MERGERS & ACQUISITIONS - 2021 by Tony Shap, CPP

Acquisitions have been driven by the desire to gain capabilities and access to payment markets as rapidly as possible. Speed matters because the pandemic has accelerated digital buying, which is where payment companies are focusing their growth.

For example, during the pandemic, Square has acquired a deep learning company, the tax filing unit of Credit Karma, and the majority of Tidal, Jay-Z’s streaming music service. They are now in the process of acquiring Afterpay, a buy-now-pay-later (BNPL) platform. With Afterpay, Square is expected to offer its merchants buy-now-pay-later capabilities that their clients can select at check-out, increasing both overall merchant sales and per-sale value. They will also integrate Afterpay with their payment app, CashApp. The Tidal acquisition gave Square a way to let consumers buy and sell Bitcoin, fees from which provided half of Square’s revenue in Q3 2021.

While there is not “typical” payment company when it comes to mergers and acquisitions, Square is a good example of how varied acquisitions are these days, where companies are looking past what defined traditional merchant payment services before the pandemic to find new ways to earn a percentage of transactions even when traditional merchants aren’t involved.

In 2021, PayPal acquired four companies: Curv (a cryptocurrency transaction processor), Chargehound (an automated return dispute handler), Happy Returns (allows customers to return online purchases to physical stores), and Paidy (a Japanese BNPL company).

M&A for Future Growth

Chase, which owns Chase Merchant Services, acquired Volkswagen Payments, which supports in-car purchases. In-vehicle purchases are projected to have a huge future potential.

Intuit purchased Credit Karma and Mailchimp in 2021, the first to help consumers with smarter purchase decisions, and the second to get close to the heart of small businesses, two areas indirectly related to payment processing which it handles through its QuickBooks arm.

Both companies expect to leapfrog by 5-10 years by making these acquisitions.

Partnerships Instead of Mergers and Acquisitions

Stripe, which previously had a partnership with Afterpay, has not acquired a buy-now-pay-later company, but created a partnership with Klarna to provide BNPL service to their merchants. Similarly, Shopify has created a strategic alliance with BNPL giant Affirm. The BNPL market is growing and is likely to be a driver of future mergers or acquisitions.

[Author’s box]

Tony Shap, Quantum’s Payment Technology Officer, has spent more than a decade as an electronic payment expert, helping businesses of all sizes grow by using automated payment systems to accelerate their financial success.