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Insights and Expertise

Consolidation is along the linear pace suggested by the professionally

produced power points. But, the most valuable assets, as
coming ... still measured by the multiple of price paid for the asset relative
to earnings, is not for large consolidated assets. It’s for
the innovators, which have interrupted the consolidation
journey.
The last mile, the entity closest to the merchant, owns the
relationship. In the past, agents and ISOs were the owners.
Now POS system and SaaS providers are demonstrating
their value, and merchants are opting for these offerings
because of their simplicity.

Failure-proof plan
If being large was the criteria for value, then Worldpay
would have sold for a premium. Instead, FIS acquired
Worldpay in 2019 for $43 billion. In 2023, when FIS sold a
55 percent stake to GTCR, Worldpay was valued at $18.5
By Ken Musante billion. This equates to a deterioration of over $23.5 billion
Napa Payments and Consulting in four years.

hen younger payments executives ask me Not only did FIS lose out on the appreciation of the $43
about the most significant changes within billion, but it also lost an additional $23.5 billion. Under
payments, I usually start with the easy stuff. Brewster's Millions Rules, I would be hard pressed to lose
W Integrated solutions. Wireless terminals and that much if I worked at it 16 hours per day, seven days
chip cards. The truth is a bit more detailed. Authorization per week.
costs used to be much higher so instead of running an
authorization on every transaction below $50, a physical
book was checked to ensure the card was not listed. A decade of shifts in payments
from scale to specialization
This book was updated and sent out weekly to every
single merchant. The time merchants took to open and Over the past decade, the payments industry has
search this warning bulletin made it such that cardholders evolved through alternating waves of consolidation
did not want to engage in smaller transactions. Back then, and innovation. In the mid-2010s, the sector’s focus
there were three interchange categories. was on modernization. Mobile wallets, contactless
payments, and EMV chip cards were finally becom-
Additional categories were implemented to incentivize ing mainstream in the United States, while large data
electronic data capture terminals so that merchants could breaches pushed security and tokenization to the
electronically send their drafts rather than having to bring forefront.
them to their acquiring bank. This was an enormous shift.
Once the merchant was no longer tethered to a physical Processors raced to upgrade infrastructure and reas-
branch, this allowed for all the innovation that followed. sure merchants, setting the stage for a surge in merg-
ers and acquisitions that would reshape the industry.
The rise of consolidation
By 2017 and 2018, the acquiring landscape was in full
But even this is not the most seminal change. Ever since consolidation mode. Major players sought scale and
merchants were able to process with a efficiency above all else. Global Payments absorbed
nameless, faceless acquirer, consolidation has continued. Heartland Payment Systems, Fiserv acquired First
Consolidation: increasing merchant and transaction Data, and Worldpay itself merged with Vantiv. These
count to increase economies of scale in order to decrease deals measured in tens of billions of dollars. The as-
processing costs. It happened first on the cardholder side sumption was clear: bigger meant better, and control-
and the merchant side followed that same path. ling vast transaction volumes was the surest path to
profitability.
And while there has been consolidation of large and
dynamic acquirers, replacements continue to emerge. The momentum reached its peak in 2019, when FIS
While established players like Vantiv, Moneris USA and completed its record-breaking $43 billion acquisition
Cardservice International faded, new entrants like Nuvei, of Worldpay, creating one of the world’s largest mer-
NMI and Shift4 emerged to fill the gap. chant acquirers. At the time, the deal was heralded
as proof that scale was king. Yet as the decade un-
I won't analyze or argue that we have larger acquirers now folded, cracks in that logic began to show. Integration
than in the past, or whether the consolidation has happened
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