Yesterday’s news of the prospective $9.9 billion-dollar merger between acquirers Vantiv and WorldPay may be just more noise in the cacophony of FinTech M&A. But we FinTech geeks want to know, “What will this merger look like?” and “will the processing systems actually be integrated, or will the two companies continue to operate separately under one umbrella?”
The question of integration is a huge one. Upgrading legacy systems is a thorn in the side of all financial services companies, and payments processors and acquirers are no exception. As designers of payments systems, we dream of the opportunity to create the perfect processing system and these two companies could provide the foundation for a very good start.
In our dream scenario, here is how we see this whole thing going down:
Advance Vantiv’s march toward industry end-to-end services
The major differentiators in the payments industry today are price (what are you charging merchants?) and connections to third-party services, (do you integrate with my software, my bank, and my CRM?). Vantiv appears to have decided that acquiring the most desirable third party services is more beneficial than just build the connection to them.
Since their acquisition of Litle&Co’s recurring payments engine in 2012, Vantiv has been strategically acquiring companies that contribute technology and services to their platform. The acquisition of Moneris in 2016 allowed Vantiv to gain to merchant bank channels, and the 2017 acquisition of Paymetric gave Vantiv a powerful CRM. By merging with WorldPay, Vantiv will have access to some solid technology, including the new WorldPay Total Gateway. By integrating all of these pieces, Vantiv could ostensibly take the customer from sales and acquisition, through gateway and processing, to settlement.
With their European presence, WorldPay brings Vantiv a larger global footprint and expands both the currencies Vantiv will be able to accept and allows Vantiv to accept more payment methods. Merchants will find this combination of options appealing since often the best option is to have separate acquirers for US and international transaction volume. If merchants currently on the Vantiv system were to have access to the WorldPay functionality, they would benefit from these options by being able to sell goods and services more widely.
WorldPay's clean APIs could be used to enhance the intricate functionality Vantiv acquired with Litle&Co. in 2012. If Vantiv can successfully integrate things like the prepaid flags, balance flags, and mass affluence indicators they gained from the Litle&Co technology, Vantiv could possess some valuable data points. That data could be leveraged to increase overall merchant profitability if the data is placed in the hands of the right analytics tool. When merchants are more profitable, the Vantiv/WorldPay entity would stand to rake in considerably more in revenue.
WorldPay is currently negotiating a new fraud screening relationship with a major provider. Assuming Vantiv’s relationship with ThreatMetrix will be offered in addition to this new WorldPay relationship, merchants could have an additional option available to them. Choice always benefits the merchant. More choice will only help to differentiate the Vantiv/WorldPay combination even further from the competition, catapulting the newly merged company to the top of the list for many merchants seeking an acquiring relationship.
The Bad News
Upgrading legacy systems is a complex and expensive process, and while the benefits far outweigh the drawbacks, very few large companies are easily convinced that upgrades and integration are worth the dedication of resources. And even if these two fully integrated their system and technology, they still wouldn’t be our “dream system” unless they were upgrading their processing to meet the needs of the frictionless economy, which would require one more critical piece of integration.
Whether fully integrated or two companies operating as separate entities, the Vantiv/WorldPay merger could be the start of something special for merchants and the payments industry will be watching.
Disclosure: Patrick Rivenbark, a Let’s Talk Payments employee, is on the Board of Advisors for FinTech Payments Corporation.