Not Just Me In Love With Payments?

There must be something in the water at the moment. Considering that August is supposed to be the quiet month of the year, there have been a rash of announcements about plans to merge or acquire in the payments arena, and if the rumours are true, we certainly haven’t seen the last of the deals either. This follows a whole slew of other deals that have been announced over the last 18 months that are set to transform the industry. I’m curious in particular about the deals being done by private equity firms. Advent International recently co-bought WorldPay, the payment processor, along with Bain. KKR, who bought First Data, part provided finance for the deal. Advent are now in the process of buying the card and identity divisions of Oberthur, who are the 2nd largest card manufacturer in the world. Earlier this week, GTCR bought BankServ, who also stated that they have identified 10 more businesses to acquire and integrate. Payments undoubtedly are big business. For example, McKinsey have estimated the US payments business to be larger than both the airline and hotel industries in revenue terms. But I’m still not quite sure what we are to make of all of this activity, as few seem to be combining investments in a 1 + 1 = 3 kind of way. Often quoted is the attractive nature of processors – they tend to have attractive cash flows and electronic payments can only see growth, at least for the next 20 years. But is that reason enough? And how does that apply to those businesses that aren’t directly processing payments but provide terminals or software for example? It could be that payment companies are under-valued perhaps. Not just in price, but in what they represent. They are more than infrastructure – they form the thread that links all of us and all that we do. Imagine a world without the ability to exchange money and you’ll understand what I mean. I’d like to think that’s the reason for the interest – but then perhaps I’m just a hopeless old romantic.