Point-of-Sale and Payment Processing Industry Consolidation: The Pros and Cons for Customers
Over the past couple years, we’ve seen press release after press release announcing acquisitions in the point-of-sale and payment processing industries. In 2017, two deals were announced. ScanSource acquired POS Portal and Ingram Micro acquired The Phoenix Group. In both cases, the acquiring company expanded their portfolio of product and service offerings to include a range of credit card terminals and other point-of-sale equipment.
On the payment processing side, mega-mergers seem to be a recent and accelerating trend. As more people switch from cash to digital forms of payment, processors are seeking strategies to capture a larger slice of what’s estimated will be a $3 trillion a year pie by 2023. Fiserv surprised analysts earlier this year when they announced plans to acquire First Data for $22B. As anticipated, the deal set off a wave of further consolidation. FIS acquired Worldpay for $35B. Less than a year before, Vantiv paid $10.6B for Worldpay, which was valued at $43B at the time of the FIS announcement. Talk about rapid growth! Adding to the trend, Global Payments and TSYS agreed on merger terms. This came about a year after TSYS purchased Cayan for $1B.
What’s driving all this industry consolidation?
There are many reasons organizations seek acquisitions:
- To quickly grow top line revenue
- To achieve economies of scale
- To expand their product or service portfolio
- To access innovation or intellectual property
- To reach new customers or markets
- To expand their manufacturing capabilities or footprint
And the list goes on. In the case of the recent payment collection and processing industry consolidation, companies are looking to serve as a one-stop-shop for customers. They’re tapping into adjacent product and service offerings to more efficiently meet customer needs. And in doing so, they’re increasing market share more rapidly than they could have through organic growth.
So, what are the benefits of consolidation for customers?
Certainly, the companies involved seek to gain from a transaction. But what’s in it for customers? A few pros of consolidation include:
- The ability to purchase larger volumes without delay
- The convenience and operational savings of buying from a single supplier
- The potential for new innovations as a result of greater supplier investments in R&D
But, it’s not all upside for customers. There are some cons of consolidation.
When suppliers remain independent, customers can avoid some pain associated with:
- Higher prices or reduced choice that often result from greater market share or monopoly power
- Communication or coordination challenges in dealing with a larger entity
- No longer supporting American companies when merged organizations become global powerhouses
At POS Global Concepts, we’re proud to be a small, family-owned business. Because we’re independent, we’re able to prioritize customer service over shareholder returns and respond quickly to the ever-changing market landscape. Our U.S.-based team of experts is available to exceed your expectations for new and refurbished credit card processing equipment and repair services.