Nexi acquisitions aim to ward off U.S. payment giants coming to Europe

Italian technology firm Nexi has dedicated about $15 billion over the past two months to shore up its position in the European payment processing market, a local burst of consolidation that exists inside a larger wave of similar mergers globally.

Nexi and Nets agreed on a framework for a merger widely reported to be worth about $9.2 billion. That followed an October deal in which Nexi agreed to acquire SIA for $5.3 billion; the two distinct deals have not yet closed. Nexi estimates the consolidation will expand its addressable market by more than 400% as a result of the two deals, with double-digit yearly growth in payment revenue within that market.

Combined, the three companies will cover more than two dozen countries, spanning bank technology, payment gateways and merchant acquiring. It will sell itself as a gateway for fintech/bank partnerships, merchant services, government and consumer clients.

Nexi, Nets and SIA are building a European-focused network with about $5 billion in revenue for fiscal 2020 to ward off the encroachment from the other companies, most of which are based in the U.S.

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The merger of Nexi and Nets provides scalability and distribution capabilities for Europe to enable greater competition due to the competition from the Worldline/Ingenico combo and WorldPay/FIS, said Krista Tedder, head of payments for Javelin Strategy & Research.

“The expanding need of digital commerce is the primary driver — being able to deliver multiple payment rails and consumers experiences in a multichannel environment,” Tedder said. “With commerce being cross-border and multiple-currency, consolidation of regional payment processors makes sense and can deliver the experience that consumers expect. PayPal, Stripe, Adyen and other processors will continue to work within the EU landscape, however having regional staff and capabilities to focus on Europe is seen as a positive.”

The global payments market has seen several deals like this over the past two years, as firms like FIS, Fiserv, and Global Payments made multi-billion-dollar deals to acquire payment processors, combining merchant acquiring, card issuing and bank technology.

That’s allowed the firms to serve several kinds of digital transformations, such as moving merchants to mobile payments, or enabling partnerships between banks and fintechs, or creating a suite of products that stack on top of real-time payments.

Nexi did not return a request for comment by deadline, but Nexi’s site notes local entrenchment as a general advantage. Nets, for example, is headquartered in Denmark and is one of the leading processors in the Nordics, where digital payments are widely used. In Norway, for example, only 4% of payments are made with cash. Nets has been acquisitive in its own right the past two years, expanding its mobile wallet and Bluetooth approach to digital in-store payments beyond the Nordics.

Nets has added Poland’s Dotpay/eCard and Concardis in recent years. Nexi contends this gives Nets the ability to transport digital payments expertise from mature markets to European markets with more upside for digital payments growth, such as Germany, Austria, Switzerland, Poland and southern markets in Eastern Europe.

The combined companies’ roadmap features a Nexi-SIA integration that will focus on Italy in 2021 and a broader integration with Nets in 2022 that will form what it calls a One European Platform. At the same time, the three companies will fast-track e-commerce and omnichannel shopping and payments.

Beyond the U.S. payment giants, Nexi additionally has local competition with Worldline, a French payment processor that recently merged with Ingenico, another French technology company. Adyen has also gained ground over the past few years by diversifying its technology bundle.

“The payments industry is being reshaped by a wave of mergers and acquisitions, and is becoming increasingly dominated by regional and global champions,” said Zil Bareisis, head of retail banking at Celent, adding: “The combination of Nexi, Nets, and SIA follows this trend with an expectation that it will give the group the scale and capabilities needed to compete effectively in digital payments.”

Nexi is moving as FIS accelerates its combined technology from its Worldpay deal, which includes expanded open banking and PSD2 integrations for European markets. Global Payments’ TSYS deal provided a route to give TSYS’ merchant technology to Europe and other international markets. Also looming as a threat is Stripe, which has been acquiring technology to round out its security, risk and payment processing technology to reach European markets.

The Nexi, SIA and Nets combination is similar to the TSYS-Global Payments deal in that it’s focused largely on payments (FIS and Fiserv have multiple lines of business that drove their acquisitions). And in Nexi’s case, there’s a focus on expanding existing relationships in Europe, and take a position as more merchants and consumers turn to digital shopping and payments due to the pandemic and the natural progression.