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Insights and Expertise

decked out to that vertical’s providers. Larger providers
are caught and unable to pivot quickly. The result is a
challenges, changing merchant expectations and the shrinking portfolio or at least a portfolio that does not
rapid ascent of software-driven innovators eroded the grow as fast as an ISV’s.
advantages of size.
Specialization over scale
By 2022 and 2023, the market had shifted dramati-
cally. FIS reversed course, selling a 55 percent stake Despite the macroeconomic climate, which favors
in Worldpay to GTCR for $18.5 billion, effectively un- consolidation, innovative and entrepreneurial companies
winding much of the earlier mega-deal. The devalua- have thrived. And their numbers are increasing. Micro
tion underscored what many already sensed: the fu- lending companies, B2B payment gateways, risk platforms,
ture of payments wasn’t in building monoliths but in specialized CRMs, payfacs, dispute management
cultivating nimble, tech-enabled ecosystems. companies, statement analysis services and middleware
have thrived.
Meanwhile, independent software vendors, payfacs
and vertical-specific platforms were thriving. For- AI has made software development easier and faster,
ward-looking companies and a new generation of and in some cases, has become the solution itself. Instead
integrated POS providers rose to prominence by of- of consolidation, these companies have focussed on
fering tailored, API-driven solutions that combined specialization. Every time the grip of consolidation seeks
payments, analytics and business management tools to build a Borg-like portfolio, an individualistic offshoot
in one experience. Their innovation outpaced the abil- is born because the needs of the few are unmet. But, our
ity of legacy acquirers to pivot. industry is so large that even a few are enough to build a
business.
Now, as of 2025, the industry finds itself at another
inflection point. A number of large acquirers continue Financial engineers will always seek to build monoliths.
to recalibrate their positions, as embedded finance, There is way too much money for them not to do so.
AI-powered risk tools and hyper-specialized SaaS But, these monoliths will fail specific customers. Larger
providers redefine what it means to "own" the mer- players will seek to emulate nimble specialized providers,
chant relationship. but their heft will prevent execution and specialization.

Taken together, the past 10 years show how cycles of Entrepreneurs will recognize these failings and speak to
consolidation and innovation have continually re- these maligned clients. These dedicated, hyper-focused
shaped the payments landscape. players will dedicate their solution, and their clients will
become zealots. The feedback provided will so impact the
entrepreneurs, they will seek to share their solution with
a much wider customer base and will seek to consolidate
The resistance on their newly built platform. This consolidation will, in
turn, provide new opportunities.
Innovations, however, sell at a premium to even the best
run portfolios. Mercury Payment Systems was one of the Whenever I see a PowerPoint presentation about the
forerunners of the payment integrators. When Vantiv impending consolidation within the acquiring space, I
purchased Mercury Payment Systems in 2014, the multiple am reminded of G. Michael Hopf’s quote from his post-
was nearly 18 times earnings. This was a world away from apocalyptic novel Those Who Remain: “Hard times create
the sale of merchant portfolios which had valuations of strong men, strong men create good times, good times
three to seven times and unleashed an entirely new line of create weak men, and weak men create hard times.”
payment providers: the integrated software vendor or ISV.
Hopf, a former Marine turned author, used the line to
Operators learned that having a unique solution that capture the cyclical nature of struggle and renewal—a
locked out other clients or provided superior earnings pattern that feels strikingly familiar in payments today, as
led to valuations far above a normal portfolio. Traditional challenges and innovation continue to shape the industry’s
merchant portfolios multiples looked pedestrian in next generation of leaders.
comparison to the valuation of software companies.

The rise of innovation and software directly led to the As founder of Humboldt Merchant Services, co-founder of Eureka
deterioration of large static portfolios, like Worldpay. Payments, and a former executive for such payments innovators as
Innovative software companies' merchant bases are WePay, a division of JPMorgan Chase, Ken Musante has experience in
protected. These merchants are receiving some additional all aspects of successful ISO building. He currently provides consulting
services, which may be directly or tangentially related to services and expert witness testimony as founder of Napa Payments
payments. and Consulting, www.napapaymentsandconsulting.com. Contact him
at kenm@napapaymentsandconsulting.com, 707-601-7656 or www.
Examples include integration to a related software or linkedin.com/in/ken-musante-us.
a better POS experience or a vertical-specific solution
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