Merchant acquiring fuels Worldline’s growth

Worldine’s H2 results underlined how much progress the Paris based organisation has made towards establishing itself as “as a premium global Paytech at the heart of the European payment ecosystem.” Originally spun out of ATOS,  primarily as a back office processor, Worldline has reinvented itself. Merchant services now accounts for 68% of group revenue. 

Payment volume was up a very impressive 30% in H1 to €177bn as the impact of new acquisitions kicked in. The positive result  was also “reflecting the widespread and rapid shift towards digital payments.”. Organic growth has been positive too and Worldline is adding roughly 10,000 new merchants each month split pretty evenly between in-store and online. Total merchant count now exceeds 1.2m. 

Revenue from merchant services grew 16.8% “fuelled by steady growth in commercial acquiring across all geographies and customer segments” with acquiring growing faster than its payment acceptance or digital business lines. Acquiring delivered “strong double digit growth trending towards 30% with almost all geographies and customer segments contributing…. and a strong performance from DCC products and the positive impacts from strong holiday period boosting the Travel and hospitality verticals.” Much lower growth – mid to high single digits – was reported from payment acceptance (mainly payment gateways and managed POS terminals) and digital services.

The wholesale business fared a little less well as a number of ex-Equens contracts were renewed on less favourable terms although Worldline did re-sign Credit Agricole for a new five year deal, And it started working with AEGON Bank for SEPA instant processing. Overall, higher authentication volumes related to SCA compensated for lower iDeal volumes in the Netherlands.

Highlighting Worldine’s ability to win new bank partnerships, three big acquisitions closed in the half year.

  • Greece – acquired an 80% share of Eurobank’s merchant acquiring business in Greece which brings a 21% market share including 123,000 merchants with 190,000 POS terminals, 219m transactions and € 7bn of payment volume. This acquisition complements Cardlink, the leading Greek network service provider (NSP) which Worldline bought last year for an enterprise value of €155m. The vertical combination of NSP and acquirer under common ownership is likely to accelerate consolidation of the fragmented Greek retail payment market which has recently become the focus of much international investment. 
  • Australia – went live with its joint venture with ANZ. Worldline holds 51% of the new business which brings 80,000 merchants and 2bn transactions pa. Worldine has pledged to spend $22m AUD to localise its platforms for Australia.

Beyond banking, Worldine announced a slew of large merchant wins and new distribution partnerships. These included retailers such as JD Sports and Jysk but also high-risk merchants in the travel sector – TUI Cruises and Iceland Air. New partnerships include Planet Payments (DCC and tax free shopping) and Casio (integrated payments in Japan). More interesting for the future, was the launch of a new Softpos product in Belgium working on the platform. Worldine has been working with – a very well regarded start-up – in Poland since 2020 and clearly now sees the proposition as ready for international roll-out. 

Visa optimistic on Europe and VAS

Reporting its Q2 results (or Q3 if you’re Visa and weirdly start your financial year in October), the largest global card brand made positive noises about the world economy. International travel, and business travel in particular is recovered from the pandemic and spending on Visa cards exceeded 2019 levels for the first time. “Consumers are back on the road, visiting various corners of the world, resulting in cross-border travel volume surpassing 2019 levels for the first time since the pandemic began in early 2020.”

Payment volume in Europe was up 17% on the same quarter in 2021 despite the impact of Visa losing a large British issuing client. Excluding the UK, European volumes were up a very impressive 37% “reflecting share gains in multiple markets.”

Travel to Europe recovered a sizeable 30 points in the third quarter with more than half of that from North America. Inbound travel to Europe was 21% above 2019 with luxury hotel payments  volume and average ticket size outpacing more modest accommodation.

Worries about a looming recession were brushed aside. Alfred Sloane, Visa’s CEO, said there was “No indication of any slowdown, including in more recent weeks” although the UK may be an outlier. Payment volumes in Britain did not grow in the quarter. 

Visa has been building an impressive roster of Fintech acquisitions and highlighted its success in cross-selling to its issuing and acquiring base:

  • Global Payments and NCR have agreed to market Visa’s Cybersource payment gateway to their merchant customers. This is a good win for Visa as it indicates that even the largest acquirers may be struggling to invest in their own market-leading payment gateways with global delivery capability. Visa mentioned that acquirers are twice as good a distribution channel for Cybersource than direct sales
  • Revolut which already took Visa Direct and Currencycloud has started using Tink for openbanking payments
  • Demand for 3DSv2 as Europe implements SCA >60% increase in transactions at Cardinal Commerce, which authenticates card transaction for gateways, acquirers and larger merchants

Together, Currencycloud and Tink are reported to add c.$35m/quarter of revenues for Visa and c.$70m/quarter of cost. It’s early days but a great deal more cross-selling will be needed to recoup the acquisition costs of $0.9b and $1.9b respectively. 

Mastercard European volumes up 14%

Mastercard’s European payment volume grew a healthy 14% in the second quarter with ATV ticking up slightly. CEO Michael Miebach said that “spending trends are positive, although the risks related to both the supply of natural gas and higher interest rates remain headwinds.

Miebach, like his counterpart from Visa, also highlighted the long-term potential of Mastercard’s push into Openbanking in Europe. 

Mastercard announced a series of impressive cross-selling product wins with European financial institutions as the card brand strengthens its position in payment-related services.  

  • Paysafe will offer Mastercard Send (allowing easy pay-outs to Mastercards) to its merchant customers in the UK and the EU.
  • Postepay is using Mastercard’s Identity Check payment authentication service in Italy and claims double digit improvements in approval rates
  • Dwolla, Synctera and i2c have signed up as openbanking partners

On the product front, Mastercard continues to promote the much delayed Click to Pay. Other than to say that it is now enabled in 20 markets, no other information was forthcoming. Similarly, we’re in the dark about how much BNPL volume is running through Mastercard Instalments. 

One new acquisition was announced in the quarter. Mastercard purchased Dynamic Yield from McDonalds which had, itself, only bought the company in 2019.  Total cost is $325m including $219m goodwill. Dynamic Yield is a SaaS platform that offers “individualized product recommendations, offers and content based on a range of factors, including past purchases, page views, time of day, current store traffic and trending products.”

As a footnote, the decline in Maestro may have slowed or even stopped. The number of cards issued edged up 1% in Q2.