This piece was posted in Digital Transactions and provides an opinion around reasons for recent (and less recent) investments/acquisitions by Mastercard and Visa. One of the overriding points is the networks’ shared desire to gain broader participation in the B2B payments flows across the globe. We have been pointing out many of the same things across our services in some depth so members can find more detail in various reports and viewpoints released over time.
‘Amazon, Apple, and Microsoft each briefly enjoyed a market capitalization greater than $1 trillion. The two dominant global payment networks, Mastercard and Visa, aspire to join this august, and for the moment, memberless club…..In the near term, the networks could grow on autopilot. However, inevitably diminishing retail-payments growth in mature markets like Scandinavia, the United States, and the United Kingdom underscores the networks’ desire for additional avenues of growth….Here, acquisitions play a role….Visa’s largest deal, bringing Visa Europe back into the fold in 2016 for roughly $23.4 billion, was paramount. In the same vein, Mastercard’s taking full control of Europay in 2002 remains its most strategically important M&A move.’
Staying relevant in a rapidly changing payments environment requires adaptation and connections across the various payment corridors to execute against the existing and expected use cases. B2B is one of the largest use cases, with commercial flows generally accepted to be north of $100 trillion globally. The card networks have never been a core part of that space, but have awoken to its potential in recent years, so a key target.
‘…But B2B isn’t easy. During the dotcom bubble, a slew of largely disappointing vertical-market hubs attempted to transform B2B payments. Though Visa and Mastercard touch only a sliver of the total market, B2B now accounts for roughly 11% of their payment volume…..To strengthen its B2B hand, Mastercard in 2017 acquired a minority interest in AvidExchange, which provides accounts-payable and payments-automation solutions to small and medium-size businesses. Integrating directly or indirectly with platforms that businesses use to manage payments expands Mastercard’s market….This month, Visa acquired cross-border payments hub Earthport for $310 million in an all-stock transaction.’
One thing we can be fairly sure of, and that is more activity is on the way, so we’ll keep you posted.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
