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What Payments M&A Activity Can Mean to an ISV

February 25, 2019

Over the past few years, major U.S. payment processors have merged, resulting in fewer, larger companies.

Saying that mergers and acquisitions (M&A) activity in the payments space has been active is definitely an understatement. Over the past few years, major U.S. payment processors have merged, resulting in fewer, larger companies. Consolidation results in benefits — often for both parties involved, as well as for merchants that gain access to new technologies and the ability to support additional types of payment transactions.

For ISVs, however, payments M&A activity can mean you arrive at work one day to find that your payment processing partner is different than the day before. You may even suddenly be linked to a company that you had decided not to partner with for one reason or another — or you may now be a part of an ISV partner program at a company that offers what you had considered a rival solution.

Regardless of the situation, payments M&A activity begs the question: Stay or go?

Make an Informed Decision

With so much at stake — not the least of which is the possibility of having to integrate your software with another payment processing solution — it’s essential to weigh all of your options carefully and make the best decision for your ISV. Ask and answer these five questions following a merger or acquisition:

  1. Will the merger or acquisition change the features of the solutions you provide to your customers?

One reason payments M&A activity occurs is when one or both companies want additional technology or resources. Understand the advantages this could offer.

  1. Will the headquarters of the organization change?

Your U.S.-based payment processing partner could now be headquartered in a different country. Will that have an impact on your business?

  1. Will the new organization handle customer service in the same way?

Will you and your customers still receive personalized attention from account reps or will the new enterprise change processes? Will you lose business relationships that are valuable to your business?

  1. Will prices change?

Payment processing companies can have varied fee structures. Will your customers’ invoices reflect the same types of fees — and the same prices?

  1. What are your other options?

Even if you aren’t convinced that the merger’s pros outweigh the cons for your ISV, are your alternatives better?

When Payment Companies Expand Their Offerings through Acquisitions

In addition to consolidation among payment processors, payment companies may also choose to acquire a company that expands its offerings, for example, a payments company may acquire an e-commerce solution that merchants can use to sell online.

This type of acquisition may benefit some partners — it can enable them to offer a broader range of solutions to their customer. But, it can also result in a payments company that’s now competing with its ISV partners, selling the same type of solution that they sell.

Although there’s no way to guarantee you’ll never be in this position, making smart choices when you enter into partnerships can help you avoid it. ISVs routinely evaluate potential payment processing partners for their solutions, customer service, expertise in their clients’ industry, and competitive, transparent pricing. But there’s one more thing to add to that list — their commitment to their ISV community. You want to form partnerships with companies that aren’t only interested in their own growth, but that are also committed to protecting the relationships they’ve built that helped them get where they are.

The terms of a payment processor’s ISV partner program and the resources that they’ve dedicated to it, such as dedicated account representatives, integration resources, and sales and customer service assistance, can provide some indication of a payment company’s level of commitment to its ISV partners.

The onus is also on you to stay informed about industry news and rumors of M&A activity. Also, before entering into a partnership, you should familiarize yourself with the company’s past and everything you can about where they’re headed in the future.

Forming a partnership with a payment processor and integrating payments with your solution represents a significant investment of time and potential changes to your client’s user experience. Changing payment processing partners is not something you want to repeat often. Choose wisely.

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