#478
Bigger Is Not Always Better

Published:

Mar 06, 2023


Author:

Cindy Grazer

Published:

Mar 06, 2023


Author:

Cindy Grazer


Share:

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”.

Newsletter Image - 3/6

Portfolio News


RBC adds Vestwell as exclusive 401(k) platform provider - The new integration will enable advisors to efficiently scale their retirement plan practices and customize their offerings while giving clients the experience they expect. Read more

Fintech One-on-One with Sam Bobley of Ocrolus - Next guest on the Fintech One-on-One is Sam Bobley, the CEO and Co-founder of Ocrolus. They have become the standard when it comes to document automation in the small business lending space and they are now tackling consumer lending and they are now tackling consumer lending and the incredibly complex mortgage lending process. Read more

Devron partners with Cover Whale to enable safer roads - By using Devron's federated data science platform, Cover Whale will develop and train AI models to rapidly incorporate new and alternative data sources to better predict risk, provide coaching to drivers and align premiums. Read more

YC's 2023 top private company rankings - FTC portfolio companies Flutterwave, Fondeadora, Axoni, and OpenSea were all named as top private companies of 2023. Read more

Bigger Is Not Always Better


Worldpay and FIS: the ‘original sin’ that tore up a $43b merger - US financial technology group FIS last month announced plans to spin off Worldpay just four years after paying $43b for the group in a deal now seen as the high watermark for the consolidation then gripping the payments industry. Read more

He founded a fintech worth $43b: Worldpay entrepreneur Nick Ogden - A great re-read of the founding of WorldPay. Nick, a former policeman, founded Worldpay in 1997, a year before PayPal was founded, when he noticed that customers of his online retail website wanted multi-currency quotes on goods. Read more

Industry News


Brazilian digital Real passes public blockchain pilot test - A tokenized version of the digital real is part of the Brazilian initiative for building a central bank digital currency that is advancing toward its possible issuance. The pilot showed that the digital real token can be used in public blockchains following all compliance rules set by Brazilian laws. Read more

Biden nominates Ajay Banga to lead World Bank - The Biden administration on Thursday nominated Ajay Banga, a former Mastercard executive who is now vice chairman at the private equity firm General Atlantic, to be the next president of the World Bank. Read more

Crypto companies behind tether used falsified documents and shell companies to get bank accounts - In late 2018, the companies behind the most widely traded cryptocurrency were struggling to maintain their access to the global banking system. Some of their backers turned to shadowy intermediaries, falsified documents and shell companies to get back in. The WSJ digs in. Read more

Judges, not lawmakers, are setting 2023's tech policy - Technology moves faster than Congress can keep up with, and in the absence of new laws, lasting decisions about tech regulation are being determined by judges and courts across the country. A high-profile instance came last week when the Supreme Court heard two major arguments about liability protections for user content that longstanding federal law grants to tech platforms. Read more

Revolut reports first-ever annual profit - Digital banking app Revolut reported revenues of £636.2m ($766.9m) in 2021, three times what it made the previous year, and swung to a net profit of £59.1m. Revolut has been pushing hard into overseas markets, in particular. the U.S., where it currently has over 500,000 clients. The firm has also opened operations in Brazil, Mexico and India. Read more

Visa, Mastercard pause crypto push in wake of industry meltdown - Both Visa and Mastercard have decided to push back the launch of certain products and services related to crypto until market conditions and the regulatory environment improve, said the people, who asked not to be named as talks were confidential. Read more

Santander to target unbanked Mexicans with Superdigital wallet - The wallet received permission from the CNBV on Tuesday after a one year and three month long process. Superdigital is the retail product of PagoNxt, the payment technology division of Grupo Santander. Read more

Goldman Sachs weighs strategic alternatives for consumer platforms - Goldman Sachs' consumer push has struggled, culminating with the bank's pullback from those efforts late last year. Solomon's recent comments immediately put the spotlight on lender GreenSky and its card partnerships with GM and Apple, which sit inside the unit. Read more

Supreme Court will consider constitutionality of CFPB - This case may be the most serious challenge yet to the decade-plus-old agency, which was founded in the wake of the 2008 financial crisis to more closely regulate financial companies' dealings with everyday Americans. Consumer advocates say a decision upholding this case would substantially weaken the agency and destabilize the mortgage market, which relies on established rules from the agency. Read more

UK cities set to host fintech hubs to help drive innovation - The plans are part of a push to encourage financial innovation which will be coordinated through a new Centre for Finance, Innovation and Technology (CFIT). One of its other roles will be to work with the government, regulators and the Bank of England on improving rulemaking in the sector. Read more

U.S. FTC seeks to block ICE's $13b takeover of Black Knight - The FTC has been scrutinizing the Black Knight deal for months amid concerns from some U.S. lawmakers the pricing power ICE would gain in the mortgage data market that lenders rely on could lead to higher costs for consumers. Read more

Just Eat Takeaway hit by €5bn impairment charge over pandemic-era deals - Just Eat Takeaway has taken a near €5bn writedown on the multibillion euro mergers that created Europe’s biggest food delivery group, revealing the cost of buying rivals at the top of the sector’s lockdown-driven boom. The online food delivery company on Wednesday reported a €5.7bn loss in its full-year earnings for 2022, up from €1bn a year ago, largely due to a €4.6bn impairment charge on past equity-funded acquisitions. Read more

Select Financings


Brazilian digital Real passes public blockchain pilot test - A tokenized version of the digital real is part of the Brazilian initiative for building a central bank digital currency that is advancing toward its possible issuance. The pilot showed that the digital real token can be used in public blockchains following all compliance rules set by Brazilian laws. Read more

Biden nominates Ajay Banga to lead World Bank - The Biden administration on Thursday nominated Ajay Banga, a former Mastercard executive who is now vice chairman at the private equity firm General Atlantic, to be the next president of the World Bank. Read more

Crypto companies behind tether used falsified documents and shell companies to get bank accounts - In late 2018, the companies behind the most widely traded cryptocurrency were struggling to maintain their access to the global banking system. Some of their backers turned to shadowy intermediaries, falsified documents and shell companies to get back in. The WSJ digs in. Read more

Judges, not lawmakers, are setting 2023's tech policy - Technology moves faster than Congress can keep up with, and in the absence of new laws, lasting decisions about tech regulation are being determined by judges and courts across the country. A high-profile instance came last week when the Supreme Court heard two major arguments about liability protections for user content that longstanding federal law grants to tech platforms. Read more

Revolut reports first-ever annual profit - Digital banking app Revolut reported revenues of £636.2m ($766.9m) in 2021, three times what it made the previous year, and swung to a net profit of £59.1m. Revolut has been pushing hard into overseas markets, in particular. the U.S., where it currently has over 500,000 clients. The firm has also opened operations in Brazil, Mexico and India. Read more

Visa, Mastercard pause crypto push in wake of industry meltdown - Both Visa and Mastercard have decided to push back the launch of certain products and services related to crypto until market conditions and the regulatory environment improve, said the people, who asked not to be named as talks were confidential. Read more

Santander to target unbanked Mexicans with Superdigital wallet - The wallet received permission from the CNBV on Tuesday after a one year and three month long process. Superdigital is the retail product of PagoNxt, the payment technology division of Grupo Santander. Read more

Goldman Sachs weighs strategic alternatives for consumer platforms - Goldman Sachs' consumer push has struggled, culminating with the bank's pullback from those efforts late last year. Solomon's recent comments immediately put the spotlight on lender GreenSky and its card partnerships with GM and Apple, which sit inside the unit. Read more

Supreme Court will consider constitutionality of CFPB - This case may be the most serious challenge yet to the decade-plus-old agency, which was founded in the wake of the 2008 financial crisis to more closely regulate financial companies' dealings with everyday Americans. Consumer advocates say a decision upholding this case would substantially weaken the agency and destabilize the mortgage market, which relies on established rules from the agency. Read more

UK cities set to host fintech hubs to help drive innovation - The plans are part of a push to encourage financial innovation which will be coordinated through a new Centre for Finance, Innovation and Technology (CFIT). One of its other roles will be to work with the government, regulators and the Bank of England on improving rulemaking in the sector. Read more

U.S. FTC seeks to block ICE's $13b takeover of Black Knight - The FTC has been scrutinizing the Black Knight deal for months amid concerns from some U.S. lawmakers the pricing power ICE would gain in the mortgage data market that lenders rely on could lead to higher costs for consumers. Read more

Just Eat Takeaway hit by €5bn impairment charge over pandemic-era deals - Just Eat Takeaway has taken a near €5bn writedown on the multibillion euro mergers that created Europe’s biggest food delivery group, revealing the cost of buying rivals at the top of the sector’s lockdown-driven boom. The online food delivery company on Wednesday reported a €5.7bn loss in its full-year earnings for 2022, up from €1bn a year ago, largely due to a €4.6bn impairment charge on past equity-funded acquisitions. Read more


Share:

FinTech Collective Newsletter

Curated News with Context

Delivered every Monday, the weekly newsletter, produced by our team, provides a tightly edited rundown of global fintech news, along with a bit of our original analysis.