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New Worldline, New Strategic Goals In PaymentsFormer Ingenico Senior Vice President Grégory Lamertie is now Head of Strategy, M&A and Public Affairs at Worldline, assesses the current payments market and outlines Worldline’s strategic opportunities, synergies and goals over the next few years.
In November 2020, Worldline merged with Ingenico bringing the two companies closer to their shared vision of creating sustainable economic growth for banks as well as for retailers and merchants. The merger made Worldline the fourth largest payment player globally and opened the doors to new international consolidation opportunities.
In this interview, Worldline's CEO, Gilles Grapinet, talks about the ambitions and the way forward for the new Worldline, and he explains how a large digital payment company manages to remain close to its local clients while expanding globally.
An interview with Worldline's CEO, Gilles Grapinet
What is the current status in Worldline after the completion of the big Ingenico merger?
Gilles Grapinet (GG): The two companies have been together since November, so we already have ten months behind us working as one, and we have recorded remarkable first results in our integration.
In Worldline, we have this term called 'Day One Readiness', which means that from day one of a merger's closing, the new team is immediately operational, with clearly defined reporting lines and allocated budget. We have a long history of mergers and acquisitions for growth and the Ingenico merger was indeed the largest one so far. And I can say it with pride that this pre-merger process, is probably one of the most successful we have ever completed.
Is there one or two highlights that you would like to point at from the process?
GG: Well, we announced the Ingenico transaction in February 2020, only six weeks before COVID-19 started to impact everything. And the actual finalization of the deal and pre-merger process happened during these very peculiar times where we had to prepare our integration without any single physical meetings between the two teams! So this was a particular challenge that I think we did overcome phenomenally well all the way. The positive outcome has developped an exceptional common mindset and a powerful fighting spirit across the teams.
The merger with Ingenico is no mean feat. This process involves hundreds, if not thousands, of colleagues in more than 50 countries. Our chance, somehow, was to have announced the deal before the first confinements and lockdowns in Q2 2020. During the following months and challenging times where the world was sometimes shaking on its foundational pillars and many societies were wondering what tomorrow could bring, in Worldline and Ingenico, we had a vision. We had plans. We knew what to do. And we knew that once combined we would be so much stronger when the crisis would fade away. Having a very clear strategy during these troubled periods has certainly been an incredible strength from a managerial standpoint. And I'm very proud that the team - despite what a merger can sometimes represent in terms of personal uncertainty - fully understood the strategy and its timely execution as a critical element of success.
Worldline has now moved from being the biggest payments company in Europe to being one of the world's biggest. What does that mean for the organisation?
GG: Well, you do things because you create business value, not that much for size or ranking. It happens that, in payments, size is an essential element for value creation. It is a super scalable business with a lot of economies of scale. Payment is also highly regulated, and and sometimes different payment companies have to make the same investments in parallel. This creates opportunities for synergies. So indeed, being one of the largest players means that we can create more value for our customers, create better offers, and save a lot of resources in terms of elimination of redundant investments.
Is it possible to be one of the biggest companies globally and still stay close to your customers, even the smaller ones?
GG: The payment business is what we call a ”glocal” business, which is at the same time both global and local. By being global, we are able to channel a lot of value to our local customers. Reduced costs, better pricing, more attractive offers, more R&D. And at the same time, payment is still a local business in the sense that it's still diverse from one country to another. The way we pay, the way we behave, the payment methods we use, and how we like to get paid are still influenced by local considerations.
So the right recipe for a payment company is to acknowledge this diversity. We have big global business units that are in charge of getting the benefit of scale, but we also have, pretty much everywhere, powerful local sales and engineering teams. This is, I believe, a necessary part of the DNA of successful global payment company today.
So you are convinced that both the merger with Ingenico and the growth of Worldline over a more extended period will benefit the clients?
GG: It does, big time. Not long ago, payment was super fragmented, at least in Europe. This was due to the monetary history of Europe with different currencies, different regulations and standards, different payment brands locally and many different, much smaller payment companies in charge of doing everything locally. So Europe was clearly lagging behind in the global payment race. Since Worldline undertook its mission to be the leading European consolidator in 2013, one of our ambitions is to fix this situation and give to Europe a new player of global scale. Both merchants and banks can benefit from having an option to source from such a larger European company, as long as, of course, you don't lose the connection with the local markets.
We can invest much more than in the past. To give you a data point, we invest more than 300 million euros a year in our solutions and platforms and in R&D and innovation, which is seven times more than when we started our journey as Worldline in 2013. So, of course, customers benefit from these muscles and these brains that are daily working to deliver the best possible payment experience. In payment, scale matters. And you need to bring the benefit of scale to your end consumers.
When becoming such a big company, do you also feel responsible towards the societies you are part of?
GG: These days, running a corporate organization of any size comes with the responsibility of taking care not only of your short-term financials. You are responsible for the relevance of your company for the next 10 years or 15 years. In the payment space, we often sign contracts with customers for more than 5, 7, or 10 years. So ensuring the resilience and sustainability of your business model is a part of what your mission is as a CEO. It's part of what the customers are buying from you. They know they're going to be working, sometimes for more than a decade, with your organization. And they need to trust you in staying relevant and sustainable.
That's why sustainability is not only a duty. It is, I believe, a part of business imperatives. Payment is a long-term business. Today we call it CSR, but fundamentally it's the same thing. It's about creating a sound business, never sacrificing the long term to the short term, always paying attention to all your stakeholders - the local society in which you operate, the environmental impact, your employees, your customers, partners, and suppliers - making sure that you are not creating imbalances.
The Worldline vision is to create sustainable economic growth for banks, retailers, and merchants. Is that also what you are talking about here when you talk about sustainability ?
GG: Sure, indeed. Because if we step back one second and try to understand the significant challenges that our planet is facing, fundamentally, it's straightforward. It's how to pursue growth because we need it, sustainably; if not, our planet will run into a wall. Population will continue to grow in the decades to come; we need to support it while using more efficiently our resources. And when you look at an industry like payments, due to the fragmentation of the payment industry, there is a massive waste of resources. When you have ten companies in the same territory doing the same payment activities, investing in almost the same systems, all on a sub-efficient scale, while in fact all that could be done at a much bigger scale by fewer and more prominent players, it's a waste of resources, waste of carbon, waste of electricity, waste of CapEx and investments.
So scaling a business like Worldline to deliver, at the correct scale, payment solutions and services to merchants and banks is a way to optimize the use of scarce resources and to provide more efficiently critical payment infrastructures and payment systems with less impact on the planet. That is why Worldline's mission is to scale the business to better serve the societies in which we operate through the merchants and the banks. We help reduce the level of waste associated with the hyper fragmentation of this industry. This does not mean that scale and hyper concentration is always good in every business. The concentration versus localization of the production centres has to be addressed differently from one industry to another. But in payment, it makes sense because of the digital and highly standardized nature of the business.
How do you see the consolidation landscape evolving in the next two to three years in the payment industry?
GG: Well, over the last ten years, the speed of consolidation in the European payment industry has been impressive, but it is clear that we are not done yet. Probably 50% of the payment volumes are still fragmented into numerous local operators, whether they belong to banks or independent companies. So I believe that until 2025 and maybe until 2030, the consolidation trend will continue.
Who will be the winners and the losers of this process?
GG: There are no winners and losers per se. Ultimately scale is benefiting everyone in the industry. What we have seen over the past years is that fundamentally this has been a pretty much uni-directional consolidation model. I.e., banks that were historically the owners of payment activities, whether on the issuance side or the acquiring side, have recognized that this was, in many countries, a pure-player business, and banks have, in many cases, been now partnering with payment specialists and they tend to sell their in-house payment businesses.
I believe this should be the way forward for the years to come. I anticipate we will see more and more of these types of partnerships between banks and companies like Worldline. It is what we stand for. We are the long-term partner of the banking industry to help the banks adapt to the new paradigm of the payment ecosystem. And I think we can form great partnerships and alliances as we do in Germany with the Sparkassen-Finanzgruppe with our JV Payone, and as we recently announced in Australia with ANZ Bank for acquiring on the Australian market. Or as we did in the past with Komerční Banka in the Czech Republic, or more recently in Sweden with Handelsbanken and BNL-axepta in Italy.
I believe a lot in these partnership models between banks and the payment specialists like Worldline. And definitely, we will invest a lot to make sure that we are seen as the right long-term partner for these banks not only from a technology standpoint but also from a cultural governance and behavorial standpoint. It is a win-win business model and value proposition for both parties.
Five years ago, the banks believed that they should divest payments because, as you say, it's better handled by pure-play players. But now, they are starting to recognize that the strategic importance of payments is still of benefit to their core banking business. Do you see that the collaboration with the banks is changing from just divestments to you serving your payment knowledge to strengthen their core banking activities?
GG: I'm a firm believer that retail banks should stay strongly involved in the distribution of payment products and payment services; but it does not mean that they must produce these products and services themselves, as the complexity, the speed of innovation and the level of competition have immensely changed over the last decade in the market.
The point of our value proposition to banks is precisely to solve this issue, to allow them to benefit from our scale so as to make sure that they will stay relevant for their own customers with best-in-class product produced by and with Worldline. They can then redeploy their internal resources, not to produce payments, but on all the rest: distribution, marketing, digital front-end, customer experience, and things the bank can only do by themselves. This is a winning formula. And banks are more and more convinced as we could see during the last 10 months with all the new bank partnerships we signed in Europe and beyond.
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