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Will Western Union, Revolut, Visa and Fleetcor drive cross-border payments M&A?

Since the beginning of 2019, there have been nearly 1,400 Fintech M&A deals of which around 300 have been in payments. But in the cross-border payments segment, we count but five major deals and a handful of other smaller/undisclosed value ones. 

Some thoughts:

  • The first point of note is that in all of the deals above, the purchasers were many times larger than the targets and there were many more acquisitions. We have not seen any true mergers. Currencies Direct and OFX is one recent example who did have talks but no deal materialised. 
  • Cross-border payments is also highly fragmented. Even Western Union, the leader in the remittance space claims they have only around 12-13% of the market size. The next players along, MoneyGram and Ria account for around 3-4% points each. This means any strategy to grow scale in the cross-border segment, as we see in other segments such as payment processing, is very hard to achieve. 
  • In terms of private financing, venture capital has been much more prominent than private equity, putting many well funded players on organic growth curves rather than build and buy private equity strategies. One smaller deal in 2019 was from Pollen Capital but otherwise, the bigger private-equity owned groups such as Currencies Direct and Moneycorp haven’t managed to secure a big deal to do.

Does this mean there are no big deals to be done? Not at all and the pandemic may present some new opportunities. The rising demand for digital remittance services experienced in the past months seems to be the main driver for the acquistion of Sendwave by WorldRemit, which was announced this week.

But a glut of consolidation? We’d be unlikely to see that either.

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Will Western Union and Revolut lead the way?

In our latest Forbes column , we look at what some of the strategic M&A options may be for players such as Western Union and Revolut. Both these companies’ CEOs have said they are looking for acquisitions in recent interviews.

 “I am pretty active on the M&A front, our financial position is much better than any competitors. We have a good cash flow position even through Covid-19, and some competitors struggle.”
Western Union CEO, FT Interview

“This is not just blue-sky thinking — we’ve just done a fundraising, we’re cash rich.”Revolut CEO, FT Interview

Our article (linked below) has our detailed thoughts on the strategies of each of these players and who they could consider acquiring.

What independent international payment companies are left?

As our Top 100 market map shows, there are few independent players of size left in the cross-border payments market.

On the consumer side of the market, players such as Sigue, Dolex, Viamericas and Moneytrans stand along but would they add enough scale to a potential acquirer. And for the major players such as a Western Union, Ria or MoneyGram – they would not add enough scale.

On the B2B side, AFEX and FIRMA are two independent examples. AFEX is one of the oldest independent money transfer players left and with its international presence, could be a good fit for some players. With AFEX’s B2B focus, it would likely best fit alongside one of the other B2B specialists such as Fleetcor backed Cambridge Global Payments, Western Union Business Solutions or two of the smaller fast growing players such as Argentex or Alpha FX.

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