Wirecard’s $9 Billion Bid For Worldpay

by | Sep 4, 2015 | Payments

Wirecard with a market value of $ 5.2 billion made a $9 billion bid for Worldpay. Is this a serious bid? What will Wirecard do with Worldpay?

Wirecard has extensive experience with M&A and also in acquiring companies larger than itself and making it a success; as many of the ‘old timers’ in the payment industry remember the current Wirecard is a result of the 2006 acquisition of Wirecard AG a publicly listed acquiring bank by a little known upstart payment service provider.

As these old timers also know and remember, Wirecard made its name and money by processing high risk transactions. And this is the key to Wirecard’s bid for Worldpay and why it would be able to make the acquisition a success and more of a success than the private equity bidders.

The secret formula to making a high risk acquiring business work is keeping your fraud ratios below the scheme defined limits. Acquiring banks that chase the high margins provided by high risk businesses soon find themselves on the wrong side of scheme fraud ratios resulting in fines, merchants being switched off, scheme audits etc, in short a whole lot of pain.

The only way to grow a high risk business is to blend the high risk volume with low risk volume bringing the average fraud ratio of the acquiring bank down below the scheme limits. This is where Worldpay comes in. Worldpay has a strong portfolio of low risk volume processing close to 50% of all POS transactions in the UK.

It’s this low risk volume from Worldpay and Wirecard’s experience with and access to high risk volume that makes the combination of Wirecard and Worldpay total sense.

Wirecard will be able to unlock value through the acquisition that the private equity bidders will not.

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Gropay provides management consulting and interim management services globally in the areas of online payments, mobile payments and point of sale POS payments. Our clients span the entire payments value chain from schemes to merchants and also include private equity investors, technology and mobile companies. The Gropay team consists of proven industry leaders with extensive experience both on the demand (merchant) and supply (Payment Service Provider, acquirer, scheme) sides with a focus on sales and business development, operations, risk, compliance, valuation and due diligence.

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