Wirecard Stakes Claim in North America with Citi Prepaid Buy
Wirecard AG has been making numerous deals and acquisitions over the past several months to expand its global footprint, but today’s news that it has entered a definitive agreement to acquire Citi Prepaid Services puts it firmly on the map in North America.
Citi Prepaid Services, which is based in Conshohocken, Penn., has launched more than 2,500 corporate disbursement programs worldwide, primarily in North America. Citi purchased the prepaid incentives pioneer formerly known as Ecount, in 2007.
The combined share and asset deal, subject to regulatory approval and other closing conditions, is expected to close in the fourth quarter when the total purchase price is due for payment in cash to Citi Holdings, according to an announcement. Wirecard is estimating an EBITDA contribution of the acquired business of more than US$20 million (€18 million) for fiscal year 2017. Financial terms of the transaction weren’t disclosed.
“On an operating level we look forward to sustainably enriching their existing product portfolio via our innovative issuing solutions,” said Wirecard CEO Markus Braun. Wirecard will be assuming all current staff with more than 100 employees at the head office in Pennsylvania and 20 employees at different international hubs.
Citi first announced plans to spin off its Pay Award-winning prepaid business in 2015. “This seems to be part of a larger trend where bigger banks such as Chase have gotten out of part or all of the prepaid business,” notes Ben Jackson, director of Mercator’s prepaid advisory service. “It is interesting timing because it is occurring just before the CFPB is planning to issue final prepaid regulations.” But the deal won’t close until after the rules are set to be released this summer. Although the global prepaid card market is forecasted to grow to US$3.1 trillion by 2022, according to Global Industry Analytics Inc., some experts are concerned that the CFPB’s final rule on prepaid accounts could stifle innovation and growth in the U.S. market.
“This transaction is a positive outcome for our clients and employees of Citi Prepaid Card Services, which will become part of an industry leader poised for growth,” said Citi Holdings CEO Francesco Vanni d’Archirafi. “We are especially pleased that all Citi employees supporting this business will have the opportunity to join such an innovative company.”
“While the entry to North America is intriguing to come via prepaid, this acquisition adds another ‘arrow in the quiver’ for Wirecard in its core international markets, particularly when the incentives business has global clientele. Its adjacency to loyalty, another Wirecard value-add service, is a logical extension,” adds John Grund, partner at First Annapolis Consulting. “Relative to prepaid in the U.S., industry consolidation continues, but the entry of a global player into the U.S. adds a new dimension to the landscape.”