When Mastercard agreed to acquire cybersecurity firm Recorded Future in September for $2.65 billion, the credit card company made its intentions clear: It said it’s seeking to defend the “global digital economy.” 

As the payments industry players become increasingly digital and tech savvy, they’re building up their software arsenal and technology capabilities to compete in an increasingly digital marketplace. 

Less than a month later, Mastercard made another acquisition, this time a tech company called Minna Technologies, which manages subscriptions through bank apps. 

Purchasing technology and software firms has become a trend among payments companies, as they look to expand their technology stacks while simultaneously securing digital systems. 

“They’re looking to find more ways to be a one-stop shop,” said Sam Wares, director of client success at The Strawhecker Group.

The firm, known as TSG, tracks payments mergers and acquisitions. This year is shaping up to be a busy one in terms of M&A volume, with about 62 deals announced through mid-October, according to TSG.

Deal-making this year will likely result in a slightly higher annual tally than for 2023, when there were 72 deals done, Wares said. The Fed’s recent interest rate cut could spur even more activity in the remaining months of 2024 and into 2025. 

“There’s a little bit more appetite to do M&A now,” said Kartik Sudeep, managing director in Houlihan Lokey’s FinTech Group. 

Payments meet tech

Payments companies announced 22 deals in Q3, beating out the 16 deals in Q2 and 19 in Q1, according to TSG.

“We're definitely seeing an uptick,” Wares said. 

Many of the acquisitions have been in the millions of dollars, or for undisclosed amounts, but Sarasota, Florida-based Roper Technologies’ purchase of Scottsdale, Arizona-based Transact Campus in August amounted to a $1.5 billion deal, including tax benefits. Roper’s CBORD business absorbed Transact, with both firms focused on higher education and campus payments. 

Aside from overlapping industries, “technology leverage” was another reason the two companies joined forces, according to Nancy Langer, CEO of the combined entity. Both firms were cloud and mobile focused, but they were able to “layer the technology we had together,” playing to each of their strengths and developing a full suite of cloud-native mobile apps, Langer said. 

“It just made sense strategically,” Langer said.

Technology was also a compelling reason for U.S. Bank’s purchase of Salucro Healthcare Solutions in August. The latter company provides healthcare financial technology, with a focus on billing and patient payments. 

U.S. bank has “a good foothold in healthcare, but they needed to expand their solution set,” Wares said.

Other tech-centered deals in the second half of 2024 included Cantaloupe’s acquisition of SB Software; Veritas Capital buying digital commerce company NCR Voyix in a $2.45 billion deal;  Global Payments’ purchase of Yazara, a tap payment solution for mobile point-of-sale; and Shift4’s $148 million acquisition of Givex, which provides cloud-based software services to merchants.

“Shift4 is “continually grabbing market share wherever they can,” Wares said. “I don’t expect them to stop.” 

It goes the other way, too, with software companies acquiring payments firms. In August, international payments software provider Flywire acquired Invoiced, a business-to-business finance company, for $55 million. 

Sudeep said this trend diversifies revenue models for software companies, shifting them from pure-play subscription to subscription plus transaction. It allows software firms to become a one-point solution and save costs related to third-party processing of payments. 

Cash on the sidelines

Beyond merging finance and technology, payments companies have other reasons for M&A. Fraud, whether it’s a cybercrime or a deepfake, is creating what Sudeep described as “a lot of heartburn” in the industry. Companies are buying solutions that fight fraud, just as Mastercard did with Recorded Future and as its larger rival Visa did with an acquisition of Featurespace a few weeks later.

Cross-border payments and geographic expansion are also incentivizing deals. Payoneer Global acquired Skuad, a Singapore-based company, for $61 million as part of a strategy to capitalize on cross-border payments.

“It's never easy to build payment rails in a new regulatory environment in a different country,” Sudeep said. Instead of building an in-house solution, acquisition allows faster expansion into new locales. 

The question, ultimately, is whether it makes more sense to build or buy a solution. The factors will vary for each company, but taking upwards of two years to build something could cause firms to “miss the boat on capturing the opportunity,” Sudeep said.

The last couple years have seen a less active payments M&A landscape – “a reflection of the market and interest rates and ability to fund the deals,” Langer said. 

The Fed’s recent interest rate cut is starting to reverse the pattern. Companies had cash “sitting on the sidelines” as they waited for interest rates to come down, Wares said. Now that one cut happened, and others are likely, companies will lay the groundwork to acquire their target firms.

“Definitely a good, healthy environment to do deal-making,” Sudeep said.