Worldline/Ingenico Is Just Getting Started

Its big merger behind it, the new Worldline is flexing its muscles in the global market for processing and point-of-sale technology.

As with so much else in the payments arena, scale is vital to continued success. That appears to be the case with Worldline S.A.’s $8.6-billion acquisition of Ingenico Group S.A.

The Worldline/Ingenico combination make it Europe’s leader in payment services and provides Worldline with an international presence. Though both companies are known mostly for their point-of-sale terminals—Worldline started in 1973 and Ingenico in 1980—the two companies have been building up their payment processing capabilities over the last few years.

In 2017, Worldline purchased from First Data Corp., now part of Fiserv, subsidiaries in Lithuania, Latvia, and Estonia for $85 million, only to follow that in 2018 with an acquisition of card-processing businesses in seven other European countries, also from First Data, for $437.3 million.

And in 2015, Ingenico formed Ingenico ePayments, its brand built on prior acquisitions of processors. In 2017, Ingenico created the Retail and Banks & Acquirers business lines.

For many years, Ingenico, Verifone Inc., and Hypercom Corp. led the U.S. market. Verifone purchased Hypercom’s international business in 2011 and that company’s domestic business is now Equinox Payments.

Now, Worldline says it is the largest “European player in payment services” and the fourth largest globally. In December, Worldline struck another global deal, one that forges a commercial acquiring alliance with ANZ Bank in Australia.

“The Australian payment industry shows favorable dynamics with a sizable and growing addressable market and a high level of readiness and receptiveness towards cashless payment methods,” a Worldline press release said.

‘A Very Logical Evolution’

The Worldline/Ingenico combo has approximately 35 million point-of-sale terminals deployed and works with more than 1,000 banks, acquirers, independent software vendors, aggregators, and fintechs, the company says. Ingenico had the bulk of the deployed terminals, at 30 million, it said in 2020.

The combo also processes payments for approximately 1 million merchants; Ingenico alone processed for 550,000 of them. The new iteration of Worldline acquired approximately 5.6 billion card transactions, based on 2019 data.

“Having the scale and now global capabilities, we have reshaped our group entirely in order to support, now more than ever, our clients, merchants, and banks in particular, enabling them to rely on state-of-the-art electronic payment services to accelerate their own growth as well as their digital transformation strategy,” Gilles Grapinet, Worldline chairman and chief executive, said in a statement when the deal closed in October.

The combination now has a presence in 50 countries. Worldline gained broad access to the U.S. market, where Ingenico competes against Verifone Inc., other POS device providers, and cloud-based POS services.

And with the strong processing presence, most notable outside the United States, Worldline finds a host of other competitors, like FIS Inc.’s Worldpay, Square Inc., and PayPal Holdings Inc.

Two years ago, Ingenico prepared for a shift as it said it was considering “strategic options.” That was in conjunction with the removal of long-time chairman and chief executive Philippe Lazare. That same year, rival Verifone Inc., based in San Jose, Calif., became a privately held company.

“The Worldline/Ingenico merger is indicative of payment companies needing to find scale in a digital, multichannel payment environment,” says Krista Tedder, director of payments at Javelin Strategy & Research, a Pleasanton, Calif.-based advisory firm. “Uniting their business and technology will help them become more competitive with Worldpay, Square, and PayPal as each grows in the market.”

That will take on greater importance as the industry collectively grapples with the increasing digitization of payments. Says Thad Peterson, senior analyst at Boston-based Aite Group: “There will be challenges to the POS space going forward. Supermarket and other retailers will need relatively complex POS systems.”

At the other end of the spectrum, so-called PIN-on-glass technology could win adoption among small sellers, displacing traditional terminals. PIN-on-glass, sometimes referred to as PIN-on-mobile, is a standard that enables commercial, off-the-shelf devices, such as an iPhone or Android phone, to be used as a payment terminal with PIN entry.

Its potential to disintermediate conventional payment terminals is unknown. In 2018, Ingenico undertook a test of the specification with MyPINPad, a United Kingdom-based PIN-on-glass developer.

Ingenico, however, views merchants’ smart phones as a complement, not a mortal threat, Digital Transactions reported in “Smart Phones Go Contactless” in the December 2020 issue.

“We want the customer to be able to choose what the optimal path is,” Mark Bunney, Ingenico director of go-to market strategy North America, said then. Worldline did not respond to Digital Transactions for this article.

Bunney noted, however, that Ingenico in recent years has expanded its roster of processing and software-based products. “That’s the path Ingenico has been going down, offering more software and services,” Bunney said. “It’s a very logical evolution.”

‘Driving Revenue’

The task ahead won’t be unique to Worldline and Ingenico, Peterson says. The move to digital technology and away from the physicality of payments is under way, but there is a very long tail to the payment acceptance technology already in place, he says.

POS terminals will remain a growth market, Javelin’s Tedder says. “The POS terminal market will continue to expand as consumers come to expect contactless. QR code, and NFC payments will flourish, as well as the expansion of PIN-on-glass capabilities,” she says. “The consumer expectations of ease of use and security will continue to trend.”

That’s something every POS device and software provider will have to contend with. “Nobody wants to be just a black box any more,” Peterson says. Worldline’s acquisition of Ingenico is a reaction to that, he says. “Everybody is trying to find a way to create and add value because value creates revenue.”

Providing POS terminals had been a cost-based business for a long time, he says. Most device manufacturers have outsourced their production; Ingenico began doing so in 2006, according to an online company history. “Now, it’s more about driving revenue than it is about lowering costs,” says Peterson.

One example is Worldline’s deal to work with PayMyTuition, an international tuition-payments service, that sees Ingenico enabling international bank transfers for more than 600 Canadian higher education institutions.

Ingenico, too, sees value in providing more than an acceptance device. Last year, it debuted a service called Smart Self for Vending that includes the acceptance device, gateway access, detailed data reporting, and acceptance in more than 20 currencies.

‘Combined Potential’

This speaks to the digitization of payments, too. Integrated payments is changing the industry, Peterson says.

Another trend is the disaggregation of payment nodes. An example is P97 Networks Inc.’s PetroZone platform that will tap into Cybersource’s gateway connections to more than 140 acquiring banks. Another is voice assistants, such as Amazon.com Inc.’s Alexa used for voice-enabled payment, Peterson says.

Specific to the U.S. payments market, the combination of Worldline and Ingenico is sound, Peterson says. “Given their brand name and desire to increase their global presence, it’s a great way to get introduced to the U.S. market,” he says. “There are millions of merchants that may or may not have heard of Worldline.”

Tedder says Worldline and Ingenico are better off together. “Combined, they are better positioned for growth. They each bring different core competencies to the market,” she says. “Had they not merged, each would have needed to spend considerably on research and development to reach their new, combined potential. This is a smart move to expand services quickly and increase profitability.”