Global Payments’ purchase of TSYS is the latest merger of large payment technology companies — and by no means the last.

Payment processing as a standalone industry is already gone, as the FIS-Worldpay and Fiserv-First Data deals attest. While these companies are quick to tout massive scale, they still have holes that keep them from serving their markets.

And they remain threatened by outside innovators.

So what makes the $21.5 billion merger of Global Payments and TSYS tick, and what questions does it raise? Here are six takeaways from the deal.

Battle of the fintechs

All six of the big buyers and sellers — FIS, Worldpay, Fiserv, First Data, TSYS and Global Payments — face disintermediation by well-funded and smaller technology companies that are attractive to investors and have a reputation for moving faster.

“TSYS and Global Payments are two of the last large relevant standing payment-only type companies,” said TSYS CEO Troy Woods, who will be chairman of the combined company, in an interview. “It made sense to take both companies and find a way to do something together.”

The deal will provide TSYS greater access to global markets as e-commerce and cross-border transactions become more important to merchant acquiring, an area where TSYS has room to grow.

“Global payments is in 32 countries outside the U.S. for acquiring,” Woods said, adding TSYS does not have a major non-U.S. merchant acquiring business. ”The heavy lifting for us to do that over the next few years would be Herculean.”

The combined company will attempt to differentiate itself from the other large legacy companies with a heavy focus on payments-related tasks and merchant services, such as consumer solutions, reloadable payment products (such as TSYS’ Netspend business) and merchant acquiring, Woods said.

Under the terms of the agreement, TSYS shareholders will receive 0.8101 Global Payments Shares of TSYS common stock, representing an equity value of TSYS of about $21.5 billion. Global Payments shareholders will own 52% of the combined company, and TSYS shareholders will own 48% on a fully diluted basis.

One-stop shop — but only for payments

The deal will also streamline how payments technology is packaged with other merchant services in the sales process, Woods said.

“The other large companies do have components of that but they are also doing mortgage services and many other things that a bank might need,” Woods said. “We are purely a payments technology company.”

Stripe is one of the biggest competitive threats to legacy processors, with its huge valuation and international ambition. Square also offers merchant credit, PayPal is embedding its own Venmo P2P app into merchants payment flows, and Adyen has picked up processing and e-commerce heft in Europe.

In competition with fintechs, TSYS and Global Payments will rely on scale, according to Woods.

"[The fintechs] are formidable competitors that have grown up from typical acquiring and moved into credit and advances and faster access to money, which are things that we have done,” Woods said. “Some of the biggest differences is we’ll have 24,000 team members when a merchant is growing to run down a problem.”

By pairing merchant innovation, delivered as in a cloud, Global Payments and TSYS hope to respond to the fintechs, according to Global Payments CEO Jeff Sloan, who will be CEO of the combined company

“The world is moving more toward tech adoption — those other two transactions validate that thesis,” said Sloan during a Tuesday morning conference call to announce the deal. "This merger accelerates that division between folks that sell commoditized processing and those of us that are migration toward tech enablement."

Small merchants are big business

Both FIS and Fiserv want to pair card issuing and merchant services, giving banks a way to connect more directly with retailers. That's also part of Global Payments and TSYS' goal — to give banks inroads to small businesses that Square, Stripe and other fintechs are targeting by offering financial services beyond card acceptance.

During the Tuesday conference call, Sloan spoke extensively about monetizing customer relationships beyond payments, saying Global Payments is "selling an ecosystem."

For example, Global Payments and TSYS can use technology acquired from the earlier Heartland deal to sell lending and payroll services to merchants, a popular play for fintechs such as Square that Global Payments and TSYS can augment via a network of 1,300 financial institution clients.

Small business will be a particular target. This market is specialization for Global Payments and TSYS, which can wield the scale of a mega-merger yet still attempt to serve a niche.

"The deal positions TSYS and Global payments as a competitive player against FIS/Worldpay and Adyen, and with a focus on small to medium sized businesses versus the enterprise, they may be in a differentiated position with a focus on smaller business," said Thad Peterson, a senior analyst at Aite.

When the deal closes in the fourth quarter, the combined companies will process more than 50 billion payments annually in 38 countries physically and more than 100 countries virtually with about 3.5 million merchant locations. The combined companies will also have about 1,300 financial institution clients.

Mind the gaps

Beyond the international acquiring reach that Woods mentioned, there are lines of business that TSYS and Global Payments can pursue in each other's markets.

TSYS has a large presence in smaller retailers, while Global Payments has strength in restaurants. “And each company has a point of sale solution that’s targeted at those industries,” Sloan said.

"TSYS can capitalize on our unified business payments platform which TSYS does not have outside the U.S.,” Sloan said.

TSYS has strengths as a U.S. payment facilitator, while Global Payments has strengths as a cross-border payment facilitator.

Also, TSYS has strengths in B2B, B2C and P2P digital payments, where Global Payments is lacking, according to Sloan. "We expect B2B and P2P to accelerate growth for us," Sloan said.

Identity matters

Stripe recently made its own acquisition, buying Touchtech to provide strong authentication in line with EU identity risk regulations that go into effect in September as part of the PSD2 standards. Stripe views strong authentication as a gateway to broader merchant services, since PSD2 is expected to have a global impact as other markets adopt strong authentication.

Global Payments says that by combining TSYS' issuer business with Global Payments acquiring assets, the combined company can get a headstart on providing improved authentication in line with the new standards.

The merger also positions Global Payments and TSYS to sell into the overall trend toward digital, dynamic authentication as an alternative to passwords. As regulations and market conditions accelerate, merchants and issuers will be in line to upgrade identity security.

"We think that we're ahead of what the world is doing and that strong authentication can be a good use case for us," Sloan said.

Is the dealmaking over?

Definitely not. During Tuesday morning's deal conference call, Sloan repeatedly mentioned the possibility of future deals.

Sloan said the TSYS acquisition, which both companies describe as a "merger of equals," is a stock deal that opens the possibility of other transactions.

Global Payments gained a foothold in small business and education payments technology though its $4.3 billion Heartland deal in 2016. That was quickly followed by another deal, as Global Payments spent another $1.2 billion to buy ACTIVE Network a few months later, giving Global Payments a quick strike into specialty retailers such as event and fitness.

Sloan mentioned those earlier deals on Tuesday, taking note of the pace of the deals and his assertion that one deal feeds into another as Global Payments looks to enter new markets rapidly.

Also, during a recent interview, TSYS executives discussed the current buzz and inevitability of dealmaking in the payments industry.

“Vertical and horizontal transactions are not mutually exclusive,” Sloan said on Tuesday.