Vantiv bets on integrated payment tech with Mercury acquisition

Vantiv snapped up Mercury Payment Systems for $1.65 billion just as the integrated payments company pondered its own IPO.

Earlier this year rumors circulated that Mercury Payment Systems was mulling an IPO. Those rumors were made moot yesterday when the integrated payment technology provider agreed to be acquired for $1.65 billion by payment processing giant (and competitor) Vantiv.

Mercury's payment network of 3,000 POS software developers and dealers mainly targets SMBs. Last year, Mercury handled $1.2 billion in payments from clients. It recorded $237 million in revenue in 2013, a 17 percent increase from the year before, the company said.

Vantiv is currently the third-largest merchant acquirer by transaction volume and the largest PIN debit acquirer in the US, but it lacked muscle where Mercury excelled — the integrated payments space.

Integrated payments refer to tools that business can use to integrate accounting, customer relationship management, and other business applications with payments processing. Vantiv and Mercury said they expect to see this space grow to account for 30 percent of all payments processing by 2017.

There are a few other areas where the companies hope to find mutual benefits. As for Vantiv, Mercury has built EMV easy plug technology for dealers, an area that Vantiv CEO Charles Drucker said will be a focal point as EMV starts to move forward in the US.

For Mercury, Vantiv brings scale to its dealer base penetration, which Drucker said is currently at about 10 percent. Mercury could also benefit from bringing in-house Vantiv's end-to-end encryption and tokenization. 

Matt Taylor, Mercury Payment Systems CEO, chimed in on the matter during an after market call Monday:

We're in mid-innings in terms of the proliferation of smart POS software and solution to the point of sale. And I think combining with Vantiv's processing platform technology and scale should only accelerate our ability to follow and even drive integrated payments in the marketplace. 

You take a combination of Mercury's integrated payments technology expertise, and match that with Vantiv's scale, and there are opportunities to move up market and into larger merchants.

The general consensus among analysts is that the deal is a win-win for both companies. But there are two points worth noting as Vantiv and Mercury hold hands and skip to payments heaven. On the security front, Vantiv will need to closely guard its bevy of sensitive third-party data related to transactions processed as it tightens integrations with Mercury.

As for Mercury, the company will need to hold close its core strengths. In order for Vantiv to fulfill its main motive for the acquisition (integrated payments) it will need to rely heavily on Mercury for its people and ISV relationships.

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