Data Dive

Data Dive, Yes Please, No Thank-You And Maybe Later Edition: Global Payments, Apple And Amazon

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Summer may be about to begin, but apparently someone forgot to send payments and commerce players the memo about slowing down for the vacation season.

It has been a busy week, to say the least — with things everyone thought were happening off the table, and a few things no one expected on the table.

So what is in and what’s out this week?

Yes, Please: The Global Payments TSYS Merger

It’s official, the latest payments mega-merger is officially in the books.

Global Payments and TSYS have announced they will enter into an all-stock merger valued at around $21.5 billion. The deal is one of a string of big corporate marriage in payments — there was the $34 billion deal between FIS and Worldpay in March and the $22 billion announcement between Fiserv and First Data that kicked off 2019. The goal of this latest merger mirrors the goals of the previous ones, to gather scale and build global reach. Global Payments is the third largest merchant acquirer in the United States, while TSYS is the third largest card processor in the country.

In terms of management structure, TSYS’ CEO Troy Woods will serve chairman of the board. Global Payments CEO Jeff Sloan will serve as CEO of the combined entity. The TSYS/Global Payments combination is expected to be completed during the fourth quarter of this year.

In remarks on a call held last Tuesday to discuss the merger, management from both of the firms heralded the announcement as a “landmark” for a rapidly evolving payments landscape, and with an eye on offering integrated services for an ecosystem that completes 50 billion transactions annually for merchants and consumers. Upon combining, the companies will provide payment services to as many as 3.5 million merchants and as many as 1,300 financial institutions across 100 countries, according to materials offered alongside the call.

Synergies should help earnings, management said on the call, with $300 million in cost synergies to be realized on an annualized basis within three years. Revenue synergies should come in at $100 million, said the companies, with 2.5 million small to medium-sided businesses (SMBs) served by Global Payments and 820,000 SMBs served by TSYS.

No, Thank-You: Citi Takes a Pass On the Apple Card

Despite talk that the two organizations were in discussion, it seems Apple and Citigroup never got past go regarding Citi’s potential role as a partner on the new Apple Card.

Citing those with knowledge of the talks, CNBC reported that Citigroup bailed over concerns the partnership would ultimately fail to be profitable. The report noted that JPMorgan Chase, Barclays and Synchrony were also in the running to partner with Apple on the credit card. Apple went with Goldman Sachs, announcing in March the new credit card that will be available in the summer.

With its promise of zero fees, a push for consumer to pay on time to avoid debt and lower rates than are typical, the card doesn’t have a lot of income streams on tap for banking partners.

Goldman Sachs, according to reports, views the card as an excellent test case for credit use when the economic growth in the U.S. is in the late innings.

“There’s a danger for any bank entering deals like this from a profitability standpoint,” Forrester analyst Peter Wannemacher said. “Increasingly, they’re wary of co-branding deals when it seems likely that the partner firm is the ‘cooler’ brand. They’ll consider making a deal with a company like Apple or Uber, but the danger is that the economic gains underwhelm.”

Andrew Williams, a spokesman for Goldman Sachs, told CNBC that unlike Citgroup, the bank is thrilled to be a partner with Apple.

“Goldman Sachs seeks to disrupt consumer finance by putting the customer first,” Williams said in a statement. “We are excited for customers to use Apple Card, which is designed to help people take control of their financial lives.”

Maybe: Amazon Eyes Boost Mobile

As T-Mobile and Sprint are heading toward their $26 billion merger announced earlier this year, it seems the two firms are looking to shed their jointly own Boost Mobile pre-paid business, in at attempt to get the deal to pass regulatory muster. The current iteration of the merger is the third attempt in the last several years. Selling Boost would lower their market share in the prepaid wireless market.

The buyer of Boost has to ensure it would continue operations so that consumers still have choices. T-Mobile and Sprint are additonally looking at unloading wireless spectrum to get the deal closed.

It looks like there is a potential buyer for the service — and the additional wireless spectrum — in Amazon, which is reportedly eying the purchase. Reuters, citing two sources familiar with the matter, reported Amazon is interested in Boost because it would enable it to use the new T-Mobile wireless network for six or more years.

Can anyone spell 5G? And its ability to turbo-charge Alexa everywhere? And turn Boost Mobile into a new acquisition channel for Amazon Prime?

Sources told Reuters that Boost could get as much as $3 billion in a sale. The unit has anywhere from 7 million to 8 million customers. If a deal with Amazon includes wireless spectrum, it could be valued at $4.5 billion, Cowen estimated in May.

So what did we learn this week, other than there is no summer vacation in payments and commerce?

One brand’s new opportunity is another’s hard pass, the era of the mega-player mergers is upon us — and where there is a vertical to buy into it seems Amazon is always there and ready to invest.

Until next Monday.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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