Mobile bill presentment is at the heart of ACI Worldwide‘s $750 million all-cash acquisition of bill pay service Speedpay from Western Union announced on Thursday.
“ACI has a strong e-Commerce space, merchant fraud offering and we also have recurring billing,” Sanjay Gupta, SVP of ACI On-Demand, told Bank Innovation. “But at the same time we need to rise to meet the demands of the digital economy, which is becoming very much subscription based, and Speedpay has an excellent Mobile Bill Presentment solution.”
Mobile bill presentment involves configuring a bill payment to a mobile format, Gupta explained. This goes beyond how the bill is presented to the payer as it also involves connecting to bank accounts, payment channels, and the notification ecosystem, according to Gupta.
Speedpay, the bill pay unit of cross-border payments company Western Union, has invested in building its mobile bill presentment offering, Gupta said, which was one of the reasons ACI decided to acquire it.
This offering also serves ACI’s realtime payments initiatives, which are closely tied to digital bill pay. Realtime payment is a new B2B payment rail that — in order to be successful — requires realtime data movement between FIs and realtime security through digital channels including mobile.
Apart from the mobile bill aspect, the Speedpay acquisition adds two crucial business verticals to ACI’s On-Demand offering, Gupta said. ACI On-Demand is the company’s platform-based bill-pay offering.
“Speedpay has a very strong presence in consumer finance and utilities, which includes telecom, payments,” Gupta said. “ACI’s strongest verticals are higher education, insurance, and government.”
Together, ACI and Speedpay bill pay solutions will serve more than 4,000 customers across the U.S.
The all-cash deal is expected to close in the second quarter, but the platform integration is a process that will take “several quarters,” Gupta said. ACI will be integrating Speedpay’s platform onto ACI’s UP Bill Payment platform, he said.
The two companies are similar in that they are both cloud-based platforms, but they differ in the nuances of payment solutions, which are designed according to specificities of the vertical they serve. For instance, insurance-related bill pay is a different solution from a utility bill.
“This is a careful migration, not intended to be invasive and not impacting the client,” Gupta said. “We want to ensure scalability and security and will be using technologies like microservices and active-active configuration to ensure the level of high availability. This platform integration is not on the frontend.”
Third-party consultants and integration specialists will be hired to help with the process, Gupta said.
ACI will also fold Speedpay’s data centers into its own. The Speedpay team will be integrated into the ACI team, Gupta said. Whether there will be any staff cuts or additions, he declined to say.
“The deal fits in nicely with our strategy of heavily investing in R&D; and investing in platforms and data centers that allow us to securely scale,” Gupta said. ACI spends more than 15% of its net revenues in R&D initiatives focused on innovation and growth.
For Western Union, the deal allows the multi-national payments company to focus on its core business of cross-border, cross-currency payments.
Hikmet Ersek, president and CEO of Western Union, said in a statement yesterday:
Divesting the Speedpay business allows us to concentrate our resources on our cross-border money movement strategies and monetize a non-core asset for our shareholders. Our strategy remains focused on expanding our digital services, leveraging our platform to unlock new cross-border, cross-currency payments opportunities, and generating additional operating efficiencies.
Western Union moved over $300 billion in payments in nearly 130 currencies last year. Western Union has a market cap of $7.8 billion.
In 2018, Speedpay generated more than $350 million in revenue and $90 million in adjusted EBITDA, according to the announcement. The deal “provides a compelling financial benefit to ACI,” and is expected to have a material impact on ACI’s EBITDA.
ACI Worldwide shares are up 2% trading at $32.52 per share on Friday at 11:00 a.m. ET. It has a market cap of $3.7 billion.
Join us at Bank Innovation Ignite 2019, March 11-12 at the Hyatt Olive 8 in Seattle. Register here.
