Santander’s strategy day revealed its thinking on payments. Here’s what we learned:
- Payments is one of a set of strategic “network” business lines which the bank believes diversifies its risk away from lending.
- Payments – merchant services, cards and A2H – accounts for c.10% of group revenue today and will grow to 13% by 2025.
- Santander showed one killer statistic that substantiates the economic rationale for SMB acquiring. In Spain, Santander banking customers that also take POS acquiring generate 2.1x the margin of those that don’t. The multiplier is 1.6 in Mexico and 2.9 in Brazil.
- Global transaction volume is expected to rise and cost per transaction processed expected to fall. This virtuous circle results in significant projected profit increases.
- Total payments transactions processed are forecast to grow 15% CAGR 2022-25. Growth is a little faster in Europe (+12%) than Latin America (+8%). Platform cost per transaction is projected to fall c.20% each year.
- Within Santander’s payments portfolio, PagoNxt, the merchant facing division, should exceed 30% EBITDA margin by 2025 as volume grows and unit costs decline. On 2022 revenues of €953m this implies achievable EBITDA for PagoNxt of well over €300m, given current growth rates. If realised, this would show that Santander has created substantial value with the establishment of PagoNxt.
