Stockholm-based iZettle makes a credit card reader that draws comparison to Square Inc. (SQ) . However, also like Square, iZettle provides services such as inventory management, providing capital and invoicing that drive up its revenue per customer.
"The most important thing is the value-added solutions, " Wedbush Securities Inc. analyst Moshe Katri said of the motivation behind the purchase. "That creates for you, the vendor, a very sticky and recurring business model."
As payment processors look for expand their offerings, outfits such as Shopkeep Inc., Bindo Labs Inc. and Adyen BV could become attractive targets.
Bindo and Shopkeep provide iPad-based sales systems. New York-based Bindo's investors include East Ventures, Metamorphic Ventures and social media entrepreneur Gary Vaynerchuk. The company did not respond to a query on Friday.
Shopkeep, also of New York, has money from investors including Tribeca Venture Partners, Canaan Partners, Contour Venture Partners, Thayer Street Partners and TTV Capital, according to Crunchbase.
"ShopKeep and our investors are very happy with the company's trajectory and excited about the potential for the business moving forward," a spokesperson said in an emailed statement to TheDeal, TheStreet's sister publication focused on M&A. "Of course, as a venture-backed company, our investors anticipate eventually getting a return on that investment That may take the form of an acquisition, public offering, or other event at some point in the future."
Adyen develops payment systems that operate in stores, online and on mobile networks. The Dutch company has over $1 billion in sales and is reportedly considering an IPO. Investors include backing from General Atlantic, Singaporean sovereign wealth fund Temasek, Index Ventures and Iconiq Capital. The company did not immediately respond to a query Friday.
"What you will see down the road some of the more traditional merchant processors having to get to those levels," Katri said. Payments providers such as Worldpay Inc. (WP) Global Payments Inc. (GPN) First Data Corp. (FDC) Total System Services Inc. (TSS) will continue to look for services they can add onto their offerings. The companies did not immediately respond to queries.
PayPal CEO Dan Schulman recently sat down with TheStreet's founder Jim Cramer.
"All of these companies that have merchant processing capabilities are going to have to expand their integrated payment solutions," Katri said.
The payment processors have already been acquisitive.
For instance, Global Payments paid $1.2 billion for the communities and sports divisions of Active Network, formally known as Athlaction Topco, LLC, last September. The business provides payment technology and other cloud software to event organizers.
The former Vantive Inc. paid $1.65 billion for Mercury Payment Systems LLC from Silver Lake in 2016 and merged with Worldpay Group plc. in a $12 billion deal that closed this year.
"Most of the acquisitions you've seen in the traditional merchant processing world have been focusing on and targeting integrated payment solutions," Katri said.
Amazon.com Inc. (AMZN) is the wildcard. Bloomberg reported that the e-commerce power is planning to expand in payments by offering discounts on credit card fees to merchants that use its payments system.
"They have been looking at different ways to target the payments ecosystem," said Katri, who suggested the "ultimate transaction" would be for Amazon to acquire a bank or obtain a banking license. The company did not respond to a query.
"No one knows in which direction Amazon is going to go that remains the biggest mystery in the industry," he said.
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