So much for a quiet summer. Whilst many of us enjoyed some relaxing time on the beaches during the hot months, it appears that the M&A department of Global Payments put in some extra hours at their desks. On one day, Global Payments announced a $4bn acquisition of EVO Payments to strengthen its merchant acquiring business. And within a 48hr window, it announced that it had sold the consumer (prepaid and debit) card business that operated under the Netspend brand within Global Payments’ TSYS unit to Rêv Worldwide. The commercial prepaid card business remains with TSYS though. Press releases suggest a price of $1bn for the Netspend consumer unit with an expected deal closure in Q1 2023.

EDC worked with Netspend almost 15 years ago, well before it got sold to TSYS, but it is probably fair to say that the prepaid card industry has not featured very heavily in our M&A reviews in recent years. On the one hand, this might be a bit surprising considering that the global spending on prepaid cards in 2021 was approx. $1.8tr; which is quite a sizeable figure. On the other hand, maybe it is not that surprising because the prepaid industry is made up of many different components, many of which support unique use cases. There is the corporate segment covering fleet/fuel cards, payroll, corporate travel and benefits, there is the government segment that requires social benefit payments, disaster relief or pension distributions, there is the consumer segment targeted at specific user groups such as the youth segment or the un(der)banked, then there are travel related cards and finally gift cards. None of these segments dominate the others; all of these five have market shares between 15-25%.

On the consumer side, Netspend claims to serve 10m customers. These customers are offered Netspend branded cards or cards branded with any of Netspend’s partners such as Major League Baseball. Netspend runs all activities related to signing up customers, undertaking KYC, managing accounts and processing payments (also thanks to its money remittance licenses it holds in most US states). In addition to the actual card issuance, it has also built a physical reload network supported by retail locations ranging from 7Eleven, CVS, Walmart and petrol stations (obviously supplemented by online reload capabilities). On the other side of the table, Rêv Worldwide runs a payment processing platform. The platform is cloud-based and API driven and enables Rêv Worldwide’s customers to offer banking and payment products to their business or retail customers. In addition to prepaid cards for underserved consumers and mobile wallets for travellers, it provides cross-border money remittances and card issuing tied to digital banking accounts. In other words, and using trendy terminology, it offers banking-as-a-service for partners around the world, including Etihad Airways, Itaú Private Bank and LATAM Airlines.

For Rêv Worldwide, this is an excellent deal that will strengthen its capabilities. And it is a deal that does not include much uncertainty. Most deals will always stress comparable business cultures, achievable synergies and enhanced value propositions, and there is always a degree of uncertainty around those. This deal will be a little bit different. Rêv Worldwide was founded by brothers Roy and Bertrand Sosa, who happened to be the founders of … I am sure you can guess it … Netspend before taking it public, so they know very well what they are buying. A large customer base, risk assessment capabilities related to issuing cards will now be combined with a modern technology set-up. Combining these capabilities and targeting digitally savvy clients will provide considerable opportunities. Just think about the underserved Netspend customer who needs wider banking services or the ability to transfer money abroad. Or think about the Rêv Worldwide customer offering a digital banking proposition but wanting to extend it to physical or virtual card issuance. There are plenty of opportunities to grow a combined business.

The payment and even wider financial services industry is more and more moving towards an XaaS model and Embedded finance is one of the trendiest terms in the industry full-stop. Providing banking and payment infrastructure or products to neobanks, merchants or individual customers in a digital environment is needed. This will become an increasingly crowded field of competitors aiming to address those different market needs but the Rêv Worldwide / Netspend combination will be very well positioned indeed to be successful.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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