- October 19, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
M&A in Payments space
- The payments industry has witnessed high M&A activity recently. The industry has seen consolidations among the bigger legacy players to compete against the new age digital companies.Analysts expect that the M&A trend would continue in the payments space as the incumbents get ready to redefine their existing business models to withstand Digital disruption.
- The payments industry is in the midst of transformation as digital has changed when, where and how consumers pay and shop for goods and services.The transformation is being caused by changes at the point of sale, the rapid growth of e-commerce and the rise of mobile payments.
- Many companies in the payments space are merging together or acquiring companies to achieve scale and volume.Companies are interested to acquire firms that have high technology expertise or firms with a specialized vertical market solutions.
Merging Digital Platforms
- The Integration part of a M&A deal comes with many challenges. It is necessary to navigate these challenges with a clear plan of action in order to realize deal value.The acquirer and the target organization needs to finalize the new organization structure that would be responsible for implementing the deal objectives and delivering the anticipated gains.
- Integration of digital platforms is critical in payments space because if the digital experience is inadequate then customers will move to competitors.Nobody like to use an outdated mobile app with bugs or apps/portals that crash regularly.
- When companies with different digital platforms merge, then the integration team should decide whether to maintain both the platforms or create an unified platform that has the features of both the platforms. Combining both the platforms has huge challenges and requires a lot of work.This can also causes temporary disruption to its customers.At the same time, continuing to operate and maintain different digital platforms would be expensive and can also stifle innovation.Hence the best approach would be to merge the platforms together, thereby reducing long term costs and enabling rapid improvement to the digital platform.
- M&A presents a great opportunity for each companies to assess their individual platforms in terms of strengths and weaknesses.After that they can work together to design a common platform that combines the best of both capabilities. When finalizing on the unified platform, both the companies should consider how their customer base will be impacted. Both the companies should evaluate their current systems, user interfaces, platform features and data capabilities in order to determine what aspects drive customer satisfaction.The unified platform should address the needs of the combined customer base.
The Unified Digital Platform
- In order to develop an unified Digital platform, one should clearly define the objective, determine customers digital priorities and then finalize a core team to implement these priorities.
- Defining the objective is very important. An unified digital platform should address what is need to be created and why.Once the company identifies the goal, then it can achieve its objectives.
- The next step would be to identify what customers want.The digital team should analyse the data and then come up with a list of features which are popular.If a particular feature in one of the platforms is used by a large segment of its customers, then the unified platform should have that feature available.
- Once the goals and the customer requirements are identified, then a core team needs to be formed to implement these requirements.The designated team should have people from both the organizations.The roles and responsibilities of each member of the team should be made clear to every member of the team.
- It is extremely critical that the different employee cultures, management styles and geographies of two companies work together to achieve the stated business objectives. A proper Change management strategy needs to be adopted in order to achieve this.
- The customer support team should be involved in the brainstorming sessions and in finalizing the unified platform.This is necessary because the customers are going to approach the customer support team initially to inquire about any changes to the platform or any problems that may arise as a result.
- Integrating different digital platforms is challenging.Hence it needs to be done smartly and with lot of thinking, else the acquirer won’t gain the scale or profit it hoped to achieve.
- After the integration is achieved, branding needs to be done to increase user adoption.