Every Worldpay Payfac – And Merchant – Must Prepare to Get Screwed

Worldpay was one of the first processors to offer payfac extensibility.

In fact, they broke the mold when they offered Toast a payfac at $0.007 per transacation.

But a lot has changed since then.

For starters, there are a lot of software companies becoming payfacs. As a consequence, processors like Worldpay realized their revenues would drastically collapse as they lost volume to software competitors (direct revenue is much higher margin than a payfac model where the processor is making <5% of what they would make in a direct deal).

This has actually made payfac economics much more untenable in recent years, and why we recommend that software companies don’t bother with the payfac framework unless they have legitimate factoring needs (i.e. splitting payouts to multiple entities), they serve higher ticket verticals that aren’t rate sensitive, or they’re doing north of $2B of payments volume.

For all intents and purposes, a great ISO deal can get most of these players what they need.

Anyhow, Worldpay is also spinning out of FIS at a $18.5B valuation.

This is after being acquired by FIS for $43B in 2019.

Bro: destroying value at a rate of $6B per year for the past four years is nothing short of incredible.

And it’s going to keep happening to these legacy processors that don’t own real software (Global Payments, Fiserv sans Clover portfolio, Shift4, Nuvei, Paysafe).

You get the idea.

So what does this mean for payfacs using Worldpay as their processor?

The same for Worldpay merchants:

Grab your ankles.

If Worldpay doesn’t already have change in control provisions, you better bet your ass that they’re looking for ways to break the spirit of their agreements and start increasing rates.

And for merchants, you’re going to get cornholed.

Big time.

And why not?

Worldpay is circling the drain.

They’re losing both direct and payfac business to the likes of Stripe and Adyen.

High levels of debt?

Check.

Same leadership that got them right into this position?

Check.

Refusal to invest in software?

Check.

We’re running some numbers to figure out how GTCR is going to make money on this turd (separate post coming) but this is not going to be pretty.

Legacy payments are dead.