#478
Bigger Is Not Always Better
Published:
Mar 06, 2023
Author:
Cindy Grazer
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In 2019, at the zeitgeist of the payment industry wave of mergers (Worldline-Ingenico / Global Payments-TSYS / Fiserv-FirstData), WorldPay acquired FIS for $43b. As nation-scale payment companies faced (and continue to face) margin compression, core banking systems have sought to acquire processors as a means of expanding into merchant networks and adding a slew of new financial products, including POS capabilities, cards and credit for retail commerce and SMBs. At the time, WorldPay was the largest global merchant acquirer and the acquisition gave FIS access to a massive client base and a path to dominate the global payments space as a moat against disruptors.
Fast forward 4 years and FIS is spinning out WorldPay for $25b, marking an almost $18b write-down. Were the two businesses ultimately incompatible? Was scale prized at all costs? The point of failure in this narrative seems to rest on the business’ inability to offer better digital payment solutions than other fintechs in the space. By the end of the pandemic, which super-charged digital adoption, native processors including PayPal, Square, Stripe and Adyen captured 32% of the total digital payment volume market share in the US, while FIS dropped from 26 to 23%, despite the $43b shell-out to buy WorldPay. While FIS payment processed volumes was more than double that of Adyen or Stripe, its 2022 revenue was only a third more - a clear signal that WorldPay was not sitting well in the wider company.
Ultimately, the pace of disruption in payments has been rapidly accelerating. Whether it was a failure in cultural synergies or in WorldPay’s inability to move quickly enough against digital upstarts, the split has forced a reckoning over the industry that like this epic gym fail - “bigger” is not always “better”.
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