EUR 850.00 For Business Accounts Only

Morningstar | Global Payments is a consolidator in the payment industry.

The acquisition of Heartland Payment Systems vaulted Global Payments into an enviable position as one of only a handful of players processing more than 5% of worldwide transaction volume. We think this is a wise move in a business that depends heavily on economies of scale, and it strengthens Global Payment’s foothold with small and midsize merchants, much as the purchases of Accelerated Payment Technologies and PayPros did previously. Heartland will add strengths in the hospitality, restaurant, and education businesses to Global Payment’s stable.At the same time, Global Payments is adapting to a new payment landscape, in which software--rather than hardware--enables merchants to process payments. Its merger and acquisition strategy has also added to its capabilities in this arena. Global Payments’ OpenEdge division, incorporating APT and PayPros, focused on integrating payment capabilities into other software, thus increasing switching costs. We think this adds to the company’s advantage in a space characterized by intense pricing competition, supporting our narrow moat rating.Global Payments has historically focused on smaller merchant customers, which is a double-edge sword, in our view. These customers tend to be more profitable than massive retailers, as they have less bargaining power. Additionally, the growing use of electronic payments--and the ease with which small businesses can be started thanks to the Internet--provides plenty of growth potential. However, this fact is not lost on competitors. Companies like PayPal and Stripe are also fighting to provide secure, easy-to-use payment solutions and other software for small businesses. We believe Global Payments’ scale, efforts to integrate its products into other software, and sizable salesforce will repel competition in the near future.