Skift Take

Vantiv's $10.4 billion acquisition of Worldpay creates a payments-processing powerhouse with a huge hand in helping travel businesses boost online and mobile purchases. Due to competition from new rivals, fees are unlikely to spike yet.

Earlier this month, Worldpay, a UK-based payments processing company, was taken over by Vantiv, a U.S. counterpart, in a $10.4 billion deal. The combined company will be called Worldpay.

For the travel industry, in particular, Worldpay claims to be a market leader among payment providers. For example, its back-end technology has helped British Airways to ensure more customers complete the online payment process and to handle more efficiently payments across an array of currencies than the carrier’s previous solution did.

Worldpay works with more than 80 airlines worldwide — including British Airways, Emirates, HK Express, Holiday Extras, Caribbean Airlines, Beijing Capital Airlines, Vanilla Air, and BMI Regional. It also has relationships with some online travel agents, such as Fareportal (owner of CheapOair) and other travel service providers.

Worldpay did not have much customer overlap with Vantiv, and claimed to be to be the largest acquirer of card transactions generated at merchants outside of the U.S., but it only had 15 percent of its overall revenue coming from within the U.S. Vantiv, meanwhile, claims to be the largest acquirer of merchants’ card transactions in the U.S.

The combined operation could be competitive across verticals in sectors such as retail with global banks like JPMorgan Chase and Bank of America. Worldpay focuses on five verticals: travel, airlines, retail, digital (e-commerce shops), and the gaming industry.

In the travel segment specifically, Worldpay has several competitors, including Atos (owner of Worldline and Digital River World Payments), and Wirecard— though those companies do not have travel practices as large as Worldpay’s. Other potential threats in the travel segment could someday include Adyen, Barclaycard, and Stripe.

Travel Specialty

For a travel company, one of the advantages of using Worldpay or a similar processor is that it can then skip investing in its own payment gateway.

Take airlines, as an example. If you wind back a couple of decades, airlines had to have a relationship with a local bank in every country that they operated in and where travel agents sold their tickets. Rather than manage hundreds of banking relationships worldwide, airlines hire Worldpay, which has, in essence, a global license.

By using a company like Worldpay, airlines also don’t have to manage the reporting of all those individual payers, as the tech provider handles the simplification at a lower IT cost than the alternative of an airline creating its own gateway.

If the airline is a low-cost carrier in Central Europe, for example, and doesn’t participate in the travel technology marketplaces run by Amadeus, Sabre, Travelport, or TravelSky, then travel agencies wanting to book its tickets have to connect with it directly.

A company like Worldpay can help on the back-end to facilitate the transaction. If the airline wanted to appeal to Chinese customers, for instance, the carrier would need to use one of the preferred payment methods in China, such as Alipay — something that companies like Worldpay have the expertise to handle.

Overall and across industry verticals, the combined operation of Vantiv and Worldpay is set to capitalize on the boom in digital payments and the company anticipates benefits of scale as the world’s largest processor in terms of number of transactions. In the next year or so, Worldpay intends to move its global merchant clients, such as major airlines, over to a new technology platform that is intended to be better able to handle scaling up.

Based on statements in public forums, Worldpay plans to invest further in its partnerships with travel industry technology players such as Amadeus, Sabre, and Travelport, and airline back-end services providers like the Airlines Reporting Corp., the International Air Transport Association, and financial players that work extensively in travel such as Mastercard.

But the merger is not without risks. The proposed co-CEO structure could flop.

Travel Payments Strategy

Thomas Helldorff, the London-based vice president, airlines and travel, has overseen Worldpay’s vertical strategy. He thinks Worldpay has a competitive advantage when it comes to targeting the travel sector.

Helldorff spoke to Skift by phone prior to the merger. He and his Worldpay colleagues did not comment on the merger for this article.

He said: “Because of the amount of data that we have, we build intelligent decision engines that bring better outcomes in terms of authorization. The likelihood that a bank approves the transaction is the highest with us.”

He explained: “Banks don’t automatically just accept transactions that come in, and each bank has its own rules and quirks if you will.”

“One example is when you validate a credit account, like when you check in a hotel and they want to validate your card. It makes a difference whether you send a $0 dollar authorization or a $1 dollar authorization or a 99 pence authorization. Each bank has a different preferred method. Over time, we have worked out which bank is more likely to authorize which type of transaction. Given all the banks in the world and the speed of real-time transactions, this is complex, and we excel at it.”

Helldorff also provided a couple of other reasons why his company has made gains in travel: “We are truly verticalized in many aspects. Our relationship managers, our support team, our strategic team, our marketing team, they’re all verticalized — meaning they have dedicated experts who understand travel.”

“When inevitable problems come up with complex transactions and processes and integrations, our team can speak knowledgeably about what travel companies need. In the case of a travel agency, our client service agents know what airline chargebacks are and what passenger name records are.”

Growth Plans

Helldorff also thought that marketplaces like Airbnb will find Worldpay appealing because of its “strong pay out capability.”

He said, “Not only can we take payments, we can pay out the suppliers, which, again, very few or no other payments tech players offer that.”

As an example, for a transportation network company, Worldpay could take a payment from a consumer, hold the funds on their behalf in an account, pay the driver of the vehicle, and the pay the revenue share to the marketplace, like an Uber or a Lyft.

In this model, the marketplace doesn’t have to take the full money of their revenue. They only take their revenue share and can avoid creating a tax liability for what they’ll be paying out anyway.

Mergers can be complicated. Time will tell how this one unfolds.

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Tags: payments, Worldpay

Photo credit: Customers at Lure restaurant use Worldpay's international currency and payment services without realizing it when they pay the bill. Worldpay has as large travel practice. Worldpay

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