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Worldline Outlines its Path to Growth

Worldline, which IPOd in May 2014, has announced results for full year 2014 and has presented its views on the payments market, its business roadmap, and its successes to date.

The results, below, are subject to adjustment when Worldline files its financial reporting statements in late March:

  • Revenues were €1,149m, up 2.8% y/y 
  • Operating margin before depreciation and amortization (OMDA) was €215.1m, a margin of 18.7%, up 50 bps.. 

2014 revenues (and y/y revenue growth) by activity were:

  • Merchant services and terminals: €373.8 m (+2.0%)
  • Financial processing and software licensing: €396.1 m (+1.4%)
  • Mobility and e-transactional services: €379.4 m (+5.1%)  

Factors contributing to the y/y revenue growth included: 

  • Merchant services and terminals: Growth accelerated during the year as transaction processing continued to increase and the payment terminal business recovered from the prior year. Specific areas of growth were: commercial acquiring, private label cards & loyalty services, and on-line services
  • Financial processing and software licensing: licensing activities and online banking services grew, driven by project activities in Asia with large Chinese banks, and increased volume in SEPA transactions
  • Mobility and e-transactional services: Revenue growth was driven by e-ticketing (Latin America and the U.K.) and sales cooperation activities with the rest of Atos, primarily in machine to machine activities.

In the first year after its IPO, Worldline has reorganized to be able to rapidly expand its market coverage in the years ahead. Worldline recognizes that the changes to European and international payments regulations will drive both industry vendor consolidation and the internationalization of acquiring vendors. In addition, the European MIF regulation, which caps interchange fees, will drive payments vendors to lower their cost of delivery or fail. Worldline is simultaneously restructuring its:

  • Workforce, to reduce costs of delivery with increased automation (e.g. WIPE program) and consolidated delivery (e.g. sale of a delivery center)
  • Salesforce, to increase sales in its focused priority offerings (primarily mobility and e-transaction services)

Worldline is wisely preserving its cash, deciding to withhold paying a dividend, to increase its ability to invest in what it sees as a growth business opportunity. This is a rare opportunity to stake out a very large market opportunity as the payments industry undergoes a very fundamental, global, restructuring. When the payments industry change is complete, the important characteristics will be:

  • Fewer payments vendors: today each country has few market dominant payments vendors. But there are many countries, and therefore many vendors. Over the next ten years, the industry will globalize and national vendors will consolidate into a few globally market dominant vendors
  • Different technology: Driving the ability to globalize the industry is the transition to electronic payments across multiple payments channels. In the future there will no longer be proprietary payments channels used by payments platforms which are tied to those channels. Payments platforms will be proprietary, but able to transact across open channels. Channels (e.g. mobile, internet, and wireless) will be used inter-operably   
  • Lower cost of delivery: Since the consumer of payments services will be able to route payments across platforms and channels, the lowest cost available will drive the overall market. Only the lowest cost vendor will be able to survive.

Worldline has had a good first year, but the overall payments transformation game is just beginning. Worldline will need to grow aggressively, under conditions of declining revenue per transaction, to continue to prosper.

To succeed, Worldline will need to selectively acquire many local market leaders and merge them into one global payments platform. So, a good start, but there’s lots of work yet to be done. 

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