The FinTech Leader You Have Never Heard Of

Global Payments, Inc. is a U.S.-based financial technology company founded in 2000 as a National Data Corporation spin-off. It provides payments processing services to merchants, enabling them to accept credit and debit cards. In 2016, the company took over Heartland Payment Systems in a $ 4.3B cash-and-stock deal. And in 2019, Global Payments bought Total System Services (TSYS) for $ 21.5B in stock.

“Payment technology companies are fast consolidating to battle increased competition from banks making inroads into digital payments and fintech start-ups such as Adyen and Stripe chipping away market share.” by Jessica Bursztynsky for CNBC

PAYMENTS ENABLER

Today, the company serves over 3m companies, 1,300 financial institutions and 4,000 tech partners across 100 countries. It provides merchants with a unified sales experiences as it enables them to accept payments online and on mobile but also at the point of sale. Its products include:

  • Mobile Solutions

    Global Payments offers a simple, complete payment page for web and app. Customers can assemble payment fields together however they want, to create a customized checkout page. Global Payments hosts the customer data, and keep everything secure—minimizing PCI requirements for its customers. It also generates secure payment links to use in any channel or context, from email and SMS to social media and messaging platforms like WhatsApp.
  • Point-Of-Sale Solutions

    The company offers contactless and portable card readers to enable mobile point-of-sale payments. These let customers pay safely, quickly, and touch-free with Apple Pay, Samsung Pay, Google Pay and more. Merchants can then track their sales on Global Payments' cloud-based tools and even manage their inventory.

    Next to these ultra-portable solutions, the company also offer the conventional point-of-sale hardware, including a cash register and tablet. Global Payments’ back-office software then enables merchants to manage inventory, discounts, pricing, taxes and customer payments.
  • Integrated Payment System

    Through its Global Payments Integrated brand, it provides an agnostic, API-first approach to terminal management that shields partners from complexities, protects and future-proofs certifications for countertop, mobile and unattended devices.

FROM HARDWARE TO CLOUD-BASED

Along with Fiserv and FIS, Global Payments is one of the three largest merchant acquirers active at a global scale. These are now challenged by the likes of Adyen, Stripe, PayPal, Square and a batch of up-and-coming “neobanks” (e.g. Revolut). To stay competitive, Global Payments is shifting away from its payments technology and hardware position and into a software-first service.

  • From 2013 to 2015, it aimed to become the payments technology leader at a global scale and acquired PayPros and Accelerated Payment Technologies to consolidate its position
  • From 2015 to 2017, the company made a foray into mobile payment technology and acquired Heartland
  • Starting in 2018, the company chose to reposition itself as a software-focussed company and arrange its products around a cloud-driven SaaS model. To consolidate its position, the company merged with TSYS in a $ 21.5B deal

“The combination of Global Payments and TSYS establishes the leading pure play payments technology company with unparalleled vertical market and payment software capabilities and ecommerce and omnichannel solutions, operating at scale in fast growing markets globally,” by Jeff Sloan, CEO of Global Payments

AWS AND GOOGLE PARTNERSHIPS

Global Payments is quickly gaining ground within tech giants and joined forces with AWS in August 2020 and later signed a multi-year agreement with Google. Through these partnerships, it provides merchant acquiring solutions to Google and collaborates with Amazon on a cloud-based issuer processing platform for financial institutions around the world.

  • Global Payments’ cloud-based issuer processing platform built on AWS will allow financial institutions of all sizes to more seamlessly operate the entire lifecycle of card issuance and management. The company is also leveraging AWS’s global infrastructure to support the rapid adoption of Global Payments’ issuer processing platform around the world, which handles approximately 27 billion transactions annually
  • Through its partnership with Google, Global Payments will migrate its merchant acquiring technology to Google Cloud, and will provide merchant acquiring services to Google to extend its global market reach. The duo will also launch a series of strategic go-to-market and co-sell activities together

“Today, Google executes approximately 3 billion transactions annually and Global Payments is well positioned to meet the complex payment needs of one of the world's largest and most sophisticated technology companies by leveraging our Unified Commerce Platform.” 4Q 2020 Earnings Call by Cameron Bready, President and Chief Operating Officer of Global Payments

Through these partnerships, Global Payments is creating a seamless digital experience for its clients. Google Cloud’s customers will be able to tightly integrate their Google Apps (Workspace, My Business, Ads) with a capable payment solution. While financial institutions moving towards the cloud can rely on an integrated financial technology partner.

THE MARKET

The global digital payments market is set to nearly double by 2025, coming from $ 79.3B in 2020 and reaching $ 154.1B in 2025. Growth is driven by growing smartphone penetration, the prevalence of mobile wallets and growth in internet sales.

According the Markets And Markets, the global digital payments market is set to reach $ 154.1B by 2025, up from $ 79.3B in 2020

  • Growing at an annual rate of 14.2% over the 2020 - 2025 period and driven by the worldwide initiatives for the promotion of digital payments, high proliferation of smartphones enabling mobile e-commerce growth, increase in e-commerce sales and growth in internet penetration

“Major digital payment solution vendors are gradually adopting smart technologies, such as cloud computing, analytics, and big data, to offer comprehensive solutions to potential customers. Payment gateway and payment processing are the most widely demanded solutions among merchants.” Markets And Markets

According to Research And Markets, the global digital payments market is expected to grow by 13.5% each year over the 2020 - 2025 period

  • Driven by growing demand for cashless payments, favourable government policies, evolving consumer behaviour, growing smartphone penetration, the spread of mobile wallets and the rise of tech giants promoting digital payments (WeChat, Apple)

“Retail stores and services across the world are rapidly adopting and integrating mobile payment applications, such as PayPal, Samsung Pay, Apple Pay, AliPay, and WeChat Pay, to accept payments. Owing to changing lifestyles, daily commerce, and rapid growth in online retailing, this trend is expected to continue over the next six years.” Research And Markets

  • Governments are also trying to reduce their cost of printing currencies and counter the fake currency influx that disturbs economic growth, creating an environment favouring digital payments

TIER 1 MANAGEMENT

Jeff Sloan is the Chief Executive Officer and was previously a partner at Goldman Sachs. There he headed the Financial Technology Group and pioneered the development of the payments practice in investment banking. Paul Todd is the Chief Financial Officer of Global Payments and was Chief Financial Officer of TSYS from 2014 until the closing of the company’s merger with Global Payments.

Jeff Sloan

  • Jeff Sloan is the Chief Executive Officer since 2013 and joined Global Payments as president in 2010
  • Prior to joining Global Payments, Jeff was a partner and the worldwide head of the Financial Technology Group in New York for Goldman Sachs. He pioneered the development of the payments practice in investment banking, where he led many of the industry’s landmark transactions over two decades.
  • Earned dual BA and BS degrees from The Wharton School of the University of Pennsylvania in 1989 (summa cum laude) and a JD from New York University School of Law in 1992 (magna cum laude)

Cameron Bready

  • Cameron Bready is the Chief Operating Officer of Global Payments and served as Chief Financial Officer from 2014 to 2019
  • Prior to joining Global Payments in 2014, Cameron served as executive vice president and Chief Financial Officer for ITC Holdings Corp., a publicly traded electric transmission utility, where he was responsible for the company's accounting, finance, treasury and other related financial functions, as well as its corporate development initiatives. Cameron joined ITC Holdings in April 2009 after serving as vice president of finance at Northeast Utilities and, prior to that, senior vice president of Mirant Corporation
  • Earned a bachelor's degree in business administration from Oglethorpe University in Atlanta and is a Certified Public Accountant

Paul Todd

  • Paul Todd is the Chief Financial Officer of Global Payments and was Chief Financial Officer of TSYS from 2014 until the closing of the company’s merger with Global Payments in September 2019
  • Paul joined TSYS in 2008, moving from Synovus Financial Corp, where he was previously the president and Chief Executive Officer of the Synovus Financial Management (FMS) family of companies that included Synovus Securities, Synovus Trust Company, Synovus Insurance Services, Synovus Mortgage Corp., Creative Financial Group and Globalt. Paul began his career at The Procter & Gamble Company in Finance
  • Earned a bachelor's degree in business administration from the University of Memphis and a master’s degree in business administration from the Vanderbilt University

TAKE A BREATH

So… This is a lot of information. Let’s summarise:

  1. Global Payments serves over 3m companies, 1,300 financial institutions and 4,000 tech partners across 100 countries. Merchants use Global Payments to accept payments online and on mobile but also at the point of sale
  2. To stay competitive, Global Payments is shifting away from its payments technology and hardware position and into a software-first service
  3. Global Payments is quickly gaining grounds within tech giants and joined forces with AWS in August 2020 and later signed a multi-year agreement with Google
  4. The global digital payments market is set to nearly double by 2025, coming from $ 79.3B in 2020 and reaching $ 154.1B in 2025. Growth is driven by growing smartphone penetration, the prevalence of mobile wallets and growth in internet sales
  5. Jeff Sloan is the Chief Executive Officer and was previously a partner at Goldman Sachs. There he headed the Financial Technology Group and pioneered the development of the payments practice in investment banking

FINANCIAL CHECK

  • Revenues were $ 1.93B, compared to $ 1.99B in the fourth quarter of 2019, representing a decline of 2.9% year-on-year
  • In the third quarter of 2020, sales grew by 74% year-on-year and by 79% in the second quarter of 2020
  • Gross margins stood at 65%, an improvement versus the 63% it achieved in the previous quarter
  • EBT margins stood at 13%, a decline versus the 17% it achieved in the previous quarter
  • Adjusted net revenues declined 2.9% to $ 1.75B, compared to $ 1.80B in the fourth quarter of 2019
  • Adjusted earnings per share increased 11.1% to $ 1.80, compared to $ 1.62 in the fourth quarter of 2019
  • Current assets stood at $ 4.5B versus $ 4.3B a year earlier while current liabilities stood at $ 4.5B and come from $ 3.6B a year earlier

BENCHMARK'S TAKE

The Good

  • Global Payments is repositioning itself as a cloud-first company and now offers a fully integrated and robust solution to merchants
  • The company is staying at the forefront of innovation through deals with AWS and Google
  • The market for digital payments is growing at a rapid pace as customers increasingly rely on their mobile wallets and business moves online
  • The company’s exposure to offline sales could enable it to win in a post-pandemic world as consumers shift their spending back into brick-and-mortar shops

The Bad

  • The company may come under anti-trust scrutiny if it seeks to merge with another large competitor
  • The company has seen its price to earnings ratio (annual & normalised) soar to 57 and now boasts a price to sales ratio of 8, twice the numbers its earned pre-pandemic

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Jonas Leupe on Unsplash.