Another big move by Alliance Data was announced today. Last week, the news reported a shift in its credit processing to Fiserv. Today, the announcement brings Buy Now Pay Later (BNPL) options to the firm through the acquisition of Bread. With the holiday season coming and retail sales lagging, the move can help credit financing. The BNPL option can add lift to Alliance Data’s broad range of middle-market retailers.
According to the press release:
- Alliance Data Systems Corporation (NYSE: ADS), a leading provider of data-driven marketing, loyalty, and payment solutions, today announced it has signed a definitive agreement to acquire Bread, a technology-driven digital payments company offering an omnichannel solution for retailers and platform capabilities to bank partners.
- The transaction is valued at estimated consideration of $450 million, of which approximately $100 million is Alliance Data common stock.
- The point-of-sale technologies provided by Bread, which include popular installment and buy now, pay later solutions, have a proven record of driving growth for its clients. The addition of Bread’s technology platform expands Alliance Data’s payment offering to include pay-over-time products, expected to be available for Alliance Data brand partners soon.
- Bread’s flexible, easily-integrated payment solutions, coupled with Alliance Data’s Enhanced Digital Suite, will improve the digital customer experience and support increased acquisition and checkout rates, offering the best payment product to the right consumer pivotal moments in the customer’s online shopping journey. Alliance Data will have an option for every customer need with a diverse suite of payment products while appealing to younger, digitally native consumers.
The acquisition makes sense for Alliance Data and the retail industry. For 2020, Emarketer projects a 10.5% drop in total retail sales, with brick-and-mortar sales dropping at 14.0%. E-commerce is the shining star, with an expected 18% increase, but that only affects 14.5% of total retail sales.
BNPL brings new options that can help address unbanked households, credit-resistant Millennials, and consumers looking for credit card options. Most BNPL programs can address retail sales in a variety of channels.
BNPL is an excellent addition to Alliance Data’s business strategy. At the same time, the company’s private label partnerships carry only one of the top 25 U.S. Retailers (see this Mercator Advisory Report), where Capital One, Citi, and Synchrony compete. Alliance Data’s new executive management will likely aim upmarket while it also addresses the current retail client base.
The acquisition should settle in time for this year’s holiday season. Perfect timing.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
