Major Fintech Merger Speaks to Supremacy of Software in Age of Stripe and Square
Global Payments CFO talks TSYS merger, digital payments and a cashless society.
Global Payments and Total System Services have inked a $21.5 billion deal to merge, the two companies announced Tuesday, in a major realignment of the payments business as legacy processors fight to compete with upstart processors like Stripe and Square.
This is the third payments megadeal of 2019. Fidelity National Information Services, better known by the abbreviation FIS, struck a $34 billion deal — the largest ever in the fintech space — to buy Worldpay in March. Two months earlier Fiserv agreed to buy First Data for $22 billion.
Global Payments is the fifth largest merchant acquirer in the U.S., meaning it processes credit and debit card payments for merchants. About 75 percent of its revenue is generated in North America. Half of its revenue comes from technology-enablement channels like integrated payments, e-commerce, and omni-channel services.
Total System Services, better known as TSYS, is the largest third-party credit-card processor in the U.S. with roughly 45 percent of its revenues from card issuer processing, 35 percent from merchant acquiring, and 20 percent from prepaid solutions.
Cheddar spoke with Cameron Bready, who will become president and chief operating officer of the combined company when the deal closes, about the merger. He said the new company is now the largest issuer in the U.S., UK, Canada, and Ireland, and the second largest issuer in Western Europe.
“That gives us scale and the ability to invest on the issuing side to support our financial institution and large retail partners with emerging trends on the issuing side,” Bready said.
He also spoke about the future of payments and the reality of a cashless society. The following has been edited for length and clarity.
You’re now the largest issuer in several markets. What can we expect from the acquiring side?
We’ve been integrating our payments technology more and more into software with an eye towards vertical markets specific software. For example, by integrating our payments technology into AdvancedMD’s small physician practice management software, we are able to create a distinctive offering to small-to-medium sized physician practices throughout the U.S. Today we do this in eight vertical markets where we own our own vertical software assets.
What has been going on in the payments industry for the last few years that brought us to this deal today?
We’re seeing more and more digitization of events around the globe, whether it’s contactless here in the U.S., or anything that removes the remaining friction around using a digital form of payment versus a cash form of payment. In Asia it’s all about QR codes. Whether it’s Alipay, WeChat Pay, PayMe in Hong Kong (which is HSBC’s version of Alipay). Using QR codes, using your phone to make payments is good for the digital payment ecosystem. Those are trends we think together we’ll be able to better position ourselves to take advantage of going forward.
So everything is still card driven.
It can be; a card load onto your digital wallet has a card element associated with it. In the case of QR codes, [payments] can also be from a bank account that you load in your digital wallet. We’re helping the merchant accept that form of payment at the point of sale in our merchant acquiring business. So whether it’s a Visa, MasterCard, transaction or QR code transaction, we’re poised to benefit from more digitization in payments.
Besides the added ease and convenience to merchants as well as consumers, how do you see the value of contactless payments?
With EMV technology coming to the U.S. recently, the physical point-of-sale payment acceptance is more secure than it was historically. But for us, it’s all about driving more payment volume. What we generally see is contactless displaces cash, particularly at lower ticket value transactions. The subway is a great example of that, the ability to tap your card to get into the metro now is a far better and more convenient, more frictionless way for customers and contactless is more than anything else going to displace the remaining elements of cash — not the entirety, but certainly a portion of it.
The payments industry seems to really want to shepherd us into a cashless society. Is that realistic?
There’s always going to be a role for cash in commerce around the globe. I don’t think that cash is ever going to go away entirely. The death of cash is probably vastly overstated. But the reality is there is a significant portion of the population in the U.S. that is underbanked and a good portion that’s probably unbanked. TSYS today focuses on consumer solutions, generally geared towards that underbanked and unbanked market — prepaid cards, digital cards — that allow customers to be able to have digital mortgage payments that they can use and help them to remember not to be in a place where they can only use cash when they have other digital means by which to pay.
Do you have more work to do as a company pushing digital payments to ensure the underserved don’t get boxed out?
We can continue to grow as we work to try to penetrate that underbanked part of the market and provide them with the same sort of digital solutions that you and I basically take for granted today: the ability to pull a card out and pay whenever we want to. There’s a big population that wants and needs, arguably, that type of capability.