Rationale of the Deal
On March 18, FIS and Worldpay announced a deal that will combine FIS’s fin-tech solutions to legacy banks with Worldpay’s strong footprint as a payment processor. The companies’ businesses are mostly complementary and only some minimal horizontal overlaps in merchant’s payment-processing services may bring scrutiny. FinTech companies are increasingly seeking to integrate banking and payment solutions.
90% Chances of approval
The deal isn’t likely to raise antitrust concerns in Europe and the companies may secure the approval by year-end. The companies present some horizontal overlaps in merchant payment-processing services, and even though Worldpay is strong in the U.K. and Europe, FIS’s participation is rather small. Thus, the competitive landscape won’t likely change with the combination of these two companies.
One precedent to look at in the U.K.
In PayPal-iZettle, the U.K. Competition and Markets Authority (CMA) defined very narrow markets in offline payment-processing services. If the CMA were to apply a similar definition in the acquiring processor market for FIS-Worldpay, the combined share could raise concerns. Yet, Paypal finally got an unconditional approval to acquire iZettle in April 30.
No remedies are expected to clear
This vertical merger shouldn’t raise foreclosure or conglomerate anticompetitive effects either. FIS provides fin-tech solutions to traditional banks. This includes software and IT solutions for services such as lending, insurance or corporate banking. Worldpay is a payment-processor that focuses on merchants. While the companies may seek to bundle some of their services or IT solutions, the combined market share in global markets won’t be large enough to squeeze competitors out of the market or to engage in any other exclusionary conduct.
Competitors may look for new M&A opportunities
FIS-Wordpay deal is seen as a respond to the Fiserv-First Data deal and it could trigger more payment M&A. The e-commerce and payment ecosystem is moving towards a more vertically integrated landscape where the provision of omni-channel services will be key. Companies such as Global Payments, Ayden or Total Systems Services are rushing to find their place in this trillion dollar race where strategic alliances may be formed in the months to come.
