October 6, 2017Blog Posts

The Strawhecker Group’s ‘Heard at SLF’ Wrap-Up

This week the industry’s leaders gathered at Dana Point, CA for ETA’s annual Strategic Leadership Forum (SLF). The Strawhecker Group, a Gold Sponsor of the event, had a large team present at the show. See below for topics that were heard by the team.

  • M&A activity on a roll – a lot of discussions on how it impacts the industry and how players should react. It appears that the industry believes that this is gaining more traction.
    • Reasons for the heightened activity:
      • Higher valuations are pushing many leveraged FinTech companies to sell to take advantage of the current market
      • Large processing providers/acquirers are seeking accretive growth through more technical/repetitive processes versus human/relationship sales force – drive better margins through scalable technologies and lower the cost of sales.
      • The industry continues to generate a significant amount of operating cash flow, and have had the financials to leverage debt at a low cost of capital
      • The impression is that the investment community, which is driving the higher multiples for the top 100 acquirers, is “industry agnostic”.  They see opportunities to make investments that will generate 30% returns based on market(ing) demand and not financial/operational performance.
    • M&A activity will remain very active through 4Q of 2017
  • One acquirer noted “Gateways were left for dead a few years ago, now they are the hottest” in the market for expanding services and capabilities
    • Clear consensus across the industry that Adyen is gaining traction
  • Renewed awareness of data and the value it can bring to an organization – payments players are now gaining a better understanding of data and the term “predictive analytics” was frequently heard
  • EMV was not a topic of discussion at SLF. It appears that the industry has shifted its primary focus
    away from the EMV migration, and back to technology investments and seamless boarding and integration.
  • Omnichannel – The industry is addressing this need through cloud based solutions. Significant interest in understanding the ISV market. In almost every conversation ISVs were discussed and there was a clear need to understand these entities better.
  • Acquirers are seeking solutions to “follow the merchant” for their global expansion
  • B2B was discussed repeatedly for the first time in memory
  • BIN sponsorship again is a hotly discussed topic as acquirers are looking for alternatives throughout the market
  • The industry is also looking to solve the challenge of finding a way to reach the remaining underserved and/or non-served merchants in the marketplace with innovative programs and technologies
  • Acquirers are there to educate the merchant in this complex industry
  • Panel on M&A – what should ISOs consider?
    • Understand your strength; what makes you special
    • Understand your identity; what are you good at, what are you not good at
    • Are you complementary to the buyer?
    • Do you have an income strategy or a valuation strategy?
    • Where are you on the growth curve; flattening is BAD
    • Do you have good controls and consistent financials?
    • Make sure your number have no noise = super simple
    • Numbers tell the story
    • Run a private company like a public company
      • Think about: vertically oriented, integrations, no noise, eight quarters of a clear story, figure out what to do

About TSG
The Strawhecker Group (TSG) is a fast-growing analytics and consulting firm focused on the electronic payments industry. The company serves the entire payments ecosystem, from fintech startups to Fortune 500 companies. The firm provides its clients with advisory services, research and analytics to help them plan and execute their strategic initiatives. Based in Omaha, a recognized payments industry hub, TSG is an established leader in this high-growth, ever-evolving space.

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