Tag: Worldine

Merchant services again fuels growth at Worldline

Geoffrey BarracloughLeave a comment

Merchant services continues to fuel growth at Worldine which reported Q2 revenue rising by 8% to €1.172bn. Giles Grabinet, CEO, said the result was “supported by a solid double-digit performance in Merchant Services, confirming, in particular, our enhanced competitive positioning resulting from our continued successful integration of the former Ingenico.”

Merchant services revenue increased 13% to €849m driven by “strong double digit growth” in Commercial Acquiring with positive performance in Switzerland, Benelux and Germany bolstered by “a good start” to the new business lines in Italy and Greece. Payment acceptance, which includes gateways and terminals, scored “good double digit growth” in revenue led by the continued recovery of online sales in travel-related verticals. However, there was a “soft performance” in digital services despite a “good level of activity” in Turkey and Benelux.

While Merchant Services prospers, Worldline’s two smaller divisions seem stuck in the doldrums. Financial Services revenue was flat at €236m and Mobility turnover fell 8% to €87m. 

OMDA, Worldine’s preferred measure of profitability which is roughly equivalent to EBITDA, was up 11%. Again, this was driven by merchant services which grew OMDA 13% to €399m although margins fell very slightly to 25%. Operating leverage and delivery of synergies outweighed higher costs.

After taking into account €244m of exceptional items including €133m to amortise past acquisitions and €70m of post-acquisition costs, operating income was roughly flat at €120m for H1.

Turning to the details of the Merchant Services performance, acquiring volume was €120bn in Q2, up 49% on same quarter of 2022. Excluding the recently acquired ANZ, Axepta and Eurobank portfolios, organic volume grew a more modest 10% in H1 with online (+15%) outperforming instore (+7%). The incremental volume from the acquisitions seems to be less profitable than the existing business. The extra €73bn processed in H1 yielded an incremental €229m revenue, reducing the take rate 21bps to 0.73%.

Merchant count rose 7% to 1.39m excluding ANZ. The customer base includes 1.2m instore customers (up 7%) but just 190K webshops (up 5%). Worldline says it is now averaging 7K net new merchants each month “despite some repricing actions.“

Management reported a number of product updates, client wins and new partnerships with the Q2 results. 

Evonity, the Belgian manufacturer of electronic vehicle (EV) fast charging points, has become the first customer of Worldline’s EV Charging Payments Suite. EV charging is quite a complicated payment process and needs to be delivered with a consistent customer experience across all continental European markets. Worldine’s proposition includes a PINpad integrated into the charging station as well as pre-authorisation, incremental authorisation and online reversals.

Other client wins include Blizzard and Valve in the gaming vertical and SNCB (Belgian railways) for a “global one-stop shop payment solution” including all channels and domestic, international and alternative payment schemes. Key partnerships include VTEX, an enterprise eCommerce platform and travelplanbooker.com. Worldline claims its distribution now reaches 15% of European retailers and this makes it an increasingly attractive partner for ISVs.

Worldline’s strategy is to expand its geographical reach through partnerships and/or acquisitions of retail banks’ merchant services businesses. The closure of the Banco Desio deal in Q2 brings 15,000 merchants and €2bn volume in Italy. This is a bolt-on to Worldline’s existing operations and bulks up its presence in a market which is still 50% cash and has plenty of room for growth. Worldline plans to start migrating the merchants to its own systems shortly. Banco Desio will distribute Worldline product through 250 branches.

Looking ahead, management gave an update on the proposed joint venture with Credit Agricole in France which would give Worldline access to continental Europe’s largest payment market. Credit Agricole will provide distribution of Worldline product through 36 regional banks and 16,000 banking advisors. The deal is expected to close in Q4 with revenue starting to flow in 2025. 

Worldine has been paying down debt, leaving it the fire power to make more portfolio acquisitions in Europe. Giles Grapinet said: “many banks are driving strategic reviews of their payment portfolios, particularly in the Merchant Services space fully cognizant that the market has been transforming and they need really to do serious things to adapt to this new reality.”

Worldline Q3 – solid revenue growth, buys into softpos and marketplace payments

Geoffrey BarracloughLeave a comment

Worldline’s Q3 update provided another very solid set of results demonstrating continued progress towards its objective of building “a premium global Paytech at the heart of the European payment ecosystem.” Revenue is growing nicely, bolt-on acquisitions are filling product gaps and the sale of the Ingenico hardware business brings capital firepower to compete with Nexi and others for merchant portfolios as they become available.

Total revenue increased 20% in Q3 to €1.158bn although the company prefers to quote a rather lower figure of 10% growth, excluding currency and acquisitions. This is sensible expectations management although an American business wouldn’t be so modest. Forward guidance is 8-10% organic revenue growth.

Originally spun out of ATOS, primarily as a back-office processor, Worldline has reorientated itself. Merchant services now account for 72% of group revenue, up from 66% a year ago. Merchant services revenue is the powerhouse, growing 30% in Q3 to €828m or a still impressive 14% excluding acquisitions and a positive exchange rate boost from the strong Swiss franc. Worldline cites market share gains and volume growth. 

Payment volumes grew 17% year on year to €90bn and stand 33% higher than 2019. Growth is broad-based; in-store volume was up 16% and online volume up 23%. Q4 is reported to have begun “still in a very solid trajectory.”

Q3 highlights include a rebound in tourism which boosted travel and hospitality verticals and contributed to a strong performance from DCC. Client wins included Lufthansa Group which will make use of Worldline’s TravelHub solution which “brings 150 payment methods, multi-acquiring, tokenisation and a range of fraud services through a single connection.”

In contrast to merchant services, Worldine’s two other business segments look underpowered, growing sales well below inflation. Financial services revenue increased just 1.5%. Worldline is under sustained price pressure from its large banking customers.

The sale of the Ingenico terminal business to Apollo has finally completed. This brings €1.4bn extra capital which Worldline is likely to spend on further acquisitions as it consolidates the European merchant services market in competition with arch-rival Nexi. The Apollo deal comes with a five year partnership agreement which is likely to commit Worldline to continue selling Ingenico terminals to its banking and merchant customers. An extra €0.9bn is available subject to performance. 

Wordline made two important product acquisitions in Q3. 

  • Marketplaces – a 40% stake in Online Payment Platform (OPP), a Dutch payment gateway which boasts over 100 marketplaces and platforms as customers including eBay Kleinanzeigen, Marktplaats and Royal FloraHolland. Marketplaces account for about one third of European online payment volume today but require specialist support. OPP has sixty staff and its product set includes fast merchant onboarding, split payments, pay-outs, virtual IBANs and dispute management. Worldine has a call option to buy the remaining 60% in 2026.
  • SoftPOS – Worldine has bought a 55% stake SoftPOS, a very well regarded Polish softpos vendor which launched in 2019. Softpos is an existing Worldline partner but is also working with ING in Poland and Romania as well as Credit Agricole in Poland. The latter is through an arrangement with Elavon. It’s not clear whether SoftPOS’s current banking partnerships will be negatively influenced by the stronger Worldline relationship. Worldline has the option to take full control in 2024. 

The SoftPOS capability forms the basis for new product called Worldine Tap on Mobile which is aimed at all merchant segments but also as a white label through partners. For example, Worldine is making Tap on Mobile available on Zebra’s range of handheld devices. Zebra is a giant in the world of enterprise devices with over 10,000 channel partners globally. Many of these are ISV’s that will be interested in providing merchants a bundle of Zebra hardware, Worldine payments and their own software application.

SoftPOS has many transformational use cases but the one chosen for the launch video is not one of them. In this scenario, softPos makes life more difficult for both merchant and customer.