Visa buys an omnichannel specialist for the age of Amazon Go

Card issuers are accustomed to a world in which consumers choose which card to use at the moment they make a purchase. But in the Amazon Go model that more retailers want to emulate, that choice is made long before the shopper enters the store.

To equip itself for this new world, Visa on Wednesday morning announced a deal to buy Payworks, a Munich-based payment gateway software company. Payworks’ cloud supports omnichannel payments for restaurants, retail and transportation, and Visa plans to combine Payworks with its CyberSource e-commerce and mobile payment unit to build a single integration to support face-to-face and digital transactions.

The goal is to blend digital and physical sales into a single platform. For example, Amazon Go operates by allowing consumers to use the payment card they already registered online at Amazon.com when they visit its stores. As more retailers blur the lines between their channels, they'll need a payment system that can keep up.

Amazon Go turnstile entrance
An turnstile entrance to the Amazon Go store is seen in Seattle, Washington, U.S., on Wednesday, Jan. 17, 2018. After more than a year of testing with an employee-only focus group, Amazon Go opens to the public Monday in downtown Seattle, putting to the test the online retailer's technology that lets shoppers grab what they want and leave without paying a cashier. Photographer: Mike Kane/Bloomberg

Visa was already an investor in Payworks, participating in a $14.5 million Series B funding round in 2018 that Payworks used to develop point of sale, incentive market and CRM systems. Visa did not disclose the price of the Payworks acquisition, and did not return a request for comment by deadline.

The card brand has made several moves to add scale in digital retail and payments. Payworks is the second acquisition for Visa in just a few weeks, as the card brand in late June announced plans to buy Verifi, a firm that offers SaaS-based technology that connects parties in an attempt to resolve payment disputes before they become chargebacks.

That followed Visa’s $320 million acquisition of Earthport, completed in May. Mastercard made a similar deal to acquire Transfast. These purchases allowed the card brands to move fast in the cross-border payments market to meet the threat of blockchain-powered firms such as Ripple.

In this context, the Payworks deal is a different prong of the same strategy applied to multi-channel shopping and purchasing. As retail giants such as Amazon and Walmart play across channels, consumers and other businesses are becoming accustomed to marketing, selling and accepting payments in different venues, often simultaneously.

That trend has led to numerous acquisitions and investments over the past several years as merchant acquirers scrambled to cover digital and non-digital bases.

The activity accelerated this spring through a series of megadeals, such as FIS’ deal to buy WorldPay, Fiserv's agreement to acquire First Data and Global Payments' TSYS deal.

These transactions are designed to bridge issuer and merchant acquiring services through a single relationship, but there is also an omnichannel component. TSYS had earlier acquired TransFirst to support integrated payments; First Data had extended its Clover point of sale system with Silicon Valley Bank to add merchant flexibility; and WorldPay's earlier Vantiv deal provided more cross-channel payment tools to sell to merchants.

A fully integrated payment acceptance solution is quickly becoming table stakes for merchants, said Thad Peterson, a senior analyst at Aite Group.

"Omni-channel commerce is completely dependent upon having a 360 degree view of a customer’s shopping journey and that’s simply not possible in payments with different processing platforms for physical and digital," Peterson said. "Add the need to process alternative payments and cross-border at any touch point and there’s really no way that a siloed solution can deliver, much less compete for merchant business."

By adding Payworks, Visa can cover more real estate in omnichannel, adding to other technologies such as Visa's Token Management feature, which allows merchants to view and monitor transactions across different commerce platforms and payment types. Visa has additionally opened its technology tools to external developers to build a mix of digital and in-store innovations.

"Visa's Cybersource is already a strong player in e-commerce acceptance, and integration with Payworks will help it develop an omnichannel proposition," said Zil Bareisis, a senior analyst at Celent.

Payworks also brings its own partnerships to Visa. Payworks' cloud structure has attracted high-profile partners who, like Visa, were looking to expand services quickly to respond to competitive pressure.

For example, Payworks has partnered with Alipay to support quick integration with point of sale terminals in Europe, a key move for Alipay to counter WeChat Pay in the race to capture payment revenue streams for Chinese travelers, the main way the Chinese payment apps compete in foreign markets.

A Payworks collaboration with merchant software company Squire extended EMV chip card payments to barberships and also helped Stripe, Squire's processor. The partnership provided a way for Stripe to integrate card readers into apps for EMV and contactless payments. The integration allowed Stripe to offer the same account for both online and point of sale payments.

It also was part of a broader strategy at Stripe to address a need to support both online and in-store transactions.

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