M&A on the rise as Visa & Mastercard go for the Trillion $ Cross Border Payments

The Cross border payments market was at $22 Trillion three years ago as per a research by the Boston Consulting Group. Certainly a market to go after, and Visa and Mastercard do not seem to be shy of throwing punches at each other in the process. So who got their nose ahead?

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Earlier this year, Mastercard and Visa were fighting it out for the acquisition of Earthport. In Dec 2018, Visa had made an offer of $250 Million to acquire Earthport, a UK based payments firm. Mastercard came to the table with a $300 Million offer for Earthport. The deal was too important for Visa that they upped their offer to $320 Million and pretty much closed it. Pretty much closed – because the Competitions and Markets Authority (CMA) yesterday said that they were investigating if the acquisition would create a “substantial lessening of competition” in the UK.

No deal is done until it is sold, signed and then signed again. At this point, the deal looks far from signed – however, the acquisition could help Visa’s dwindling fortunes with the cross border payments segment. Visa’s Q1 results showed that the growth of the segment was at 7% and Mastercard’s growth was at 17%. So, clearly desperate times for Visa, and no wonder they are willing to pay a bigger amount.

Earthport were considered leaders in disintermediating the cross border B2B payments space. Historically, this process saw monies taking several hops before it reached the target bank. Through Earthport’s network, the process would be simplified with just one hop, and clearly Visa see the advantage. Having backed out of the deal, Mastercard focused on acquiring Transfast, another cross border payments firm. Transfast boast a network of about 125 countries and integration with over 300 banks.

We believe Transfast gives us the strongest platform to immediately enhance our cross-border capabilities and further deliver on our strategy.

Michael Miebach, Chief Product Office, Mastercard

Mastercard have been more aggressive in driving growth through acquisitions in recent times. In Q1 2019 alone, they were involved in several other payments deals. They committed $300 Million as a cornerstone investor in the IPO of Dubai-based Network International. Network International is the largest payments processor in the Middle East and Africa, and are planning their IPO in London with a target valuation of $3 Billion. The transaction would see them take a 9.99% stake in Network International.

Mastercard are beefing up their Africa presence through their investment into Jumia, an Africa focused payments firm. Jumia and Mastercard have been working together since 2016, and the latest round would take Mastercard’s total investment into Jumia to $56 Million. The ambition is to expand aggressively across the 14 African markets that Jumia are already present in, and also help entry into other African markets.

Having taken care of Africa and the Middle East markets, Mastercard have also set sights on Asia. They have now taken part in the current funding round of Singapore based Bill.com, who handled $60 Billion in payments in the region. Bill.com raised $88 Million from several investors including Fidelity investments, Franklin Templeton, Tamasek and Mastercard.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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