More M&A in Digital Gift Cards: First Data/Transaction Wireless

Navigator Edition: August 2015
By: Aaron Mercurio

First Data continued its M&A spree with the recently announced acquisition of Transaction Wireless (TW), a specialized provider of digital gift, or ‘e-gift’, cards. According the company’s recent S-1 filing, First Data will pay $65M in total consideration for TW. The acquisition is the latest in a series of deals that expand First Data’s reach and depth, particularly in the area of digital payments (see Figure 1).

Figure 1: First Data Recent Acquisition History

Fig-1_-First-Data-Recent-Acquisition-History1Previously a joint venture between First Data and Standard Chartered.
Source: First Annapolis Consulting research and analysis.

First Data has now acquired two companies in the past twelve months that specialize in gift cards, both focused on digital gifting. Gyft was the first, giving First Data a platform to enable consumers to buy, send, manage, and redeem gift cards in a managed app (wallet). TW further strengthens First Data’s virtual card capabilities related to distribution and channel support.

While still a small portion of the overall gift card market, e-gift cards are growing rapidly, piggybacking on consumer trends and accelerated mobile investment by retailers (see Figure 2). Until recently, the e-gift segment of the market has been primarily served by specialists such as Transaction Wireless, CashStar, and Giftango (acquired by InComm), companies that started up in the 2005-2007 window specifically to pioneer e-gift cards. While these specialists bring varied solutions to the market, common themes include:

  • Enabling retailers to sell e-gift cards through a hosted website or on the retailer’s site
  • Facilitating different types of innovative digital marketing and use cases of e-cards
  • Allowing for integration with core processors and/or in-house gift card platforms
  • Often acting as the ‘merchant of record’, taking on fraud risk on behalf of retailers
  • Offering distribution and support in areas such as B2B and mobile apps

Figure 2: U.S. Closed-Loop Gift Card Estimated Market Sizing by Form Factor ($Bn)

Fig-2_-US-Closed-Loop-Gift-Card-Estimated-Market-Sizing-by-Form-FactorSource: First Annapolis Consulting research and analysis.

Consolidation is underway in the gift card and broader prepaid market. Other notable acquisitions include InComm‘s purchase of Giftango in 2013 and Blackhawk’s recent acquisitions of CardLab, Parago, InteliSpend, and Achievers. Other players to watch include e-gift specialist CashStar, which recently announced a Series D capital raise of $15M bringing its total funding to $50 million, and core gift card processor SVS, which was part of FleetCor’s acquisition of Comdata in 2014.

On that note, we expect more M&A activity in the prepaid market as strategic buyers look to strengthen and expand their digital presence while financial buyers pursue businesses with attractive growth profiles and a digital upside.

For retailers, the consolidation of vendors could open up opportunities to streamline relationships and interfaces across distribution channels. There are a few more chess moves to be made in the gift card space, but it is clear that the pace of activity is accelerating.

For more information, please contact Aaron Mercurio, Senior Consultant,, specializing in Credit Card Issuing.

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