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As Global Payments Inc. reported quarterly earnings, the processor announced a deal to purchase CyberSource's U.S. merchant-acquiring portfolio from Visa Inc.
January 6
Any thought that Visa Inc. was interested in dipping its toe into merchant acquiring quickly dissipated last week, when the card network
Industry members were scratching their heads in April 2010, when Visa said it would acquire CyberSource Corp., a payments processor and fraud prevention technology developer based in San Francisco. CyberSource's online merchant portfolio was included in the deal.
By buying that portfolio, Visa in effect put itself in direct competition with acquirers of Visa transactions, according to Zil Bareisis, a London-based senior analyst for research firm Celent.
"Most of us in the industry expected that Visa would divest that part of CyberSource at the right time and focus on the processing services instead," Bareisis says.
That right time apparently has come. Executives for Atlanta-based Global Payments told analysts during a quarterly earnings call Jan. 5 that it has agreed to acquire CyberSource's portfolio of 9,000 online merchants from Visa. The deal is expected to be completed this quarter.
Executives from both CyberSource and Visa declined to comment further regarding the portfolio sale. A spokesperson for CyberSource would only provide an e-mail statement from Visa saying: "This agreement enables CyberSource to focus on its core business of providing comprehensive payment management services to merchants."
The sale to Global Payments reinforces a trend in which card networks, especially Visa, are spreading their wings to provide services "that get them closer to the customer," Bareisis says. For example, Visa's new consumer-oriented digital wallet, called V.me, stresses more of a technology-based service designed to compete with the likes of Google Inc. and PayPal Inc. instead of banks.
Monitoring Visa acquisitions and sales of the past few years provides a case study on why the payments industry has been changing so rapidly, analysts say.
"When a company like Visa gets involved in a wide scheme of alternative and mobile payments, it makes you think a lot about what's happening in the industry," says Paul Martaus, a merchant-acquiring consultant based in Mountain Home, Ark.
Visa's deal to sell the online merchant portfolio to Global Payments makes sense for both companies, he adds.
"Why would Visa want to be in the acquiring business, as opposed to advancing mobile technologies and processing?" Martaus asks. With companies like Google and PayPal seeking to capture more of the mobile-payment market, especially the merchant advertising revenue dollars, Visa has to make strategic moves that reinforce its intention to remain a formidable foe, or possibly a partner, he says.
Global Payments did not reveal specific details of the CyberSource portfolio acquisition during last week's conference call. But David Mangum, Global Payments chief financial officer and executive vice president, told analysts the processor was "not alone" in its pursuit of online merchant accounts.
"We're going to be the best partner to CyberSource that we can," Mangum said. "There's lots of other institutions and processors who would like to do the same thing, but we believe that we are going to be very responsive and we're hoping our relationship with them expands."
Global Payments executives also cited the company's need to bolster its ecommerce presence. The company's ecommerce merchants historically have operated brick-and-mortar locations, too, but the CyberSource portfolio represents 9,000 merchants specific to an online presence, Jeff Sloan, Global Payments president, said during the call.
The acquisition represents "a very big step in the right direction" for Global Payments to get more ecommerce business, Sloan said.
