On April 3, 2017, e-Commerce Merchant-of-Record supplier Avangate (MGI 360 rating: 46, Outlook: Neutral) announced an acquisition of 2Checkout, a payment gateway operating as a payment facilitator. 2Checkout provides merchants with payment pages, mobile checkout, and PCI compliance globally.
- How will the technology landscape for global payments evolve?
- What best practices can enterprise employ to optimize their payment and foreign exchange processing costs?
- What is the impact of new FinTech offerings on payments technologies and practices?
- Who are the winners and losers in the evolving digital payments economy?
The conclusion of our analysis is that this is an economically motivated deal. It aims to bulk up the revenues and the payment volume of Avangate. It also provides Avangate with a payment facilitator (“PayFac”) capability. Aside from revenue gains for the combined entity, the near-term benefits are not immediately obvious for customers and prospects. Until a crisp integration and go-forward plan are achieved and Avangate’s operational strategy is clear, the deal will likely consume precious Avangate resources.
A positive outcome of this deal would be for Avangate to move more quickly towards disaggregating its all-in-one merchant of record capabilities to offer its services as a more flexible set of components. Moving towards a Payment Facilitator (PayFac) model is a step in the right direction.
This is an immediate win for Avangate in terms of processed volume and the ability to negotiate with its suppliers. 2Checkout adds to critical mass—several thousand customers and and a new base in the US. It also introduces an expanded merchant community that Avangate may aim to bring online, globally, over time. In the short term, the lack of an integration roadmap and a cloudy licensing status for 2Checkout in the UK gives one pause. While the Avangate management team has a track record of managing acquisitions and expects to add resources post-transaction, current customers and prospects should expect a degree of operational distraction for the next 6 to 12 months. We will be reviewing and updating the MGI 360 Rating for Avangate soon to account for the impact of this transaction.