FSI, a Milan-based private equity fund, has completed its c.€100m investment into Bancomat, Italy’s domestic card payment scheme. With the new capital, Bancomat will engage Nexi to refresh its core technology infrastructure and accelerate plans to expand operations outside its home market.
FSI has quickly become one of the largest forces in Italian payments, having been active in the creation of BCC Pay from assets purchased from Iccrea Banca and Banco BPM.
Bancomat is currently owned by an unwieldy consortium of 105 Italian banks led by Intesa San Paolo and Unicredit. After its investment, FSI will hold 44% of the shares and has installed a new, streamlined board of directors which, it is hoped, can take decisions more quickly and be better placed to compete with Visa and Mastercard.
Fabrizio Burlando, a former BCG consultant and long-time Mastercard executive has been appointed as Bancomat CEO. He will need to oversee a sharp change in its business model. The scheme has operated for years as a co-operative organisation working largely to recover its costs. Now having accepted private equity backing, Bancomat will need to focus on growing its top line.
Bancomat’s 2023 results demonstrate that, despite its scale, the scheme generates relatively little revenue. Total sales were up 8% to €52.5m with the bulk of this turnover coming from the operation of Pago Bancomat, its core debit card issuer and acceptance business.
30m Pago Bancomat cards in circulation today, issued by 190 member banks, and can be used at 2.5m points of sale. Total payment volume processed was €119bn in 2023, up 4%. In common with the rest of Europe, Italy has seen a marked shift to contactless transactions, stimulating card use for lower value purchases. Bancomat’s ATV was down 4% to €47.20.
Pago Bancomat revenue was up 11% to €35.8m amounting to just 1.4 cents for each of its 1.85bn transactions. This equates to 3bps of turnover compared to the c.20bps or c.$0.12 made by Visa on its worldwide card business. .
Bancomat works on a conventional four party model with Interchange set at 0.2% although there is a discount to 0.1% for transactions under €5. Merchants typically pay c.1% per transaction, leaving the balance for the costs and margins of the acquirers such as Nexi, Worldline and many small banks.
Bancomat’s recent innovations include adding acceptance to Nexi’s SoftPOS application with 22.000 devices activated in 2023 and its inclusion in the Google Pay wallet. Apple Pay is reportedly coming shortly. Bancomat has also started issuing commercial cards.
Bancomat Pay, a new mobile-app based payment product offered through member banks allows both P2P and P2B transfers. Bancomat Pay is growing swiftly from a low base. Volume was up 83% to €0.44m although revenue rose just 19% to €0.5m, equivalent to 5 cents per transaction.
FSI will likely be looking to grow Bancomat Pay internationally. Bancomat has already signed an agreement with Bizum (Spain) and SIBS (Portugal) for interoperability of their products. It is taking a similar approach to working with Bluecode (Austria) and Twint (Switzerland) and has a pilot working for the European football championship in Germany.
Reflecting the long-term decline in cash transactions, ATM volume was down 4% to €106bn and ATM revenue fell 5% to €4.4m.
Bancomat has an existing partnership with Discover, has added Discover to its ATM service and is working with Italian acquirers to put Discover live at POS. In 2023, Discover paid Bancomat €2.2m incentive fees.
Despite the higher revenues, Bancomat’s EBITDA fell from €16.6m to €5.9m due to higher operating costs.
Staff numbers rose slightly to 81 at an average cost of €104K, up 12% on 2022.
EBIT swung from a profit of €12m in 2022 to a loss of €4m in 2023 due to €16.6m write-downs and break-fees associated with the termination of its plans to create a new business unit, a “payments hub” joint venture with SIA, a technology supplier subsequently merged into Nexi.
Bancomat’s new strategy is to commission Nexi to build a new payments infrastructure but as a vendor rather than business partner.
