recently which provides a mobile marketing platform. Innovative Companies in the industry are integrating proven technologies in geo-location, message optimisation and mobile payment to deliver much higher ROI than traditional promotional methods (including paid search/SEM)
  • POS terminals and Merchant Acquiring: First Data acquired Merchant solutions which offers merchant acquiring services and Point of sale (POS) terminals unit of ICICI bank. The POS terminal sales are increasing worldwide driven by growth in the retail sector, increased online trade non-cash payment, more smartphones and card users. By 2014, global POS hardware industry is expected to reach c.$31.5bn; and global POS software industry is expected to reach $3.2bn. POS systems involve hardware and software used by retailers to accept payment transactions from their customers.
  • Clearing House and Processing: First Data acquired Transportation Clearing House and OmniPay who offer transaction processing services. The industry continues to grow as a result of wider merchant acceptance, increased consumer use of bank cards and advances in payment processing technology

Acquisition rationale

  1. First Data acquired mobile loyaltystart-upPerka for $30M to take on the rivals like Square and PayPal In small business products market. This acquisition will enable First Data’s customers to upgrade their old school credit card terminals
  2. First Data acquired full ownership of the Merchant Solutions joint venture from Standard Chartered Bank. Taking a 100% stake in First Data Merchant Solutions strategically positions First Data to better serve some of its most important Asia Pacific markets and grow well into the future
  3. First Data and and Transportation Clearing House (TCH) created a joint venture company. First Data contributed its EFS Transportation Services business to the new venture with TCH. The joint venture will create a leading payment card provider by bringing unparalleled service levels, customer-driven innovation and new technology to the transportation industry
  4. First Data acquisition of the remaining 30% stake of Omnipay will enable First Data to enhance its association with FEXCO and bring OmniPay into its technology portfolio
  5. First Data bought an 81% stake in ICICI Merchant Services. The deal will bring reduction in the various costs of transactions which will help the company to further expand its network and thereby enhance its business
  6. First Data acquired InComm Inc. With this acquisition, First Data hopes to integrate InComm’s diverse prepaid product portfolio as well as its distribution channels into its operations to better serve its retail customers

About First Data

First Data is a global technology leader in information commerce. The company processes transaction data of all kinds, harnesses the power of that data and delivers innovations in secure infrastructure, intelligence and insight for its customers. With operations in 37 countries, First Data serves more than 5.4 million merchant locations and more than 2,000 card issuers and their customers.

About FA team

FA team in Let's Talk Payments is a team of financial analysts and experts in the payments industry. The team consists of CFAs and MBAs who have worked for leading investment banks, big four consulting firms, and financial research agencies. The team has tracked more than 5000 deals since 1998 in the payment space