Cross-border payment mergers and acquisitions fell by 35% in the current year
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In the first three quarters of 2023, the cross-border payments sector has experienced a significant decline in mergers and acquisitions (M&A) activity. A recent report by a leading platform has identified several key factors contributing to this downturn.
Joe Baker, senior copywriter and author of the FXC report, acknowledges the difficulty in pinpointing specific factors driving the decline, given the wide range of companies assessed. However, the report highlights a weakening global economic environment, geopolitical tensions, regulatory complexities, and investor caution as the primary factors.
The global economy showed signs of slowing down in early 2023, with political fragmentation, ongoing geopolitical issues, trade tensions, inflation, and labor market shortages undermining overall merger activity. As a result, deal volumes dropped by about 25% in the first half of 2023 compared to the prior year.
Cross-border deals faced heightened scrutiny and risk due to geopolitical frictions, particularly between major economies such as the US and China. Regulatory bodies like China’s State Administration for Market Regulation (SAMR) increased scrutiny based on national security and industrial policy considerations, extending involvement even in deals that did not meet previous thresholds.
Multijurisdictional merger reviews have become increasingly complex with new rules and thresholds, leading to longer approval processes and higher regulatory risks. Investment managers adopted a more patient approach, favoring resilience against economic uncertainty. Private equity or investment manager-driven deals declined, with corporations dominating M&A activity at 95%.
The adoption of new payment technologies like stablecoins and evolving cross-border payment infrastructures is reshaping the competitive landscape, possibly creating uncertainty around traditional payment-focused M&A targets.
The report indicates a 35% decline in cross-border payments M&A from Q1-Q3 this year, compared to the same period last year (161 in 2022 to 104 in 2023). The specific areas experiencing significant drops in M&A activity include B2B payments, consumer money transfers, and payment processors.
Despite the overall decline, the acquisition of Worldpay by GTCR at $18.5bn is the biggest disclosed M&A this year in the cross-border payments sector. The majority of the activity is happening in the US, with 33 out of 90 acquiring companies having a headquarters in the country, and 27 of the acquirees being based there.
However, the decline in M&A activity is observed across most types of businesses, except for card issuers. The challenging global economic climate and the collapse of Silicon Valley Bank are suggested as factors contributing to the overall decline in fintech M&A this year.
The platform analysed data from various third parties and news outlets to determine the status of M&A in the cross-border payments space. There appear to have been fewer disclosed acquisitions relevant to cross-border payments to achieve multi-billion dollar status this year compared to last year, with the exception of the Worldpay acquisition.
In conclusion, the cross-border payments M&A market has been significantly impacted by a variety of macroeconomic and geopolitical factors in 2023. While dealmakers remain active to some extent, the downturn in M&A volumes is a notable trend in the sector.
In the face of a weakening global economic environment and increased regulatory complexities, businesses may choose to hold back on investing in the finance sector, potentially leading to a decrease in the number of M&A deals in the cross-border payments industry. Thisancheity, a careful approach towards business expansion and investing in more resilient companies may become more prevalent, given the uncertain economic climate.
