First Data Acquires CardConnect

by Raymond Pucci 0

 In their second deal in two months, First Data is acquiring CardConnect, an integrated payment services provider that focuses on enterprise business solutions. As the following article reports, First Data looks to strengthen its value added services and technology applications.

As competition rises in the fintech space and the market becomes increasingly saturated with digital payment firms, the industry has shifted its focus from core payments processing technology to new value-add services

The remarks from the fintech CEO come as First Data, with more than $2.2 trillion in transactions a year, buys out integrated payment solutions company CardConnect for $750 million, or $15 per share. In acquiring the Pennsylvania-based business, First Data will enhance its integrated payment solutions, which link to companies’ enterprise resource planning (ERP) systems.

The acquisition could open up a new market for First Data, improve its cash management and expand its suite of client services. Bisignano says the transaction is “consistent with our strategy of integrating and scaling innovative technologies across our distribution footprint.”

The global card payment and ecommerce processing company has seen its shares gain about 36% in the most recent 12-month period, propelled by strength of its financial sector, ecommerce and credit card clients. Bisignano also added that the firm hopes it can provide some help to dying brick-and-mortar retailers.

This deal is part of continuing evolution of acquirers to diversify away from commodity type processing. So we’ll be seeing more of this across the payments industry. First Data has set up a potential trifecta here: 1) scaling up processing volume for cost efficiencies, 2) adding more integrated technology solutions and business tools to customers that bring higher margins, 3) further inroads into more enterprise scale relationships that are ideal for cross selling across First Data’s portfolio. A bonus is that CardConnect is already FD partner which will help smooth coordination issues and challenges that inevitably accompany any deal like this.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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