After long speculation, Visa Inc. recently announced that it is in formal talks with Visa Europe regarding reconsolidating into a single global entity. The two separated in 2007 as part of Visa Inc.’s restructuring before listing on the NASDAQ; Visa Europe remains owned by its European member banks. Visa Inc. maintains call back options to mandate repurchase of shares in Visa Europe and Visa Europe maintains push options to sell shares to Visa Inc. In practice this means either side could theoretically force a merger. Industry speculation has been mounting for years that such a shift is imminent, with some European banks hinting that they supported selling Visa Europe so that they could instead focus on creating a new pan-European payment scheme.
The time is ripe for M&A in payments
Although there has long been talk of a merger, these latest developments suggest more concrete movements may be close. Both Visa Inc. and Visa Europe are in a good economic position, benefitting from the growing shift from cash to electronic payments and Visa’s aggressive push into debit card products in recent years. However, as the broader payments market continues to expand and players face growing competition – including from new kids on the block UnionPay and Alipay – such a move would help to shore up Visa’s positioning globally. Europe in particular remains a high growth opportunity for Visa, particularly in terms of mobile payments driven by Visa’s Tokenization technology, as used in Apple Pay and Android Pay.
Payment providers globally now appear to be consolidating, using acquisitions to achieve growth in both geographic reach and payment capabilities. One example of this is PayPal’s spate of acquisitions ahead of its own public listing in July 2015. The latest talks between Visa Inc. and Visa Europe underline this push to increase scope in payments. As a market, payments has always been about achieving scale and a merger of Visa Inc. and Visa Europe would dramatically increase what is already impressive scale.
“Visa’s Digital Enablement Program is shaking up the economics of mobile payments,” IT0059-000017 (July 2015)
“Payments innovation needs to go global for true disruption,” IT0059-000009 (April 2015)
“Android Pay is the next step in Google’s mutating payments strategy,” TE0003-000834 (March 2015)
2015 Trends to Watch: Payments, IT0003-000628 (November 2014)
Gilles Ubaghs, Senior Analyst, Financial Services Technology