The battle for the register and the battle for the wallet. It's always the same. Who can get the biggest percentage of the merchant dollar? Who can get the most out of the consumer?
This morning we learned that Global Payments (GPN) is merging with Total System Services (TSYS) (TSS) to form a payments colossus that handles everything that happens after you pay an enterprise no matter how big or small with a credit card.
Global Payments has all sorts of payment technologies that merchants need for seamless transactions. So does TSYS and together they will make a heck of a lot more than separately. The combined entity which will be run by Global's Jeff Sloan, a true visionary when it comes to solving merchant payments, will be able to make a heck of a lot more money together than separately. MoffettNathanson's Lisa Ellis, my go-to payments analyst, says that without the deal Global Payments was going to earn $7 in 2020 and $8 in 2021. Now numbers go to $7.35 and $8.80 to $9.00
While TSYS grows more slowly than Global, I like its handheld credit card solution, Genius, which allows a waitress to take your credit card at your table which is exactly what you want if you own restaurants like we do. It's an incredibly forward-looking company.
TSYS allows you to look at how you are doing in real time, another fantastic help for a small to medium sized business like some of the 800,000 customers of Spotify (SPOT) .
Sometimes the battle isn't worth winning. This morning we learned from CNBC.com that Citigroup (C) was in advanced talks to handle the Apple (AAPL) credit card, but let the business go to Goldman Sachs (GS) because it didn't think it could earn an "acceptable" profit on this fee-less card. Citigroup is one of the greatest credit card companies out there. It handles the gigantic Costco (COST) account and it makes a lot of money doing so.
Goldman, for its part, is glowing about the card. Here's what the firm's official statement is about the business: "We're thrilled to partner with Apple on Apple Card. Goldman Sachs seeks to disrupt consumer finance by putting the customer first. We are excited for customers to use Apple Card, which is designed to help people take control of their financial lives."
Behind the scenes I am hearing that the demand for the card may be so high that it could trigger a tsunami of orders that no bank is set up to handle. The upfront cost for Goldman could be tremendous, but CNBC.com also said that JP Morgan (JPM) , Synchrony (SYF) and Barclays (BCS) all considered working with Apple on it.
We still don't know the launch date and I have to say that I would normally not want to take on a business that Citigroup with its expertise doesn't want. However, Goldman wants to be in the fintech category, something that includes every credit card processor, then it might be worth it given how lowly Goldman Sachs is valued - it has the cheapest price to earnings multiple of all the banks.
I heard immediately that this Global Payments-TSYS tie up could end up being a Square (SQ) or a PayPal (PYPL) killer. I say dream-on. Square's done a great job simplifying the register with its reader and has a point of sale system that allows Square to give advances versus receipts.
PayPal? It's the real juggernaut, a worldwide payments company run by the inspirational Dan Schulman that includes Braintree, which is the king of e-commerce and web payments, and Venmo, a business so well-known that millennials use it as a verb, which loosely translated, means send money to another person, perhaps with emoji attached. I say if this transaction is so bad for PayPal why the heck was it one of the best performers in the entire S&P 500. The answer? Every time you see competitors trying to team up to catch PayPal it just reminds you how PayPal is the undisputed worldwide leader, the one that grows faster and better than just about any other fintech in the world.