1. Payments 2012:
Hindsight to Insight
White Paper - March 2012

2. 2
In terms of mergers & acquisitions (M&A), the payments (PMT) industry1
is very active right now. These are exciting times
for potential buyers and sellers. Deal values have risen, the number of transactions completed has increased, and most
importantly, revenue and EBITDA multiples have fully recovered from the downturn in 2009. Large corporate acquirers,
well aware of the industry’s changing landscape, are looking to acquire innovative and successful firms.
Berkery, Noyes & Co. LLC (BNC) has been closely tracking the PMT industry over the past three years. From 2008 to
2011, BNC recorded 242 M&A transactions. Compared with 2009, the number of transactions in 2011 and 2010 were
up 38% and 73%, respectively. VeriFone, the most
active PMT acquirer during this timeframe, completed
eight transactions.
The total value of these 242 PMT deals was $29.92
billion. Relative to 2009, transaction value in 2010
and 2011 improved 167% and 267%, respectively.
Advent International Corporation was the largest
acquirer by value, paying $5.04 billion. The buyout
firm acquired Card Systems and Identity Divisions
from Oberthur Technologies, Prepaid Platform from
Springbok Services, National Processing Company,
RBS WorldPay, and Payment Processing Unit from
Fifth Third Bancorp.
Transactions valued between $150 and $500 million
(mid market) had the highest median EBITDA
multiple, which was 15.5x. Transactions valued less
than $150 million (small-cap market) and greater
than $500 million (large cap market) received
lower median EBITDA multiples: 8.3x and 12.5x,
respectively.
In contrast to 2009, median EBITDA multiples in
2010 and 2011 were up 51%. Median revenue
multiples in 2010 and 2011 were up 80% and
86% from 2009, respectively (see Figure 1). In
addition, Private Equity buyers completed 14% of all
transactions yet paid the highest average price per
transaction.
M&A activity continued at a robust level in 2011.
The most active acquirers by volume were Fiserv with
three transactions and VeriFone with four.
Fiserv purchased Maverick Network Solutions,
CashEdge and Mobile Commerce. VeriFone purchased
Point Transaction Systems AB, Global Bay Mobile
1 BNC defines the payments industry as payment processors, which includes credit and debit card networks, money transfer firms and prepaid
card service providers, financial institutions, merchants, acceptance locations, mobile network operators (MNO’s), handset manufacturers
(OEMs), technology providers, and consumers.
Figure 1. 2009 - 2011 median revenue and EBITDA comparison.
2 Mobile payments at a tipping point?
A tipping point is defined as the moment of which a previously rare p
dramatically becomes more common.
The attention for mobile payments has been rising steadily over the p
mobile payments continue to be hot – perhaps hotter than ever. Adva
technology have also allowed m-payments to be carried out in new w
m-payments growth have continued to be aggressively optimistic.
1200
Global volume of mobile payment transactions (in b
Figure 2. Lists the top ten transactions for 2011. Calculates their aggregate
transaction value as a percentage of the 2011 total aggregate transaction
value in the financial technology and information industry.
Top Ten Notable Transactions 2011
ents at a tipping point?
Deal Date Target Name Buyer
Value MM
US$
03/01/11
Egg Credit Card Unit from
Citigroup
Barclays PLC $3,200
08/04/11
Card Systems and Identity
Divisions from Oberthur
Technologies
Advent International
Corporation
$1,758
07/05/11
Travelex Global Business
Payments, Inc.
The Western Union Company $975
11/14/11 Point Transaction Systems AB VeriFone, Inc. $818
09/26/11 Accuity, Inc. Bankers’ Almanac $542
06/29/11 CashEdge, Inc. Fiserv, Inc. $460
07/26/11 S1 Corporation ACI Worldwide $422
09/15/11 FundTech, Ltd. BankServ $283
07/07/11 Zong PayPal, Inc. $240
02/09/11 PlaySpan Inc. Visa, Inc. $162
2011 Aggregate Transaction Value $11,258
Top 10 Aggregate Transaction Value $8,860
Top 10 Aggregate Value as a Percentage of All Transactions 79 %
Payments 2012: Hindsight to Insight

3. 3
Technologies, Destiny Electronic Commerce Pty, and Point
of Sale Solutions Business from Gemalto.
Total transaction value for 2011 was $11.26 billion, an
increase of 19% from 2010. Barclays PLC completed the
largest PMT transaction for the year when it purchased
select assets from Egg Credit Card Unit, a subsidiary of
CitiGroup, for $3.20 billion.
The top ten M&A transactions had a combined value of
$8.86 billion, which comprised 79% of all completed
M&A transactions in the space (see Figure 2). Although the
top ten deals encompassed 79% of the total completed
M&A transactions in terms of value, the small-cap market
constituted 89% of the total transaction volume.
Value Drivers
The discussion so far has centered on transaction values
and valuations from an aggregate perspective. From
a decentralized viewpoint, individual players in the
PMT industry who are commanding high values tend to
possess one or more of the following characteristics: (1)
the “Dictator Effect;” (2) “Simultaneous Demand;” (3)
“Product Extension into Underserved Niche Markets;” and
(4) “Leverage Established Infrastructure.”
The “Dictator Effect” is achieved when participants control
wide bands of infrastructure and markets. A player must
have the power to dictate standards and payment types.
For example, large incumbent participants who controlled
railway system access, banks and mobile firms in Japan
successfully launched and established the Suica market
standard for public transportation payments. In this
particular case, the large incumbents controlled all three of
those components.
“Simultaneous Demand” refers to a participant who
offers an option that fully satisfies the demands of both
consumers and merchants. Consumers are reluctant to
adopt new technologies if the value for them is unclear. For
instance, the benefits of a contactless card may be clear
for issuers, networks and merchants, but its advantages
over swipe cards is marginal and hardly sufficient to
induce the most crucial change, a shift in a consumer’s
purchasing behavior. On the other hand, a value added
payment model, such as that provided by Starbucks, allows
customers to pay with a registered prepaid card through
a mobile application. The consumer is rewarded with free
drinks, add-ons and promotions.
Product extension into underserved niche markets is
often a major source of value growth. Currently, Square
is a provider of mobile Point of Sale (POS) acceptance
equipment, which is providing simple and cost effective
solutions that meet the demands of the rapidly growing
mobile vertical of the PMT industry. Meanwhile, online
social networks such as Facebook and Zynga are driving
innovation through multiple payment offerings. These
include virtual currency, credit and debit payments, social
network currency, pay by mobile and prepaid gaming cards.
Leverage established Infrastructure due to the high fixed
costs of building a scalable, secure and convenient
payment infrastructure. The majority of successful payment
providers have chosen not to build new infrastructure
systems, but rather leverage ones already in existence.
For example, instead of competing against banks, Alipay
partners with them for clearing and settlement as a means
of running a large payment platform that processes cross-
border online transactions.
New payment offerings rarely succeed, which proves a
better method of paying does not guarantee success.
Looking back on the dot-com bust, more than 375
payment start ups came and went. It should therefore not
come as a surprise that many essential factors are often
overlooked. Companies with the highest values tend to
demonstrate at least one of the four qualifying features
discussed above.
What the Future Holds: 5 Key Insights
There are several important, nascent trends shaping the
industry. For instance, mobile payments (M-PMT), demand
in emerging markets, strategic partnerships and regulations
are heavily influencing valuations and growth projections.
MOBILE PMT (M-PMT)
M-PMT are considered to be at a tipping point. According
to IE Market Research (see Figure 3 on page 4), the global
volume of M-PMT’s is expected to grow from $37.4 billion
in 2009 to over $1.13 trillion in 2014, a compound
annual growth rate (CAGR) of 94.8%. In addition, the
number of mobile payment users worldwide is expected
to increase 38.2% from 2010, surpassing 141 million in

4. 4
2011 (2.1% of all mobile users worldwide), and reach 1 billion by 2014. The low percentage of users of M-PMT’s relative
to the amount of mobile device users shows the rapid potential for growth.
SUCCESS IN ESTABLISHED & EMERGING MARKETS
There are significant differences between developed and emerging markets pertaining to regulation, technology standards,
and consumer demands based on the relevance of existing payment models. Success is attained when new players within
an emerging or established market modify their business models to reflect marketplace differences. For example, in
the case of mobile payments, smart phone technology is being used in developed markets while emerging markets are
focusing on SMS-based technology to fulfill very basic payment needs that were once unattainable due to a nonexistent
payment model.
NEW ENTRANTS AND STRATEGIC PARTNERSHIPS
The development of M-PMT’s has altered the actions of key stake holders, a category that includes mobile network
operators (MNO’s), handset manufacturers
(OEMs), technology providers, and power players
such as Google and Apple. There has been an
emergence of strategic partnerships shaping the
industry’s future. ISIS’ payment network consists
of MNO’s like Verizon, AT&T and T-Mobile, as
well as electronic payment networks such as
Visa, Mastercard, Amex and Discover. Another
example is Google Wallet, a strategic partnership
of Mastercard, Citi, FirstData, and Samsung.
REGULATION
Merchants have expressed concern over the
rising cost of swipe fees that the Federal Reserve enacted under the Durbin Amendment, a provision of Dodd-Frank that
went into effect on October 1st, 2011. Regulation II regulates interchange transaction fees, giving banks and electronic-
payment networks such as Visa and Mastercard the power to determine the cost of swipe fees and rules for payment
card transactions. Due to Dodd-Frank’s costly regulations, a new signature payment network will most likely emerge that
would be cheaper for merchants to accept payments. The new network will develop from the rising demand within mobile
payments. Past history shows that an alternative network will replace existing networks if the former provides similar or
better services, as with email versus traditional mail and mobile phones versus landlines.
LOWER COST SERVICE PROVIDERS WILL WIN
Despite lingering economic uncertainty, there appear to be several signs of an upturn in consumer confidence and
spending in the United States. Nonetheless, there is a high likelihood that consumers will move away from high-cost
banking payment services to lower cost ones. Consumers and merchants will adjust their financial behavior and use of
credit in response to industry events such as mobile payment alternatives and rising service fees. To circumvent higher
fees, many consumers and merchants will seek new providers, or in some cases shun traditional banks altogether.
According to an unidentified business source, “for business to business transactions of $5,000 or less, PayPal was a
better option than a bank. The payment was faster, the cost was less, and was more convenient.”
It appears as though the PMT industry will remain exceedingly active in the near-term. This predicted level of activity
is based primarily on the continuation of growth in mobile platforms, and by the integration of mobile with online and
traditional landline offerings. The participants that meet the aforementioned drivers of demand will be the long-term PMT
winners.
Figure 3. Volume of M-PMT transactions, including projections for 2012-2014,
according to IE Market Research.
21
2 Mobile payments at a tipping point?
A tipping point is defined as the moment of which a previously rare phenomenon rapidly and
dramatically becomes more common.
The attention for mobile payments has been rising steadily over the past years. Undeniably,
mobile payments continue to be hot – perhaps hotter than ever. Advances in handset
technology have also allowed m-payments to be carried out in new ways, while predictions for
m-payments growth have continued to be aggressively optimistic.
Figure 2: Global volume of mobile payment transactions. Source: IE Market Research, ‘Q3.2010 United States
Mobile Payment Market Forecast, 2010-2014’, 2010.
According to IE Market Research2
, the global volume of mobile payment transactions is
expected to grow from USD 37.4 billion in 2009 to over US 1.13 trillion in 2014, which means a
CAGR of 94.8%. In addition, the number of mobile payment users worldwide is predicted by
Gartner3
to surpass 141 million in 2011, a 38.2% increase from 2010. This number of mobile
payment users would represent merely 2.1% of all mobile users worldwide, which suggests
there is still much room for growth. Especially regions where there is a lack of alternative
payment methods are seen to have strong potential.
2
IE Market Research – ‘Q3.2010 United States Mobile Payment Market Forecast, 2010-2014’, 2010
3
Gartner - 'Market Trends: Mobile Payments Worldwide 2011’, 2011
37
78
153
298
580
1,130
0
200
400
600
800
1000
1200
2009 2010 2011 2012 2013 2014
Global volume of mobile payment transactions (in billion USD)
Deal Date Target Name Buyer
Value MM
US$
03/01/11
Egg Credit Card Unit from
Citigroup
Barclays PLC $3,200
08/04/11
Card Systems and Identity
Divisions from Oberthur
Technologies
Advent International
Corporation
$1,758
07/05/11
Travelex Global Business
Payments, Inc.
The Western Union Company $975
11/14/11 Point Transaction Systems AB VeriFone, Inc. $818
09/26/11 Accuity, Inc. Bankers’ Almanac $542
06/29/11 CashEdge, Inc. Fiserv, Inc. $460
07/26/11 S1 Corporation ACI Worldwide $422
09/15/11 FundTech, Ltd. BankServ $283
07/07/11 Zong PayPal, Inc. $240
02/09/11 PlaySpan Inc. Visa, Inc. $162
2011 Aggregate Transaction Value $11,258
Top 10 Aggregate Transaction Value $8,860
Top 10 Aggregate Value as a Percentage of All Transactions 79 %

5. 5
Berkery, Noyes & Co. LLC believes the robust level of M&A activity and strong
valuations for PMT companies looking to buy or sell will continue over the next
24 to 48 months.
For more information on exit and growth strategies pertaining directly to your company, please contact
Christopher Young. He can be reached either by phone at 212-668-3022 or through email at christopher.
young@berkerynoyes.com
Christopher Young is a Managing Director in Berkery Noyes’ Financial Technology and Information Group. He
earned his MBA and Ph.D. from Rutgers University.
Justin Sheerin is a Market Research Analyst at Berkery Noyes and assisted with the compilation of this white
paper.
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