Why Global Payments buys a "more defensive than offensive" strategy

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This is the third mega-merge of this year in the Payments sector: Global Payments (GPN) acquires Total System Services (TSSThe companies announced Tuesday an agreement on shares of $ 21.5 billion. "data-reactid =" 15 "> This is the third mega-merger achieved this year in the payments sector: Global Payments (GPN) acquires Total System Services (TSS) in an agreement on $ 21.5 billion, companies announced on Tuesday.

Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" This transaction follows the payment processor Fiserv buying First Data for $ 22 billion in January and & nbsp;National Loyalty Services& nbsp; $ 35 billion purchase from Worldpay in March. "data-reactid =" 16 "> This transaction follows a transaction between the payment processor Fiserv, $ 22 billion purchased in January from First Data, and $ 35 billion by Fidelity National Services.

Cameron Bready, chief financial officer of Global Payments, told Yahoo Finance: "We are a big company, and scale is always useful … What is good about bringing our two companies together is the right kind of scale . Unlike other offers that have been made in our space, we are pure play payments. "

According to Bready, the combination of Global Payments and Tsys: "positions us both better to be able to compete with the ever-changing landscape of payments. We get exposure to more than 900 leading financial institutions around the world, with which we can now partner … Moreover, Tsys today has a good exposure to P2P digital payments, as well as 39 to B2B payments via NetSpend.

But at least one payments analyst does not see it that way.

Dan Dolev of Nomura Instinet described the deal as "more defensive than offensive" and added, "I do not think this merger has a strategic meaning." According to Dolev, the merger is only the last sign showing that big payment players are scared. Square, which is rapidly gaining market share.

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = ""Jack Dorsey should be happy""data-reactid =" 32 ">"Jack Dorsey should be happy"

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Nomura religiously followed the downloads of l & # 39; Square App vs. Venmo app from PayPal and Dolev estimate that Cash App gains are bad news for Tsys, as its Netspend service targets sub-banks – the same demographic services of Cash App with its & nbsp;new debit card. "data-reactid =" 33 "> Nomura religiously followed Square's Cash App downloads against PayPal's Venmo, and Dolev says Cash App gains are bad news for Tsys, as his Netspend service targets under -banks, the same demographic services of Cash App, its new debit card.

Dolev concludes that the merger of Global Payments with Tsys "reinforces the superiority of Square because everything happens as a result of the disruption caused by Square – both on the acquisition side of traders, where Square's attack to retail and catering, and engulfs stocks., but also on the prepaid corner of Netspend, where the Cash app is gaining a lot of appeal and continuing after, so I think Jack Dorsey should be happy. "

In its 2019 First Quarter Results Report, Global Payments network fees in North America (fees charged on behalf of card issuers such as Visa, MasterCard) increased by only 3%. increased by 8% in the same quarter. In other words, Global Payments is underperforming the growth of the broader US payments industry. "Our research shows that the global situation of Global Payments is much darker than it says," warns Dolev.

If the history of payment processor activity in 2019 has been fully focused on mergers and acquisitions so far this year, this will not be the case in 2020, says Dolev, because Global Payments-Tsys is probably the last great cumulation in space. He sees no "natural purchaser" for Square now, which he says gives Square a "scarcity value".

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Daniel Roberts is a senior writer and show host at Yahoo Finance. It tightly covers payment technology. Follow him on Twitter @readDanwrite."data-reactid =" 38 ">Daniel Roberts is a senior writer and show host at Yahoo Finance. It tightly covers payment technology. Follow him on Twitter @readDanwrite.

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Square is the company of the year 2018 of Yahoo Finance"data-reactid =" 43 "> Square is the company of the year 2018 Yahoo Finance

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