Payments M&A gains momentum amid fintech funding crisis

by James · March 29, 2023

The news: Major payment providers are leaning towards mergers and acquisitions (M&As) to strengthen their product suites and better serve customers.

Ingenico acquired the British software provider Phos, according to a press release. Phos’ technology allows small businesses to accept contactless payments with smartphones and tablets, and comes in a white-label version, enabling merchants to add their own branding.
Visa and Mastercard are among the companies bidding to buy the cloud-based banking and payment platform Pismo, according to Bloomberg. The Brazilian startup is reportedly valued at $1 billion, although Visa recently raised its bid to $1.4 billion, people familiar with the matter told Bloomberg.

Why these agreements are important: Macroeconomic headwinds are forcing companies to be more sensible with spending this year. They focus on M&A deals that have a direct impact on their value proposition.

Phos is in line with Ingenico’s push towards software solutions. After World line sold Ingenico to private equity company Apollo Global ManagementIngenico said it would focus on strengthening its existing POS solutions and offers a greater mix of software and cloud-based tools. Acquiring Phos helps Ingenico address industry trends and attract customers with more diverse payment technology. The number of softPOS users globally will increase by 475% between 2022 and 2027according to Juniper Research.
Pismo can help make Visa or Mastercard more attractive to issuers. Both firms are no strangers to M&A deals: Over the past five years, Visa and Mastercard have acquired 14 and 28 companies respectively, per M&A database Mergr. These agreements help to expand their scope in payments and technology, allowing them to offer issuers a wide range of services, such as fraud protection and open banking. Buying Pismo would expand the Visa or Mastercard offering tools for issuing cards and banking services to their customers.

The bigger picture: Fintech M&As defied a broader market downturn last year—global fintech M&A activity increased by 46% year-over-year (YoY) and reached 591 deals in H1 2022, which also marked a 70% increase from the same period in 2019, according to Hampleton Partners.

Factors such as lower fintech funding rounds and valuations make M&As a more attractive venture for larger firms. We expect established players to seize the opportunity and buy up fintech over the next five years. This will help payment providers improve their solutions to attract more customers and increase market share.