2019-03-27

FIS’s $43bn takeover of Worldpay

The scramble to build global payment systems
The Economist 2019-3-23

image

YOUR HOME is about to become a department store. Of the 27% of American consumers who own voice-activated speakers, more than a quarter already use them to shop. You may soon start ordering groceries via a panel on your fridge or buying accessories through an interactive mirror in the bedroom. Social-media outlets are also after your money: before long, that red coat you liked on a friend’s Instagram page will be just a click away.

The continuing boom in e-commerce—which is still growing at a breakneck 18% a year—is forcing speedy change on a once-staid sector: the invisible pipework that powers payments. On March 18th FIS, an American company which provides information technology to around 14,000 banks, agreed to buy Worldpay, a payments plumber, for 43bn including debt—the largest deal ever in the payments industry. It marks a sharp escalation in the battle for a market that BCG, a consulting firm, expects almost to double in size, to $2.4trn, between 2017 and 2027.

Payment technology is already pretty nifty. When a shopper swipes her credit card at a till, the company providing terminals to the shop (the “merchant acquirer”) asks the lender that issued the card (the “issuer”) to confirm that she has enough funds. That electronic query reaches the lender—whether around the corner or across the world—in milliseconds. If the answer is “yes”, the shop has a guarantee it will eventually receive the money, and the shopper can take the goods.

image

The acquirer usually requests funds from card issuers only at the end of the day, after the shop submits its full list of transactions. Payment networks, such as Visa or Mastercard, then move the money, which may take days to reach retailers’ accounts. They also set the complex rules by which the issuers and acquirers they licence must abide. For example, acquirers provide insurance: they repay customers who, say, have bought tickets from an airline that goes bust before they fly. They also store the granular data needed to withhold deposits or execute partial refunds.

This system was designed for a brick-and-mortar world. But e-commerce has spawned new payment methods, such as digital wallets, and is changing constantly. Websites and apps can upgrade their software daily; acquirers might do so every quarter or two, says Chris Jones of PSE, a consultancy. Companies dubbed “gateways” now act as multi-socket adapters, connecting acquirers to morphing e-commerce firms. “Digital storefronts” like Shopify, a software company, add another layer: they cater to small vendors, enabling them to create a sleek website connected to a gateway in minutes.

Banks have been in retreat from this fast-evolving world. “They are like turkeys waiting for Christmas,” says Mark O’Keefe of Optima, a consultancy. Card issuers outsource most of their processing to technology providers like FIS. Merchant acquiring used to be part of banks’ domain, but it was never part of their core business. In the past decade or so many have spun them off. The financial crisis accelerated this. In 2010 Royal Bank of Scotland (RBS) sold Worldpay to Bain Capital and Advent International, two buy-out firms, for £2bn ($2.7bn) as a condition of the lender’s bail-out by the British taxpayer.

RBS may now feel a tinge of regret. After a £9.3bn merger with Vantiv, an American peer, last year, Worldpay is the world’s largest acquirer. It says it processed over 40bn transactions in 2018. Other non-banks, such as Global Payments, have also become giants (see chart). This is partly due to organic growth. Acquiring is more profitable than other processing jobs, which have become commoditised. It is also cheaper and faster to scale on the web: installing card terminals in-store requires labour and local presence. It helps that the volume of transactions, on which acquirers levy a fee, is rocketing, propelled by voracious spending in emerging economies.

Mergers, often orchestrated by private-equity firms, have consolidated parts of the industry. Acquirers have bought gateways; big technology providers have snapped up smaller software firms. But vertical takeovers by broad technology providers of payments specialists, like FIS’s of Worldpay, are new. The merger comes just two months after Fiserv, FIS’s main competitor, agreed to buy First Data, a rival of Worldpay, in a $22bn deal. Both mark the start of new phase of an M&A chess game. Pawns have been captured, but most big pieces still roam free. Since these play very diverse roles, dozens of possible combinations make strategic sense, says Lisa Ellis of MoffettNathanson, a research firm.

Vertical mergers will allow companies to cut costs, gain pricing power and cross-sell products—often to banks, their former owners. This will give them the firepower to go for the real target: establishing a truly global acquiring network. Multinationals such as Hilton or IKEA would love the simplicity of signing one single contract covering their payment needs worldwide. The Worldpay deal is a step in that direction. The firm, which focuses on Europe and America, should benefit from FIS’s existing relationships in emerging markets.

Seemingly innocuous deals could precipitate the scramble. On March 11th PayPal, a digital-wallet pioneer now worth 750m investment in MercadoLibre, a Latin American e-commerce platform. Worldpay, which has ambitions in the region, was surely watching: PayPal uses First Data as its acquirer. FIS is already thinking about the next round. “It won’t surprise us that other companies come together,” says John Crawford of FIS. “We don’t expect it to be our last deal either.”

Notes

before long, that red coat you liked on a friend’s Instagram page will be just a click away.
不久之后；只需要一个点击

The continuing boom in e-commerce—which is still growing at a breakneck 18% a year—is forcing speedy change on a once-staid sector: the invisible pipework that powers payments.
电子商务；breakneck：at breakneck speed, 脖子都给打断的唠，快速且危险的；别再用fast了

On March 18th FIS, an American company which provides information technology to around 14,000 banks, agreed to buy Worldpay, a payments plumber, for $43bn including debt
同可描述，Alipay

Payment technology is already pretty nifty.
实用和方便

swipes her credit card at a till
收银台刷信用卡

This system was designed for a brick-and-mortar world.
实体的具体的，real，其实就是很接地气的意思
Ex：His plan is very practical and designed for a brick-and-mortar world

e-commerce has spawned new payment methods
孵化，产生了

Companies dubbed “gateways” now act as multi-socket adapters, connecting acquirers to morphing e-commerce firms.
很好的描述，可用于蚂蚁金服，像是一个入口，一个多孔插线板，可以接多个商户
Ant Financial’s internet asset businesses can be seem like gateways or multi-socket adapters, connecting different small-sized banks and distributing customer resources to them.

“Digital storefronts” like Shopify, a software company, add another layer: they cater to small vendors, enabling them to create a sleek website connected to a gateway in minutes.
店面、门面；线条优美的，网站很优雅，the website is sleek, the design is sleek

Banks have been in retreat from this fast-evolving world.
太棒了，怎么描述bank在互联网金融背景下的处境？节节败退

“They are like turkeys waiting for Christmas,”
同上，等待圣诞节的火鸡

Card issuers outsource most of their processing to technology providers like FIS.
外包出去

be part of banks’ domain
是银行的领域
It is part of my domain

RBS may now feel a tinge of regret.
有点小后悔

This is partly due to organic growth.
不是有机生长，而是自然地生长

Acquiring is more profitable than other processing jobs, which have become commoditised.
收单业务

big technology providers have snapped up smaller software firms.
抢购

But vertical takeovers by broad technology providers of payments specialists, like FIS’s of Worldpay, are new.
垂直收购

Vertical mergers will allow companies to cut costs, gain pricing power and cross-sell products—often to banks, their former owners.
垂直收购的好处，降低成本，提升议价能力，交叉销售

This will give them the firepower to go for the real target: establishing a truly global acquiring network.
给予火力去追逐真正的目标

View

acquiring：收单业务

银行卡收单是指签约银行向商户提供的本外币资金结算服务。就是最终持卡人在银行签约商户那里刷卡消费，银行结算。收单银行结算的过程就是从商户那边得到交易单据和交易数据，扣除按费率计算出的费用后打款给商户。
以信用卡为例子，收单通常是指某个银行，你刷卡买东西，签字后走人。商家把你签字的那张签购单留下，然后把它交给发给它刷卡机的银行，这个银行就是收单行。收单行收到你当时的签购单后，按上面的数目给钱给商家。商家就得到商品的应得的钱了。但结算并不是只有一种模式，这取决于商家与收单行之间签订的协议。还有一种模式是收单行将信息转给银联，银联于次日将款项划转给收单行，收单行再将款项支付给商家。收单行然后再通过银联平台找发卡行要该笔钱。你就还钱给发卡行就可以了。这中间当然不是这么简单，各个环节都有手续费的，不然银行和银联没有钱赚。其实你刷卡的那一下子整个过程都通过银联这个共享中间环节网络实现了。

the lender that issued the card (the “issuer”)
相当于收单银行

the shop (the “merchant acquirer”)
商户

顾客和商户之间只有信息流交易，就像扫描支付一样，不涉及实体意义上的资金交易。
商户和顾客之间的交易信息流（交易金额、时间等等）传给收单方（收单银行），由收单银行分别和商户与顾客进行资金结算。因为收单业务的存在，所以，消费很方便快捷。
信用卡消费属于收单业务的一种，支付宝扫码支付应该也是收单业务的一种。
回头再补充。