Volt, a well-financed open banking payments vendor with global ambitions, reported a strong increase in revenue for 2023. Although the business, like many of its competitors, is still a long way from profitability, the unit economics from early deals look very promising.
Revenue more than doubled in 2023 to £12.9m. Volt is based in London but the vast majority of sales came from EU where it has opened offices in Krakow and Berlin. The Krakow team looks after its Polish PI licence which supplements Volt’s existing UK EMI authorisation. The business is also active in Brazil and Australia.
In total, Volt processed £0.62bn in 2023 from 8.8m transactions. Revenue per transaction rose slightly to £1.46 equivalent to a take rate of 2.1%. This is premium pricing and well ahead of the typical c.20-25p for open banking transactions reported by Jeremy Light in recent industry commentary. Volt’s ATV was up 7% to £70.4.
Volt is evolving its product offer and now supplements payment initiation with pay-outs and provision of bank-lite products such as virtual IBANs. If you want to see Volt’s payment flow, donate a few euros to UNICEF. The checkout is elegant and even includes a prompt to steer shoppers away from cards towards open banking.
Key merchant customers include Farfetch for the UK, Germany and Netherlands but Volt has also been active negotiating key distribution partnerships. These promise significant volume if/when open banking payments become mainstream. Partners include leading ISVs such as Shopify and merchant acquirers such as Worldline.
Volt is self-styled network of networks and pays fees to 3rd parties for access to their API aggregation services. It also must pay its banking-as-a-service vendor for the provision of virtual accounts. These costs held steady at an average of 16p/transaction, well below Volt’s selling price.
Gross margin of £1.30 per transaction is impressive and led to gross profit more than doubling to £11.5m.
Administrative expenses rose much less quickly than revenue, growing 14% to £23.2m including £8.5m of employee expense. Staff numbers rose from 118 to 202 (of which 90 were contractors). The staff are good value, costing just £42K each.
Volt’s operating loss narrowed from £16.9m to £11.7m. Accumulated losses were £31m at year end.
Volt took $60m new funding in 2023 taking the total fundraise to $90m and finished the year with £38m cash in the bank. This is enough for three years at the current burn rate. If volumes increase as expected and Volt can maintain its premium pricing, the business should be one of the winners in this sector.
IPOs aren’t always a positive, especially if private equity funds are selling stock. Paysafe, the high-risk acquirer and pre-pay wallet provider, was originally listed on the London market but taken private by Blackstone/CVC for $4bn in 2017. These giants floated Paysafe in New York in 2020 at a market capitalisation of $8bn. Since then, the shares are down 80% (see chart) and management is now looking at divestments and/or selling the whole business to to another private equity fund. This sort of corporate ping pong enriches lawyer and bankers but does nothing for customers.
Checkout.com generated the wrong sort of headlines as fintech journalists focused on the poor financial results of one of its UK trading entities. Checkout comprises several businesses in different countries which often trade with each other and are ultimately wrapped up in an offshore holding company. There’s no way of telling how well it’s doing from the regulatory filings of one entity.
Fighting back, Checkout put out a release claiming worldwide revenue grew 40% in 2024. And the business is profitable on “an adjusted EBITDA” basis which I was told means cashflow positive. Following the termination of its relationship with Binance and OnlyFans, crypto/adult traffic now represents less than 5% of Checkout’s sales.
Checkout claims 40 merchants processing over $1bn, well behind Stripe’s 100, but impressive nonetheless. These numbers are not audited but are consistent with feedback I’ve had from the market. Checkout is certainly winning business from the incumbents and competing head-to-head with Stripe and Adyen.
It’s good to see Worldpay spending money again after its wilderness years entombed within FIS. The deal to buy Ravelin Technology, the London-HQ’d fraud specialist, will give Worldpay something new to sell to its enterprise clients.
Ravelin has top quality management and good technology but there really isn’t much money in fraud screening. Despite a stellar client list that includes Spotify and Deliveroo, Ravelin had only managed to achieve £15m annual revenues and may have needed refinancing soon. Merchants increasingly expect the service free of charge with their payment processing bundle. Meanwhile, Elavon (which recently signed with Ravelin) will likely need to find a new fraud vendor or risk Worldpay being able to view its customer list.
DNA Payments Group has made good progress with building a UK SME proposition from a series of acquisitions, notably from fast-growing revenue streams from acquiring and additional payment volume from new ISV partnerships. But 2023 accounts show significant losses continuing. Read more on the Business of Payments blog.
The JP. Morgan vs Haris Karounis litigation, centring on a $2bn difference of opinion about the valuation of Viva, continues but has moved from London to Athens. The US banking giant is now claiming €916m damages from Viva’s founder following the creation of this troubled mPOS joint-venture. Both parties accuse the other of bad faith but it’s the lawyers that will likely win this one. For those interested in Regulation K of the Edge Act, 1919, the full UK judgement is now available.
In other banking news, Unicaja, the sixth largest in Spain with over 900 branches, has chosen Fiserv as its merchant payment partner. This is a good win for Fiserv and gives the American giant a bank partner in Spain for the first time.
It’s been a busy month for fundraising news. Here are the highlights:
Flatpay, the fast growing Danish POS-focused payment facilitator, has raised a further €58m to support market expansion, taking total fundraising to €120m. Investors claim Flatpay is “the fastest growing Danish startup ever.” And there’s a new TV commercial in which Danes say “Flatpay” and “no brainer” to each other.
Flatpay already has 150 people in its Berlin office with 50 more to be recruited this month and is actively hiring staff in Italy. The proposition is based on a PAX A920. There’s a simple price plan although the flat rate of 1.49% in Italy isn’t particularly competitive. Shift4 is the acquirer/processor.
Flatpay isn’t the only new entrant to Italy. Dojo has opened an office and Qomodo, based in Milan, has raised €13.5m (€48m in total) to build out its POS payments solution for high ticket SMEs such as dentists and vets. Qomodo claims 2.500 merchants are using its PAX A920 Pro, of which 20% take an in-house BNPL product. Transactions are keenly priced at 0.95% for international cards and 0.49% for Bancomat.
Dublin-based Nomupay which was formed out of the ashes of Wirecard’s SE Europe and Asia businesses, has raised $37m at $200m valuation bringing the total capital received to $90m. Management says Nomupay will be profitable this year on $20m recurring revenue from 1,600 merchants. The new money will go on M&A.
Zurich-based Tiun.io, has raised €2.5m for a clever pre-pay micropayment solution for online publishers. 50 titles are already on board. Consumers link Apple Pay, PayPal etc to the wallet and set maximum monthly spend limits per publication. Tiun solves a genuine problem for the media industry and should do well.
In regulatory news, BAFIN, the German regulator, has turned up the pressure on PayOne. Worldline’s joint venture with the local savings banks has previously been accused of lax money laundering controls and will now host a “special representative” sent by the regulator to oversee improvements in its onboarding processes.
Scheming
2024 ended with yet another storming quarter for the American schemes in Europe. Combined Visa and Mastercard payment volume rose 15% to €1.325bn with Mastercard (benefiting from winning the Unicredit portfolio) again marginally outperforming its arch-rival.
Both Visa and Mastercard have finally begun promoting Click to Pay, a digital wallet viewed as their competitor to PayPal and Apple Pay. So far, Click to Pay has failed to excite the industry but Mastercard has launched a clever marketing campaign. It’s based on problems faced by people living in towns with long names when shopping online. No prizes for guessing which Welsh village features prominently.
It would be wrong to write off Click to Pay too soon. JustEat’s product manager posted on LinkedIn that 10% of its manual card entry traffic in the UK opted for Click to Pay, delivering 3ppt increase in conversion.
Away from the major schemes, Discover’s global network, built at considerable expense, is going nowhere. Worldwide transaction payment volume from its 25 alliance partners, such as RuPay and SIBS, was down 30% in Q4. It’s time for a rethink. Capital One, which is in the process of acquiring Discover, has the chance to make something of this underused gem which offers acceptance at millions of stores and websites around the world.
MPE Conference
We’re rapidly approaching the MPE Conference, Europe’s leading event for merchant payments which is held in Berlin on 18-20 March. There’s a comprehensive conference programme, exhibition and lots of networking. MPE is a place to do deals. It’s a friendly event and delegates are more likely to take a meeting than at many conferences. Readers of Business of Payments get a 10% discount by using the code mpe-10off at the checkout. Book here.
ISV
Small businesses are increasingly buying payment processing as a bundle with their software. Acquirers/PSPs need to either partner with the software vendors (ISVs) or start commercialising their own business software. I discussed the latest trends with Charlotte Al-Usta from Flagship Consulting on this MPE podcast. Click on the picture for the video version or listen to the podcast here.
Shift4 sells its own software called Skytab, counts one third of US restaurants as customers and has just launched in the UK, bundled with a payment terminal and processing contract. The UK is a crowded market for hospitality software, but Shift4 will be hoping its supersized American-style sales commissions will turbocharge growth. Its network of self-employed agents can expect to earn up to twice what competitors such as Dojo and Global Payments are paying. The Shift4 team tell me that Germany is next on their list.
MyPOS is also moving into proprietary software, having bought Toporder. This Lyon-based ePOS vendor serves 700 small speciality food outlets such as bakeries with its iPad application. This is the first significant move by MyPOS since it was acquired by Advent, a giant private equity group, last year.
Less ambitiously, Worldline will be reselling WIX webshops to its SME customers in Europe and Australia. WIX already claims over 200m merchants and over $1.5bn annual revenues so it’s not clear what Worldline will add to the proposition.
ISVs can be demanding partners for payment processors. They need their merchants onboarded swiftly with no hidden surprises, flawless customer service and transparent pricing. A growing band of start-ups are looking to supply the specialist payment infrastructure that helps ISVs and PSPs to work together.
For example, Unipaas, founded by the former Safecharge management team and based in London, offers payment facilitation as a service to eCommerce ISVs. Management claims 20 ISVs connecting to 75,000 merchants. Nuvei and JPM are the acquirers.
Investors are alive to the need for ISVs to have a strong payment offer. Nelly, a Berlin based software business focused on management of healthcare practices, just raised €50m. It offers integrated payment processing via Adyen. Terminals are free and POS transactions are charged at just 0.99%.
New shopping
The latest generation of autonomous stores no longer require shoppers to use apps or online payments. This is good news for vendors of conventional payment terminals and monoline card processing.
The world’s largest autonomous store, covering 1,200 square metres and 10,000 products, has opened in Portugal. With technology from Lisbon-based Sensi, customers of the Continente Bom Dia supermarket in Leira don’t need to check in or download an app. They simply fill their baskets, confirm their purchase total and pay on a standard card terminal at the exit. It’s a remarkable technical achievement which brings together 1,676 cameras and 2,000 scales. The promotional video is cool. This really could be the future of grocery.
Portugal is a hotbed of new shopping technology. Rekon.ai, based in Porto, has announced a partnership with IKEA for an autonomous microstore in London. In these implementations, shoppers scan their credit or debit card at the entrance and are automatically billed when they exit the shop.
Analysts suggest that 2025 could be the year of the smartcart, an interesting compromise between self-checkout machines and fully autonomous stores.
A2Z, based in Israel and one of the leading vendors, has secured orders for 30,000 carts from Casino, the French supermarket and has high hopes for a massive deal from Carrefour. Analysts estimate the monthly subscription cost of a smart cart at $150which they say is “peanuts” compared to the potential revenue from selling advertising on the smartcart’s integral screen. This may be true, but supermarkets are ferocious negotiators and unlikely to let a tech vendor see much of this upside.
Turning to biometrics, PayEye, a Polish start-up, is using iris scanning to combine automatic payments with age verification. The first customer is a five star hotel. PayEye, which is working on the project alongside Mastercard, reports 60% of triallistswould use the service if offered elsewhere.
JP Morgan showcased two new biometric payment devices at the NRF Show in New York. The Paypad and PINpad both include face and palm recognition. You can see more in the video.
SoftPOS
SoftPOS is going mainstream. Volumes are growing rapidly and enterprise implementations coming thick and fast.
DPD Poland has completed an 11.000 device roll-out of SoftPOS. The payment application sits on the courier’s Zebra handheld terminals and is used to take cash-on-delivery. There’s no need for a separate payment terminal. Planet Pay (no relation of Planet Payment) is behind the solution.
Despite almost doubling sales in 2024 to €1.9m, Munich-based Rubean is not growing as quickly as investors had hoped and the stock price is down 31% over the last 12 months. However, Rubean is steadily winning new customers such as Deichmann, the German shoe retailer and management has raised an extra €0.9m for expansion into Latin America and the US.
A small group of vendors has begun providing in-store payment acceptance to ISVs using SoftPOS to combine ECR and payment terminal in a single device.
StringIQ offers SoftPOS based payment acceptance as a service to ISVs. It claims 6,300 merchant sites live across Europe. StringIQ works as an ISO for Rapyd and Cashflows.
Amsterdam-based Klearly is focused on providing hospitality ISVs what they need to offer payment acceptance to their merchant customers. Klearly, which says 4,000 merchants use its SoftPOS application just raised €6m to expand to new European markets.
Mastercard is testing a further use case of SoftPOS that would enable shoppers to make eCommerce transactions by tapping a payment card on their own phone. This idea has been around for a while but, so far, has been viewed as a solution looking for a problem. Mastercard’s pilot will allow diners to pay at table by tapping their payment card on bills generated via a Hong Kong restaurant booking app.
Finally, it’s farewell to Phos. One of the SoftPOS pioneers, the London-based vendor was bought by Ingenico in 2023 and is now renamed Ingenico SoftPOS. Ingenico says the new identity “embodies our commitment to innovation and our vision for the future of payments.”
Despite the robust growth, open banking accounts for a tiny fraction of the 48bn consumer payments made annually so there’s plenty of upside here. The problem facing the payment industry is that there’s no prospect of volumes rising quickly enough to cover their fixed costs. Jeremy Light has done the maths and believes open banking offers “slim pickings today” with transaction fees typically just £0.2/€0.25.
Lack of consumer protection is the problem, not just from bankrupt airlines but also from scammers. As bank transfers move from considered purchase to reflex action, there’s more opportunity to trick people into sending money to criminals. For example, days after beginning to accept Venmo (a US A2A standard), fraudsters began to “deceive and defraud” Jet Blue customers.
Banks, already worried about their increased liability for fraudulent A2A transactions, risk setting open banking fraud controls so high that they reject many good transactions. The CMO of VibePay, an open banking vendor, shared his frustration at Lloyds Bank continually blocking A2A as suspected fraud. If an individual’s first open banking payment doesn’t go through, it’s going to be hard to persuade them to try again.
In vendor news, Tarabut, a leading Saudi open banking vendor, acquired London-based Vyne for its technology platform and is already closing down Vyne’s UK operations. The business did have some decent customers, including Marks Electrical, but revenues were likely to be less than £1m and Vyne had lost a total of £13m by March 2024.
Saudi Arabia is fast becoming a very interesting market for open banking as you can read in this excellent analysis by Jas Shah. He concludes that Jeddah has imported the UK regulations and made them better.
With politicians across Europe worrying about how to maintain access to cash, here’s a great idea from Switzerland. Sonect provides consumers with an app that turns store checkouts into a virtual ATM. It’s helpful for people who need cash and gives retailers some extra footfall. 2,300 sites are live in its home market and Sonect has expanded into Italy.
Crypto corner
Trump 2.0 has given full backing to crypto and is planning to roll back what limited regulations the Biden administration had imposed on the sector. There’s loads to worry about. Even established crypto tycoons are concerned that a return to the “wild west” will cause blow-ups that harm the legitimate parts of the industry. As Benedict Evans put it “combining borderless decentralised software with money” will only result in a further explosion of scams and bubbles.
Paul Krugman may be harsh in saying that crypto is for crime but it’s certainly best for gambling, not investing. Football fans are easy marks and could easily confuse trading crypto with sports betting in this commercial from Bitpanda, the new sponsor of Paris St Germain. What could possibly go wrong?
Readers of Business of Payments will be most interested in whether consumers will want to use crypto currencies to buy stuff in shops or from websites. I’m sceptical. If the price of Bitcoin only goes up, why spend it?
Nonetheless, luxury brands often do accept Bitcoin. As one put it, selling expensive handbags to crypto-millionaires can help them “diversify their asset portfolio”. Lyzi, based in Paris, is probably the leading vendor and claims 120K points of sales live with its crypto-acceptance solution including Printemps, the department store. Merchant pricing starts at a chunky 3% which would make many retailers think twice before adding a crypto button to their checkout pages.
There’s renewed investor interest in crypto-acceptance. London-based Helio Fintech, whose plug-in allows merchants to accept crypto and get paid in dollars, sold itself to MoonPay for $175m. That’s a punchy price for a business processing just $1.5bn volume from 6,000 merchants. Transactions start at 2%.
Turning to central bank digital currencies, the USA has ruled out setting up a digital dollar, leaving the field clear for the Eurozone and China. The ECB certainly believes a digital Euro is necessary to respond to the proliferation of dollar based stablecoins and help secure the continent’s strategic autonomy. The Bundesbank agrees and is hiring a 30-40 strong team to work on the project.
Klarna’s CEO says a robot could do his job. “I am not necessarily super excited about this,” he explained. Meanwhile, The Dutch Parliament is considering banning BNPL at POS, warning that it can lead to vulnerable people accumulating too much debt. Klarna would be the primary loser.
A remarkable 13% of Americans admit to first-party fraud such as falsely claiming a delivery was stolen while one third of Brits say they have stolen from self-checkout machines.
Criminals used malware to intercept one-time passwords and send stolen card credentials to a smartphone operated by a mule stationed by an ATM. Police arrested “a suspiciously masked man withdrawing money from a cash machine in Prague for a long time.”
Activists in Iceland continue to target sports groups sponsored by Rapyd, the processor whose CEO has been vocal in support of the Israeli action in Gaza. The front door of the Icleandic Sports & Olympic Federation was covered in stickers reading “Rapyd supports Genocide”.
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And finally
Yay for cheques. Can your payment method do this? (Hat tip Scott Wessman)
DNA Payments, a group of UK-based payment businesses backed by Alchemy Partners, reported decent sales growth in 2023 but is still making significant losses.
DNA was founded by two Kazakh bankers, Nurlan Zhagiparov and Arif Babayev in 2018. It received £100m investment from Alchemy Partners in 2021 to build “one of the largest independent, vertically integrated omnichannel payments companies in the UK and EU.”
While the most successful payment players have done this by building a platform from scratch, DNA (like Teya) chose to buy and integrate a series of businesses. To their credit, DNA has finally built a competitive SME proposition for the UK market but management has clearly found this taking longer than anticipated. An early objective to be the “4th largest payment provider in the UK by close of 2022” has long been missed.
DNA’s technology is based on the acquisition of Optomany, a technically strong omni-channel payment gateway, which was purchased for a bargain price of £2.5m in 2019. 123 Send, a leader in short-term rental of payment terminals also came as part of the deal. Since then, DNA acquired many more businesses, mainly small UK ISOs. These have finally been integrated into a DNA-branded core sales and marketing engine although 123 and Optomany also trade independently.
Group turnover rose 15% in 2023 to £26m, powered by strong growth from the fast-growing in-house acquiring business which more than tripled revenue to £17m. This good performance outweighed falls in revenue from sale/leasing of payment terminals (-24%) and processing fees (-23%).
DNA includes interchange and scheme fees in its gross revenue number.Despite the higher revenues, gross profit was down 23% at £8.9m reflecting the lower gross margin of acquiring. Overall gross margin fell to 33% from 51% in 2022.
DNA’s website claims 100.000 terminals and checkout pages supported at 65,000 customers and £11bn transaction volumes. In-house acquiring will only account for a fraction of total volume so there is plenty of room for growth. The acquiring portfolio has been extended to include Union Pay and acceptance widened to Paypal and Klarna. DNA’s terminals can now generate Alipay+ QR codes. There is a new merchant portal too. The product team has been busy.
DNA has strengthened its management team with the appointment of a JP Lips, Adyen’s former head of Unified Commerce, as its new CEO. Lips has a background in loyalty which might indicate which elements DNA will add next to its SME product bundle.
The ISV market is very competitive but DNA has a credible offer by leveraging the technical skills of the Optomany team. Recent wins include K3 Mstore (visitor attractions), HDS (football grounds) and Sunday (pay at table). DNA is also now available as an option in the Oracle Cloud Marketplace where Planet and Adyen are the main alternatives.
Good cost control saw administrative expenses held steady at £30.2m. Employee numbers fell from 306 to 287 although average cost per head was up 5% at £54K.
EBITDA losses (the company’s preferred measure of profitability) narrowed to £17m from £27m in 2022. Tight management of terminal stocks saw a £1.2m improvement in working capital.
Operating losses held steady at £31m which saw accumulated losses rise to £55m.
The parent company injected a further £27m equity during 2023 and another £23m during 2024. There cannot be much left of the original £100m fundraise. Alchemy Partners, which normally invests in “distressed and undervalued or underperforming businesses” and has no track record in Fintech, remains publicly committed and has provided a letter of support.
2025 promises to be another exciting year in merchant payments. With open banking and mobile wallets threatening to challenge the card schemes and ISV’s vying with banks for distribution deals, there won’t be a dull moment. And that’s without Trump 2.0 and his techno friends setting fire to the crypto sector.
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I began writing Business of Payments to produce the content I’d wanted to read when working in strategy roles for two of Europe’s largest merchant acquirers. It’s been wonderful to see subscribers growing to almost 3,000 individuals. I’d like to thank everyone who’s been in touch with news, gossip or cool new products to share.
Here’s to a successful and prosperous 2025 for everyone working or investing in European merchants payments.
Worldine’s JV with ANZ, Australia’s second largest bank, is going badly wrong. Worldline paid €307m for 51% of ANZ’s merchant acquiring unit in 2022 but is reported to be hoping to sell its stake back to the bank for less than half that figure. ANZ cites poor cultural fit, high staff turnover and excessive capital spending. For its part, Worldine called out the Australian misadventure as a contributor to missing its financial targets.
Santander is sticking to a target of 30% annual revenue growth at PagoNxt, its payment unit, although sales have been slowing during 2024. Total volume processed by Getnet, the merchant acquiring division, grew just 7% in Q3. More on the Business of Payments blog.
In corporate news, Shift4 has bought Card Industry Professionals (CIP), a small but well-regarded UK ISO for an undisclosed sum. CIP, which employs 20 full time staff and 150 field sales agents, claims a modest £60m/month of payment volume but provides a solid basis for Shift4 to expand its UK presence. This deal comes close on the heels of Global Payments buying CIP’s much larger local rival, takepayments, for $250m.
Nuvei has acquired Payaut, a Dutch-HQ’d start-up that sells whitelabel marketplace payment solutions to PSPs that don’t have in-house capability. Although the purchase brings an important addition to Nuvei’s product portfolio, Payaut’s existing customers, especially Checkout.com, are unlikely to be happy about a key supplier passing into the hands a competitor.
EPOS Now, one of the larger ISV’s focused on small business POS, has bought Yoello, a mobile order and pay business. Yoello, based in Cardiff, had raised $10m but latest accounts indicate that meaningful revenues are some way off despite claims of 2m users. EPOS Now’s interest is most likely in Yoello’s payment institution licence which will give the ISV flexibility to develop its PF offer. EPOS Now is boldly describing itself as a “global leading AI-driven point-of-sale embedded finance platform”which may come as a surprise to customers who thought they were buying an ECR system.
Although Fintech fundraising remains challenging, money is still available for the right combination of product and management. Here’s a roundup of the last deals:
Cellpoint Digital, a London-based payment orchestrator focused on airlines, has raised $30m. This comes on top of $25m funding secured in 2022. Cellpoint hasn’t filed its 2023 accounts yet. In 2022, it made an operating loss of $19.4m on sales of $2.6m.
Honei, based in Barcelona, has raised €1.45m for a QR pay-at-table solution for restaurants. Honei, which sits on top of Stripe’s APIs, has processed 1m transactions in two years.
Torus, winner of last year’s innovation prize at the MPE conference, has raised an undisclosed amount. Based in Lithuania, Torus provides merchant acquirers with tools to correctly calculate scheme fees. It claims $1m revenues from ten customers already.
JUST, based in Paris, has raised €8m for its checkout solution which integrates with Shopify, Prestahop and other leading eCommerce platforms. JUST claims 500 merchants and 1m user credentials on file. The funding will pay for market expansion including a launch in the UK.
2023 was a good one for Poland’s payment industry according to the annual report released by Cashless Poland. Revenues of the top 100 companies grew 10% to €2.7bn. One of the fastest growing companies is PSP, the organisation behind Blik, the wildly successful mobile payment standard, which saw revenues up 50% to €74m.
Cashless, an industry-funded programme to widen card acceptance has been a great success. In its first five years of operation, over 685,000 POS terminals have been placed with 500.000 merchants. The scheme will now be extended to online merchants.
Europe has many domestic schemes and mobile payment wallets which could form the basis for a continental response. The challenge is bringing them together with enough scale to challenge the global players.
Bancomat (Italy), Bizum (Spain) and MB Way (Portugal) have formed the European Payments Alliance which will provide interoperability between the three schemes. The members are looking for more national schemes to join the partnership.
One of these might be Bluecode, backed by four Austrian banks, which is an advocate of what it refers to as “payment roaming.” Bluecode is offering customers the chance to pay at any Discover enabled terminal with the transaction backed to an A2A transfer.
The CEO of the European Payments Initiative, promoters of wero, took to LinkedIn to explain why interoperability is a bad idea. She says EPI looked at this in detail before concluding that a better solution was to migrate national schemes to a single European one.
Figure 1 Photo: Nicola Breyer
Wero, which already incorporates iDEAL (Holland) and Paylib (France), announced its first eCommerce transaction and, to answer Mr Cipollone, this was made at the online store of FC Kaiserslautern. VR Payment and Atruvia (the IT service provider of the German co-operative banks) were behind the scenes. Discussing the advantages of accepting wero, the football club said “It is also European, which for a European Football Club is a key asset.”
Vipps, Norway’s mobile wallet, is the first national scheme to make contactless transactions using Apple’s NFC chip. At first, the service works with card terminals that take BankAxept cards (the Norwegian domestic debit scheme) but will be available for Visa/Mastercard before the Summer. Vipps plans to launch the service in Denmark, Finland and Sweden in 2025.
The three banks that own Vipps – DNB, Sparebank and Eika – have steadfastly refused to allow their customers to link their debit and credit cards to Apple Pay. This should give Vipps NFC capability a boost as there will be plenty of pent-up demand.
Mobile wallets will not only be competing with Visa and Mastercard but also with card-based domestic debit schemes such as Giro in Germany. Giro is fighting back with a new marketing campaign featuring a series of short scenes in which merchants congratulate shoppers on using a low-cost card. “The most beautiful of all the cards, better use Giro,” it says.
Giro quotes a Bundesbank study showing a typical transaction cost of €0.67 for its debit card compared to €1.70 for a credit card or €1.80 for cash. In total, Giro claims German merchants save €2bn by taking its cards. Jochen Siegert did the maths and concludes the figure is closer to €200m.
Meanwhile, PaySys has published a very helpful analysis of German payment terminals that answers a perennial question: how many POS don’t take international cards (ICS)? The answer is fewer than you’d think. Of 1.412m active devices, just 110K accept Giro only. And 42K of these are vending machines.
Turning to the international schemes themselves, UK’s Payment System Regulator has finally determined that “a lack of competition allowed Mastercard and Visa to increase their cross-border Interchange fees to an unduly high level.” Interchange charged to British merchants for EEA cards rose after Brexit from 0.2% to 1.15% for debit and 0.3% to 1.5% for credit. As a result, the regulator concludes British merchants are unfairly charged £150-200m each year and proposes to restore the 0.2%/0.3% levels as before.
Software businesses are increasingly taking on the distribution role previously performed by banks and ISOs. ISV’s simply have much stronger merchant relationship than financial services companies ever will. Acquirers without strong ISV partnerships are going to struggle to onboard new SME customers and risk losing the ones they’ve got.
Here’s how strong relationships work in practice. Worldpay’s compliance team mistakenly deactivated the account of a large concert venue. The venue couldn’t sell tickets and was in real trouble. Worldpay’s client account manager was on annual leave and it took a few days before reactivating the customer. Meanwhile, the venue asked its ticketing software vendor for help and were immediately shifted to Adyen. Who owns the customer? The ISV does.
Hospitality software vendors are in particular demand for payment partnerships in 2025 because over half of restaurants are looking to replace or upgrade their POS software, The key drivers are “supporting omnichannel ordering” and “mobile ordering and payment integration.” Payment companies that can support these new use cases will be much in demand.
Source: Hospitality Technology, 2025 POS Software Trends Study
The growing interest in ISVs is sparking some serious research into this sector for the first time. An excellent report from PSE Consulting (working for Unipaas, a vendor of white label payment infrastructure) shows attachment rates of embedded payments at 70-90% compared to just 5%-15% with the old-fashioned referral model. PSE suggest acquirers should build in-house PayFacs to take advantage of the trend.
PSE Consulting also asks whether it’s time to retire the payment API. ISVs are reporting $1-3m spend needed to integrate with acquirers’ onboarding, reporting and support API’s and are complaining about the GDPR and other compliance requirements of the payment industry. Much better, say the consultants, to offer ISV’s the chance to white label the acquirer’s own tools.
Product
Stripe continues to churn out well researched product innovation, this month releasing an SDK that integrates its financial APIs into LLM (AI) workflows. There’s a long way to go but this could lead to a corporate travel bot that build itineraries, reserves travel and books tickets without any user intervention.
More tangibly, Stripe has launched a clever tool that allows merchants to A/B test different combinations of payment options. This should help settle arguments between retail marketers (who typically want to add every possible payment type to a checkout so as to maximise reach) and the finance team (who want to minimise the number of payment options to reduce administrative overheads).
If you sell online in the Netherlands, this well-researched deck from the Dutch Payment Association outlines the optimal payment page. Unsurprisingly, it suggests that iDEAL should always be at the top. Interestingly, 23% of Dutch shoppers say that having too many English words on websites makes checkout more difficult.
In its first product innovation since becoming an independent company once more, Worldpay is leveraging Mastercard Move and Visa Direct to offer instant refunds. HMV, the UK entertainment retailer, is named as the first client. A month after the announcement, there’s no sign of the product on the Worldpay website or any indication of pricing.
ABIMS, the largest acquirer in Ireland has begun selling eCommerce webshops“tailored for Irish SME’s” and provided by Dublin’s FCR Media. The price of €1900 set up + €76/month is eyewatering although merchants get a rebate of €750 if they process with ABIMS. There’s also a €9.75/month “PCI fee” charged to merchants for no obviously good reason.
Turning to wearables, PAGOPace, based in Cologne, is commercialising a range of payment devices including a bracelet and a ring that doubles a Tesla key. A payment bracelet sounds niche but might be handy if you wear gloves. Your Pago device links to any payment card stored in a Curve app. Fidesmo, from Stockholm, is supplying the payment infrastructure.
PAGOPace is also working with VNTR, the venturing arm of PostFinance, the retail banking division of the Swiss Post Office to test NFC chips glued to customers’ fingernails which link to the yellow Post Finance Mastercard debit card. This is even more niche than a payment bracelet.
Cashflows, a UK acquirer, is offering “programmatic payment technology.” Using capability from Raimac, a UK start-up, Cashflow’s merchants can offer shoppers the chance to specify their own flexible payment plans. It’s like a DIY BNPL solution but with AI.
In Softpos news, Elavon has stopped white labelling the SoftPOS.eu application following the Polish start-up’s acquisition by Worldline. Elavon is now working with PinAppAll, also based in Warsaw. Pricing is equivalent to €2.34 per month + 0.61% + 1.6c per transaction.
Installation of new gas pipes by a local authority in Switzerland accidentally brought down much of Italy’s consumer payment infrastructure on Black Friday. Construction workers cut connectivity from Worldline’s data centres in Lugano, leaving consumers unable to pay with cards, or use ATM machines. Nexi and Banncomat both send transactions to Visa and Mastercard via Worldine’s network and the incident raises questions about the country’s reliance on a single point of failure.
The industry took heart from the publication of the UK’s National Payments Visionwhich discusses “unlocking account-to-account payments for e-commerce” while recognising that POS use cases are a long way off. Positively, the Government is eating its own dog food and boasts of having received 10m tax payments worth £33bn through open banking already.
Given the alphabet soup of regulators with fingers in the open banking pie, it’s helpful that the Vision clarified that the Financial Conduct Authority (FCA) not the Payment Systems Regulator (PSR) is responsible for regulation. The logic is that although open banking is payments, it is not a system. I hope that’s clear.
Whatever the regulatory outlook, the open banking customer experience needs work. Ryan Air is using Truelayer’s solution but as you can see from these screen-grabs, the payment flow is slow and clunky.
Some savvy innovators are looking to smooth the payment flow by investing new open banking checkouts. For example, Volume, based in London, just raised $6m for its one-click open banking checkout product built on Modulr & Yapily technology. The money will fund a payment institution licence and international expansion.
In financial news, Trustly, the largest A2A player in Europe, reported net revenue down 5% at €100m as management continued to clear up compliance problems that had led to a stiff fine from the Swedish regulator. .
It looks increasingly difficult to make money with open banking, even for the best regarded vendors. Yapily, based in London, saw revenues almost double to £5.05m in 2023 while operating losses were cut to “just” £11.4m. Employee numbers fell from 158 to 117.
Cash
Political pressure is growing in many countries to maintain both access to cash and the ability to use cash in shops.
Yet consumers are voting against cash with their wallets. Latest figures from UK Finance show cash transactions falling by 7% in 2023 and a 3% decline in ATM withdrawals. 22m citizens rarely use cash.
A Dublin taxi driver once explained to me at length how he kept two set of books – one for cash payments and the other for electronic payments. He told me how many sets of tyres should be booked against each one to allay suspicions at the tax office.
I was very pleased to learn that the last Dublin taxi driver still holding out against cash free payments has given in. Faced with losing his licence after 42 years, the driver agreed to carry a SumUp device.
As cash usage declines, the cost of cash acceptance rises to the point it quickly becomes uneconomic. Pay Association Netherlands estimates the cost to merchants of a cash transaction has risen from 29c to 61c since 2017 while debit PIN payments have remained at 17c.
The VC’s are delighted by the likes mood change on Capitol Hill. Andreesson Horowitz, whose founder backed the Trump campaign, published its latest state of crypto report. The authors believe that stablecoins “have found product-market fit” by enabling fast, cheap global payments. Yet the CEO of Wise, which knows a thing or two about digital remittances, remains a sceptic as you can read from a recent analyst call.
There’s an open question about how payment companies will make money from stablecoins. If the price of international money transfers really falls to pennies, then where is the margin? It seems many are hoping to profit from selling stablecoins and lending the float to other crypto businesses. This sounds a lot like banking although without the regulatory oversight.
Here’s an advert from Bleap, a crypto platform which raised money last month. What could possibly go wrong?
Revolut is reported to be blocking DCC on its cards. Other issuers, annoyed at losing out on FX commission to the merchants and merchant acquirers may follow suit.
One way for merchants to avoid high fees is to pass them onto consumers in the form of surcharges. I was in New Zealand recently and was regularly charged an extra 2% if I paid with Apple Pay. I posted about this on LinkedIn and generated 165 comments from payment folk across the globe.
If you read one deck, read Ben Evans on “AI eats the world.” You will sound much cleverer afterwards even if the conclusion remains that nobody knows what’s going to happen next.
And finally
An Australian journalist inadvertently spent £55,000 on a pint of beer in a British pub. It’s cautionary tale of why you should never use a debit card for anything other than an ATM withdrawal.
Where to find me
I’ll be moderating a couple of sessions at MPE 25 in Berlin 18 -20 March and at the ePay Summit in London 21 May. Come and say hello.
Here’s a discount offer from the organisers if you register for MPE right now.
myPOS World, supplier of mPOS devices and payment processing to over 200,000 small businesses across Europe, is a rare beast in the fintech jungle – growing, profitable and with a strong balance sheet. This makes a stark contrast with its main competitors – SumUp and Dojo – both of which have reached breakeven with a mountain of debt.
A fast growing company with a strong balance sheet is of great interest to private equity. It’s no surprise that Christo Geogiev, the Bulgarian entrepreneur who founded myPOS in 2014 sold the business to Advent earlier this year for a very generous €500m. The price is equivalent to 6x 2023 revenues or 65x EBITDA.
Advent was an early investor in Worldpay and still has a number of European paytech interests including Planet. Advent has placed myPOS at the heart of a new vehicle called Circle which is chaired by Fabio Calli, a former consultant at Bain & Co. Georgiev will no longer be involved with myPOS.
Advent has wasted no time in tidying up myPOS World’s rather complex web of European entities including buying out minority interests in its Bulgarian and Italian subsidiaries and closing an abortive attempt to enter the US market. The group has bought Cyris, a Bulgarian sister company to myPOS, which provides whitelabel issuer/acquirer processing, for €34m.
myPOS revenue was up 39% in 2023 to €84m and has doubled over the past two years. The business has widened its range of terminals to include SoftPOS and unattended but, in common with most mPOS vendors, the vast majority of turnover comes from commission charged on transactions processed. Sales of hardware and value-added services make up just 10% of revenue.
Although myPOS is based in London, over 80% of sales come from EU markets. UK sales have only begun to grow recently but almost tripled in 2023 to €15m.
Management has kept a keen eye on merchant pricing. Cost of goods sold (mainly fees paid to merchant acquirers) were up 75% so gross profit rose just 22% to €49.9m. Unlike some of its competitors which offer essentially the same price list in every country, myPOS is willing to adapt its commercial offer to each market. For example, processing fees for EU cards are 1.1% + 7p per transaction in the UK but 1.59% + 5c in Ireland and 1.69% in France with no transaction fee.
myPOS also differentiates by its willingness to open stores to showcase its products. These have opened in 21 cities including London, Brussels, Palmero and Sofia as you can see in this video.
Advent has appointed a new CTO, Abdenour Bezzouh, to modernise the core technology. In this interview, he explains his objectives of transforming myPOS from a “monolithic structure” to a more modular architecture. This should allow the proposition to evolve from simple payment acceptance to offering all the financial tools SME’s need to grow and prosper. One example is a new partnership with Liberis to offer merchant cash advance in 10 countries.
Administrative expenses rose 44% at €43m in 2023. The largest item was staff costs which rose 42% to €24m as employee numbers grew to 589 at year end. Headcount is expected to continue to expand under the new ownership, especially in technology. Most staff are in Bulgaria which kept the cost per employee at a modest €48K although this was 17% higher than 2022.
Investment in price and product saw operating margins fall from 12% in 2022 to 3% in 2023. Operating profit was down 69% at €2.3m. The main capital item in 2023 was “substantial investment in data centres” to support a new EMI license in Dublin which allows myPOS to directly settle EU merchants.
The EMI is already paying back as the merchant settlement float yielded almost €3m in net finance income. myPOS had almost €300m+ of client funds at year end. Pre-tax profit was down 19% at (still very creditable) €5.24m.
Advent has bought itself a very solid business and there is a clear opportunity to leverage myPOS’s strong payment acceptance proposition into a wider portfolio of small business financial products. But the new management will need to move quickly to fend off competition from other mPOS suppliers such as SumUp and Dojo as well as as the ePOS software vendors, many of which have begun bundling payment acceptance and other financial services with their core products.
Santander reported that both volume and revenue growth at PagoNxt were the slowest since the business was formed in 2020. PagoNxt groups the bank’’s payment capabilities in single operating division but Santander has struggled a little to mould these businesses into a coherent whole.
The German merchant acquiring business and Superdigital, its Brazilian subprime unit were closed in Q3 at a total cost of €243m. Next to leave will be Ebury, although in happier circumstances. The UK-based trade finance specialist is set to float on the London market in early 2025 at a valuation of around €2bn.
This will leave PagoNxt with two divisions. The largest is Getnet, a merchant acquirer with strong positions aligned to Santander’s domestic banking network – Spain, Portugal, Brazil, Mexico (where Getnet launched contactless ticketing on the Mexico City metro) and Argentina. Getnet is the number two acquirer in Latin America and will start selling in Chile shortly. The Latin American capabilities are now available to merchants through a single API connection called Getnet SEP (single entry point) which will be attractive to European merchants looking to simplify acceptance in this part of the world.
Total merchant payment volume at Getnet was up 7% in Q3 to €57.6bn with the strongest performance in Mexico, Spain and Portugal.. ATV was up 3% at €23.03.
PagoNxt Payments, sometimes known as Payments Hub, will be PagoNxt’s second operating unit. PagoNxt Payments groups all Santander’s A2A capabilities. The bank is steadily migrating its operating units onto the new platform and transaction volume is reported to be 5x greater than a year ago.
Total revenue across all today’s Pagonxt divisions – Getnet, PagoNxt Digital and Ebury – was up just 4% at €311m in Q3, the lowest growth since the division was founded four years ago. In better news, the proportion of business sourced from outside the Santander banking network has reached 24% year to date. This has grown from 14% in 2022 and is a key metric to help judge whether PagoNxt can prosper independently.
Expenses rose 15% year on year to €288m. Management believe technology spending has peaked and it’s now a question of driving down unit costs by driving up volume. There are early signs that the strategy is working. Cost per transaction processed, in constant currency, continues to fall and was down 7.5% YTD at 3.6c. This number includes acquiring and A2A.
Operating income, quite volatile from quarter to quarter, was down 52% at €23m in Q3 but flat year to date.
EBITDA margins were up 3.1pp to 23% YTD and management is confident of hitting its medium-term target of 30%. This seems achievable on the current trajectory, but management is also sticking to its 30% revenue growth target. This seems more ambitious – revenue was up just 12% YTD – and will present an early challenge to Juan Franco, the newly appointed PagoNxt CEO who joins from Nuvei.
Barclays is set to give away 80% of Barclaycard Payments, the UK’s second largest merchant acquirer, to Brookfield, a giant Canadian investment fund. In return, Brookfield will “bear the costs associated with growing the business.” This is a major U-turn from the British bank which had valued Barclaycard at $2.5bn as recently as last September.
Barclaycard must be in more of a mess than outsiders had realised. We knew the SME business was in freefall after Global Payments.bought Barclaycard’s best ISO but this deal suggests the corporate business is under huge pressure too.
Brookfield will be looking to emulate Bain and Advent’s stunning success in carving out Worldpay from RBS in 2010. The two PE funds leveraged their $1bn investment in Worldpay, into a $5bn return. The Canadians should be well prepared. Brookfield already has one large acquirer (Network International) on the books and Sir Ron Kalifa, the man who led Worldpay out of RBS, on the payroll.
Sir Ron and the team will have some easy costs to cut as many believe that Barclaycard employs twice as many people as it needs. And, with c.£300bn volume and 400,000 customers potentially moving into the joint-venture, there’s scope for growth. But the new owners will need to upgrade the product and replace ageing systems fast if they are to stem customer losses to Stripe, Adyen, Checkout and many others.
Dojo, a fast-growing London-HQ’d acquirer has also been taking large chunks out of Barclaycard’s SME customer base. Processed volume has grown from £10bn to £40bn in just three years. Dojo has reported its first operating profit although the bottom line is still weighed down by a mountain of debt. More details on the Business of Payments blog.
With UK growth slowing, successful international expansion is critical if Dojo is to outrun its creditors. For Spain, Dojo has hired a management team from EVO Payment and opened offices in Madrid and Barcelona. Dominated by banks, the Spanish market has long been seen as ripe for disruption by a focused, small business offer aimed at the hospitality trade. Italy is next in line for Dojo, having recently opened an office in Milan.
Worldline is in a mess. The stock price is down 90% and the CEO has been forced to resign after yet another profits warning. Management said the latest problems stemmed from “slow trading conditions”, the travel sector and “specific performance issues with the Pacific business.”
Figure 1 Worldline stock price
Some commentators argue that Worldline, valued at just €1.7bn, is ridiculously cheap for a business with €4.6bn annual sales and 20% EBITDA margins. The company has some protection against an opportunistic hostile takeover by the presence of both SIX and Credit Agricole as long-term shareholders.
The primary reason for Worldine’s evaporating valuation is management’s continued failure to meet its own modest targets accompanied with implausible explanations (such as blaming the weather) for the lack of growth. The CFTC union, which represents Worldline staff, has some well-argued commentary.
Nexi, Worldline’s arch-rival, is in better health. Q3 merchant revenues were up 7% on 13% higher payment volumes. Nexi has received a vote of confidence in the form of a €220m loan from the European Investment Bank to commercialise new business ideas from Nexi Digital, its R&D joint venture with Reply.
Competition is hotting up in Italy, Nexi’s home market, with the launch of Numia, the new name for BCC Pay. Numia is a joint-venture between a consortium of rural banks and FSI, the Milan based private equity group which has also invested in Bancomat, the Italian debit scheme. Numia claims €60bn processing volume from 200,000 POS terminals under management.
It’s often worth “buying” a big deal if it fundamentally shifts your market position. Adyen did just this in 2018 when it swiped eBay’s processing business from PayPal in return for granting eBay the right to buy four tranches of Adyen shares at €240 per share. The stock price is now €1400. eBay has exercised the second of four tranches of its Adyen warrants, netting a cool profit of €467m. For Adyen shareholders, the eBay deal is looking really expensive.
Unzer, the German PSP formerly owned by KKR, reported a €381m loss on sales of €200m in 2023. The bulk of the deficit was due to write-offs related to acquisitions and the company highlighted positive EBITDA of €27m. Unzer, which has 85,000 merchant customers, has spent €20m on beefing up compliance and has cleaned its customer portfolio of pornography and gambling. BAFIN has withdrawn a ban on signing new customers.
Klarna’s newly independent checkout business is relaunched as Kustom. The new brand claims to serve 24,000 merchants processing €13bn annually with the volume shortly to be moved to Stripe. Why Kustom? The new name “fundamentally reflects our desire to offer a high degree of customization for our merchants.” And it begins with K so the company is still KCO for short.
Kustom has competition. Qliro, listed on the Stockholm exchange, has raised €4m to help grow its sales to online merchants. The CEO believes Kustom merchants will be unsettled by the new ownership and consider changing suppliers. Qliro, which was spun out CDON, the Swedish eCommerce marketplace, processed €1bn in volume from 139 merchants last year and claims 5m user credentials.
On similar lines, Simpler a London-based business offering “checkout as a service” to eCommerce merchants, has raised €8m. Simpler says 1,000 merchants tap its database of 500.000 shoppers’ cards on file. The new investment will fund market expansion in UK, Italy and Spain. Simpler’s standard package offers one-click checkout for €63/month plus €0.2 + 1.1% for EU card payments. Bluesnap, the orchestration platform, is behind the scenes.
One-click is a major battleground with Apple/Google Pay, PayPal, Stripe and others fighting for the largest database of user credentials. Forrester warn that these options “compete with many other systems vying to auto populate data and automate checkout experiences,” and are likely to reduce conversion for one if five merchants. On the other hand, some commentators believe that organisations controlling checkout are best placed to build a western version of the wildly successful Asian superapps.
In other fundraising news, Acquired.com, which is a PSP not an acquirer, has raised £4m for product investment, notably for recurring payments.
Rezolve AI, Dan Wagner’s venture into conversational commerce, isn’t proving a good investment. Based in London but quoted on NASDAQ after reversing into a SPAC, Rezolve’s stock price has fallen from $11.36 at floatation in August to just $2.73 at the time of writing.
Figure 2 Rezolve AI stock price
Fiserv looks set to buy CCV, the Dutch-HQ’d POS infrastructure provider which is one of the few family businesses left in the payment sector. CCV has a strong European footprint in parking, EV charging and vending. Fiserv will be thinking of cross-selling payment processing to CCV’s 750,000 merchant locations but CCV’s capability will be useful to Fiserv and its bank partners too.
In other corporate activity, Access Group, an ISV roll-up financed by payment consolidation, has bought Qiksave, a mobile order and pay solution deployed in 8,000 locations worldwide and processing c.£3bn annually. Qiksave, which is loss making, has over 100 integrations with payment providers, POS software, loyalty/CRM solutions etc.
VR Payment, based in Frankfurt, has bought Wallee, a Swiss-based PSP with 80,000 terminals under management in the DACH region, Poland and Lithuania. Wallee also brings excellent automated boarding tools as well as integrations into eCommerce shopping carts. VR Payment is owned by the Volksbanken Raiffeisenbanken network and manages 286,000 terminals in Germany.
DNA Payments, a London-based acquirer/PSP owned by two Kazakh bankers, has denied reports that it would pay €50-60m for the merchant services business of Card Complete, Austria’s leading acquirer. In a statement, DNA said: “We can categorically state that DNA Payments is not acquiring Card Complete’s Merchant Services arm, nor is this something we are in discussions with them over.”
SumUp’s remarkable growth continues as the UK/German mPOS provider reported €1bn revenue in 2023. SumUp has cut costs, especially sales and marketing, to focus on “profitable growth” resulting in a maiden operating profit of €11m. This positive result was drowned by €148m interest payments on SumUp’s €1.2bn debt mountain. Undeterred, SumUp has raised an additional €285m funding and €1.5bn in loan finance and is reportedly hiring very aggressively once more.
Hardware
A combination of destocking following the pandemic’s supply chain whiplash and the recent tough retail trading environment has made life challenging for the terminal vendors. PAX reported sales down 15% in H1 2024. You can read more details on the Business of Payments blog.
Ingenico, owned by Apollo, the US private equity giant, has fared even worse with sales forecast to fall 33% this year. S&P has downgraded Ingenico’s credit rating and fears its “capital structure could become unstainable” if market conditions don’t improve.
Scheming
New research from Flagship shows the steady decline in Europe’s local card schemes with their market share in France, Germany, Denmark, Norway and Italy falling from c.80% in 2017 to 65%-75% today. Domestic schemes have suffered from being slow into eCommerce and late to insert themselves in the Google and Apple Pay wallets.
Dankort, the Danish debit scheme, is a good example. After years of enjoying quasi-monopolies both Dankort and Nets, Dankort’s sole acquirer, are under pressure.
Flatpay, which does not accept Dankort, is the main beneficiary, having reached 10% market share in Denmark with a Visa/Mastercard-only proposition. Nets, owned by Nexi, is not taking this well. Local press reports that it is bringing 17 small business customers to court for refusing to pay €270 “exit fees” to terminate their contracts.
European banks and regulators are concerned at the increasing reliance on US card brands. Wero, a QR-based mobile payment which uses SEPA Instant for settlement, is backed by Worldine, Nexi and a consortium of banks. Wero has launched in France and Germany with some lively commercials.
Wero’s French launch has clarified that the brand is pronounced Ouiro but that Vero (assumed to be the German way) will be tolerated.
Some of have questioned the logic of marketing Wero to consumers before it has built out its acceptance network. For example, Computop remains the only distributor to eCommerce merchants in Germany. And there are some teething troubles. Users have complained that they can only link their Wero account to a single bank account and that changing phones requires re-registration
Nevertheless, Wero stands a better chance of success than previous initiatives because it is built on existing products that bring a user base. The core technology comes from iDEAL and Wero will also incorporate Paylib, supported by BNP Paribas, Societe Genale and La Banque Postale. Paylib processed €6bn last year.
In Germany, Wero replaces the disastrous Giro Online/Paydirekt which processed just €1.6bn last year. But management will need to work hard to displace PayPal which dominates German eCommerce, accounting for 28% of online transactions.
Of course, Wero is not the only European mobile payment method challenging cards. Blik, owned by Mastercard and a consortium of Polish banks, reported volume up 36% in H1 2024 to €37bn and is expanding into both Slovakia (with Tatra Bank) and Romania.
The National Bank of Hungary has launched its own QR based payment product sitting on the national instant payments network. Kvik, is now accepted at 6,000 POS terminals and 15,000 online stores using OTP’s SimplePay product or Raifaissen for acceptance. 150.000 merchants are planned to be onboarded next year.
Meanwhile, the major schemes relentlessly grow their volume in Europe. Combined Visa and Mastercard payment volume was up 12% in Q3 24 in euros. Mastercard is still growing a little faster than its rival as portfolio migrations from NatWest, Deutsche Bank and UniCredit bring extra spending.
Banks will need to auto-register their cardholders. Even with a journey as smooth as this one at Deutsche Kredietbank, it’s going to be a challenge to get users to make the effort to sign up. However, Click to Pay should offer merchants higher conversion – the shopper won’t be challenged with 3DS) – at lower risk -the bank, not merchant is liable for fraud. But it’s complicated. This LinkedIn discussion between merchants and PSPs explains more.
Mastercard sees an opportunity to profit from a problem it created. The card giant has acquired Minna, a Swedish start-up that offers card holders the ability to turn off subscriptions from within their own banking app. This should be very popular.
Global Payments has bought several ISVs to gain distribution into key verticals. The strategy is now under review following the sale of AdvancedMD to Francisco Partners for $1.12bn. It’s not a fire sale. Global has made a profit, having bought the business for $700m in 2018. The cash will go on share buybacks. Global’s new CEO said of the retreat from healthcare software “”We recognize that global does not mean everywhere.”
ISV partnerships can be an effective way of distributing payment processing to small businesses, but software companies are not banks. They don’t sign long-term, exclusive agreements and can be fickle partners. Shopify, which processes $236bn with Stripe on behalf its Shopify Pay customers will now be sending volume to PayPal.
New research from PSE and TSG show Europe lagging behind the US in merchant adoption of embedded finance products, including payments. The researchers blame the local ISVs for not promoting payments strongly enough.
Adyen continues to win a series of high-profile ISV partnerships including Idosell, a Polish competitor to Shopify with 8,000 merchants and €3.5bn volume processed. These partnerships are increasingly brining larger merchants too. Adyen has signed Footasylum through its relationship with Newstore, the retailer’s software provider
A new report from Tidemark, a VC focused on vertical business software, lays out the case for ISVs to include payments as part of their core product offer. A good example is NOQ, a London-based start-up which offers business software and payments (from Adyen) to music festivals and sporting events. It just raised £3.4m.
New Shopping
Opinion remains divided on autonomous stores. Grabango, the automated checkout vendor used by Aldi, has closed down after running out of money. Grabango had raised a total of $93m. Aldi has shuttered its cashier-free supermarket in Utrecht saying “It was a fun experiment, and we learned a lot. But the investments are big.” Amazon has also been less enthusiastic of late, having closed three stores in New York saying “we couldn’t make the economics work”.
Undeterred, Sensei, a Portuguese start-up has just raised €15m to complement an initial €5.4m round in 2021. Metro, the German retail giant, is one of the investors and Sensei aims for 1,000 fully autonomous points of sale by 2026. Sensei has made a nice video that explains the proposition.
In France, Casino Group has started rolling out Cust2Mate carts from A2Z, an Israeli vendor, to its Franprix and Monoprix formats.
Kiosks are everywhere in quick service restaurants. Are they killing jobs? McDonalds say no. The kiosks are better at persuading customers to buy extras, and this creates additional work in the kitchen.
We’ve not heard much from the metaverse recently but Shopify merchants will soon be able to sell on Roblox. Expect “buy now” buttons linking you to real-world checkout pages.
Product
Revolut sees an opportunity to cross-sell payment acceptance to its 500,000 business customers. The bank just launched an in-house developed POS terminal available for sale at €169. Card processing is €0.02 + 0.8% at POS or 1% online. On-us transactions with Revolut Pay are just 0.5% and personal customers get loyalty points for choosing to pay direct from their bank account. This could be particularly be disruptive in Ireland where more than one third of the population has a Revolut account.
After its stunning success bundling checkout, processing and value-added services, Stripe has started unbundling. By the end of the year, Stripe Checkout will support 12 other processors including Worldpay. Stripe will become a processing option for FreedomPay’s enterprise merchants and has announced direct integrations with Oracle, Adobe and Cegid. This puts a clear strategic divide between Stripe, which is offering a series of modules, and Adyen which continues to insist customers take all its products.
One key reason for Stripe’s rapid evolution is that it’s been the payment provider of choice to the fastest growing businesses and has expanded with its customers. For example, Patrick Collinson, Stripe’s founder, says his business now serves 41 of the top 50 Gen AI web products.
Checkout.com is already unbundled and happy to process all or part of a merchant’s volume. Fintech and eCommerce merchants are the focus. It’s no longer much interested in crypto which, management says, represents under 4% of total volume.
At its annual customer conference in Barcelona, Checkout revealed the scale of its recent product launches including Flow, its one-click checkout service. Intelligent Acceptance, which optimises checkout flows, now runs more than 60m “optimisations” each day using AI “trained on billions of transaction data points.” Checkout now offers direct acquiring in Japan and will add Canada and Brazil in 2025.
Away from the global giants, Here’s a clever innovation from the City of Arhaus in Sweden, working with Tomra, Mastercard and Shift 4. It’s a reverse vending machine that pays you back €0.70 for returning each reusable coffee cup. “Why toss when you can tap?”
Merchant Cash Advance (MCA) has been around since the 90s but, rebranded as “embedded finance,” the product and taken a new lease of life. Merchants borrow short-term with repayments taken as a fixed proportion of each day’s card settlement payments. Lenders normally make distribution deals with payment providers – acquirers or ISOs – in return for commission payments.
Two of the European market leaders, Youlend and Liberis, are both based in London.
Youlend, controlled by EQT, grew revenues 75% to £118m year in the year to March 2024 with operating profits a very creditable £14m. Youlend has landed a number of big distribution deals including Dojo in the UK, through which Youlend has extended £1bn in loans to 20,000 businesses, Telecash in Germany and Deliverect in Spain.
Away from London, keep an eye on Flowpay, based in Czech Republic but expanding across central Europe. Flowpay, founded by the charismatic William Jalloul (read a good interview here) has locked down critical partnerships with local ISVs including Dotykačka, Shoptet and Storyous.
MCA has become much quicker and easer to access due to advances in credit scoring and the simpler integrations between lenders and Android payment terminals. Possibly too easy. This flow, demonstrated by MWBS, a UK based ISO on an Ingenico DX8000, is a great piece of customer experience. But borrowing money should be a considered purchase and this makes it too easy for a small business to get into debt.
Green payments
If we are to use less CO2, a good start will be for shoppers to understand how much greenhouse gas is generated by their purchases. Worldline is working with Stabiliti, a start-up based in London, to offer consumers the chance to offset their transactions.
Connect Earth, another UK start-up, is working with Tide, an SME bank, to show business users their CO2 statement alongside their financial one. I’m not sure there is a business opportunity here. Most likely the existing data providers such as Tapix will add CO2 estimates to their current product offers.
Calculating CO2 based on payment transaction data is a blunt instrument as is necessarily based on assumption about the carbon intensity of MCC codes.
As usage declines, the cost of cash acceptance increases, making more and more retailers likely to become cash free. This causes problems for a small number of people who either can’t or won’t use cash. I’ve sympathy with the former but not the latter.
The politicians are catching up. Norway has ruled that consumers should have the right to pay with cash up to 20,000NKR (€1700), a significant sum. It’s not clear how severe the penalties will be for refusing to follow the new law.
Let’s start with the positives. The UK open banking programme has passed a number of technical milestones and merchants are now getting real benefit from the technology. Just Giving, an online charity donation platform, which previously replied wholly on cards, now reports that 8-9% of donations are arriving by bank transfer. GoCardless is behind the scenes. JustGiving is not currently passing on the cost savings to its customers.
We’ve also seen a steady stream of new market entrants:
BlipPayments, built on Yapily’s aggregation APIs is aimed at the SME market with transactions at 80p each
Contiant, from Bulgaria and founded by emerchantpay alumni, claims to be cash positive after less than 12 month trading
However, many insiders are frustrated about the near-term future of open banking payments. The alphabet soup of regulators and competing industry groups making similar but slightly different proposals is confusing and leading to delay. Volker Schloenvoigt from Edgar Dunn explains the problems well in this blog post concluding that “too many (regulatory) cooks are spoiling the broth at the moment.”
Many in the industry are pinning their hopes on variable recurring payments (VRPs) which are the open banking equivalent of direct debits. Justin Hanna explains a fatal flaw. Unlike recurring card payments or standard direct debits, merchants cannot migrate VRPs from one vendor to another.
Some are looking to government for leadership, and I spoke to a number of MPs from the open banking panel at the Labour Party conference in Liverpool in September. We had a more lively discussion than the photograph suggests.
With Trump 2.0 looming across the Atlantic, the UK needs strategic autonomy in payments and open banking can provide this quickly.
But we need an acceptance mark, scheme rules (including consumer protection) and a consistent pricing model. Government could try to achieve this through one of its many regulatory bodies; a better idea would be for the UK banks to form a consortium and get on with it.
If domestic interests don’t show some leadership, the US card brands will fill the void and good luck to them. These folks know how to run payment schemes.
Visa’s new A2A product looks like the real deal. It includes both one-click open banking payments and consumer protection as Ciaran O’Malley explains. More importantly, Visa A2A has four banks on board at launch – Barclays, Nationwide, HSBC and Lloyds. Visa A2A debuts in the UK early next year with the Nordic markets following closely afterwards.
Elsewhere in Europe, the German banks won’t make much progress with open banking if the user journeys are as poor as these highlighted by Stefan Holscher. Transaction times of 45-90 seconds won’t draw shoppers from PayPal.
Worldline has finally launched its A2A product. If you’ve a SEPA bank account, you can try it out by making a donation to the Croix-Rouge Francais.
In corporate news, Vyne, has been acquired by Tarabut, the largest open banking vendor in the Middle East. Tarabut raised $32m last year. Vyne is supplying VRPs to Visa’s A2A product.
GoCardless has completed its acquisition of Senteniel from EML Payments. Senteniel, which includes Nuapay, an open banking vendor, grew revenue by 22% in year to June 2024 to €9.3m on €123bn processed volume. That’s a take rate of 1.2bps. Nobody is going to get rich selling direct debits.
Kevin, the well-funded Lithuanian open banking pioneer was hoping to make A2A transactions work at POS. The business went bankrupt in September having raised $65m. The founder blamed his investors, writing Kevin failed “due to the lack of courage and support from shareholders.”
In a new report, Flagship Consulting reveal that two thirds of payment providers in Europe and North America already offer SoftPOS. As volumes increase, the consultants believe it will cannibalise mPOS sales rather than traditional terminals.
I’m not so sure. I’m seeing many good enterprise use cases with kiosks and ECR systems and 71% of merchants in this research said they thought SoftPOS would ultimately replace the usual POS terminal.
In vendor news, Rubean, the Munich-based SoftPOS leader met market expectations with its Q3 results. A new deal with Deichmann, the German shoe retailer, boosted Q3 numbers and sales in 2024 have more than doubled to €1.3m. Rubean has >50K softPOS terminals live in Germany and Spain.
Banks have been losing share in SME payments but SoftPOS, embedded in an app that SMEs check several times a day, will be a good way to fight back.
Tide, a neo bank focused on small businesses, has included SoftPOS in its standard offer. I’m a customer and was able to register and start taking payments from my wife as a test after just a few clicks. Adyen is behind the scenes and the onboarding was impressive. On the downside, Tide offers net settlement (ie, it deducts the fees from each transaction) which is confusing and makes reconciliation a pain. And refunds are far from straightforward. But it’s early days and the service will improve quickly.
Just when you thought that the madness was behind us, Trump and the crypto bros are back in town. Expect a global scale Ponzi scheme backed by the government of the world’s largest economy and promoted daily by Elon on X. Already, the FT reports that 71% of crypto trades are derivatives. This won’t end well.
Shift4 will start offering crypto acceptance, partnering with Mesh. The first customers are a Las Vegas restaurant and a business offering helicopter tours of major cities. Jared Isaacman, Shift4’s CEO, paid $200m to Elon Musk to become the first businessman in space putting Shift4 in pole position to become Trump’s payment provider of choice.
Meanwhile, BAFIN, the German regulator, has shut down 47 cryptocurrency exchanges and confiscated 13 crypto ATMs in a long awaited anti money laundering crackdown. Criminals reportedly used these exchanges to conceal the origins of illicit funds, often obtained through dark web drug sales or ransomware attacks.
Some are developing solutions for merchants to accept crypto at POS. Musquet, based in London, has raised £750K to launch Bitcoin acceptance on a PAX A920. It claims a world-first. Bitcoin transactions are priced at 1%. Credit cards, processed via Raypd, are 0.9% + 5p.
This is an interesting proposition but not unique. Done4You, an ISO based in Namur, Belgium, has implemented crypto at POS for a petrol station in Luxembourg using GoCrypto’s technology. Crypto transactions are 1.25% compared to interchange + 0.5% for credit cards. NAKA, from Slovenia, is working on similar lines.
Stablecoins are less glamorous than Bitcoin but are beginning to have real world applications, especially in cross-border money transfer. Stablecoins are meant to track US dollars 1:1 but there’s always a worry that something might go wrong. The WSJ reported that Tether, the largest stablecoin, was under investigation for possible AML violations. Tether has denied this.
Stripe has paid $1.1bn to acquire Bridge, the largest stablecoin platform, with a view to providing remittance services to its worldwide merchant base. How excited should we be about Stablecoins and remittances? The CEO of Wise, who should know something about international money transfer, seemed unexcited in this answer on a recent results call.
Cashless Poland has been a stunning success in helping small businesses move to digital payments and it’s not over yet. There’s a new campaign featuring Szymon Majewski, a major celebrity in his home country.
And finally
Jas Shah has written an entertaining history of PayPal. It’s quite a story and far from over. Paypal has its mojo back including launching the best payments commercial in years. Enjoy Will Ferrell.
Truelayer, the leading open banking payments provider, is finally beginning to grow its revenues but, despite cost-cutting, the business remains a long way from profitability.
Reporting results for 2023, Truelayer says that payment volume doubled to £21bn and had reached an annualised £25.5bn by the end of the year. Momentum is growing and the company’s website now claims annualised volume of £29bn from 120m transactions. Truelayer’s multiple partnerships and blue chip customer relationships are beginning to deliver.
Truelayer describes itself as “Europe’s leading open banking payments network” but has dropped a previous claim of market leadership in four European countries. Instead, it reports “significant market share” in UK, Ireland, Spain, France, Germany and Netherlands.
The London-based fintech is investing at pace to establish leadership in the crowded market for open banking payments. Along with its competitors – Tink, Token, Volt, Yapily etc – Truelayer aggregates connections to thousands of banks into a single API. This allows merchants to offer consumers the option to pay from almost any bank through a single connection with Truelayer. Capability now extends to pay-outs and customer onboarding too.
Customers include Coinbase, Revolut and William Hill. Truelayer has some good case studies. For example, lastminute.com found that offering openbanking payments grew average order value by 20% and was a helpful resilience tool during the Crowdstrike outage.
Revenue tripled to £12.43m in 2023 but Truelayer is having to work hard for the money. Open banking transactions, at least for high-ticket items, are much cheaper than cards. Truelayer’s take rate is just 5bps which compares to 30-90bps for a traditional merchant acquirer. However, most open banking deals are believed to be priced per transaction. By this measure, Truelayer’s average of c.12p is reasonable but you still need to sell a lot of transactions at this price to justify a unicorn’s valuation.
Simoneschi understands this. Speaking in June, he told journalists that “scale is everything…. We are an infrastructure business. That means we are likely going to spend a lot of time and a lot of years building and spending money before actually earning.”
Cost of sales rose fourfold to £4.64 with gross margins falling 7ppt to 63%.
With Fintech investors less generous than of late, management has kept an eye on costs. Total employee expenses were down 7% at £43m. One third of engineering and product staff were laid off and total staff numbers fell from 434 to 346. But Truelayer kept on selling. Client care and sales numbers rose slightly.
Overall, administrative expenses were 4% lower at £62m.
Despite the reduction in development resource, Truelayer has been busy launching new products.
Variable Recurring Payments (VRP) is widely expected to transform the openbanking payment market by offering a modern replacement for direct debits. Truelayer says it is now processing 1m VRPs each month.
Management is also very pleased with progress from Signup+ which combines account set-up with making the first payment in a single action. And Truelayer has launched Payment Links which allows merchants to send an openbanking payment request via a text or email.
The payout product is also growing quickly, notably in Belgium, France, Netherlands and Portugal.
With a fast growing number of transactions flowing over a steady cost base, the operating loss narrowed a little to £54m from £61m in 2022. Accumulated losses now stand at £198m. With £51m cash in the bank at the end of 2023, Truelayer has another 12 months to become cash positive or will need to take additional capital.
Management is pleased with the 2023 results, saying “overall this was a significant year for the company and has laid strong foundations for continued growth and success in 2024”.
If shoppers do shift quickly from cards to open banking, the prize for API aggregators such as Truelayer could be significant. Transaction volumes are finally beginning to grow but competition between the specialist open banking vendors is reported to be ferocious. Consolidation is inevitable. In the past few weeks, we’ve seen GoCardless buy Nuapay and Paypoint acquire OB Connect. And Kevin, a well-funded Lithuanian open banking competitor couldn’t find a buyer and is now in liquidation.
The future is likely to favour open banking vendors with wealthy and committed backers. Truelayer should be one of winners but there is a long road still ahead.
Paymentsense, parent company of the Dojo brand which has taken the UK market by storm, has reported its first operating profit and refinanced its debt mountain with a new facility which does not expire until 2030.
Paymentsense is the brainchild of two low-profile serial entrepreneurs – Juan Farrarons and George Karibian. The duo intend to keep their foot on the gas, saying “the investors in the business continue to prioritise long term growth over short term profit.”
According to documents filed at Companies House by Typhoon Noteco, the ultimate UK holding company of Paymentsense and Dojo, payment volume for the year to March 2024 rose 29% to £43bn, continuing the astonishing growth witnessed since 2021. The number of transactions processed was up 32% at 2.2bn with ATV falling 2% to £19.24. This mirrors a consistent trend across the market as low ticket transactions continue to move from cash to cards.
Revenue rose 37% to £409m. The overall take rate increased 6bps to 0.96% and revenue per transaction was up 3% at 9.8p.
Paymentsense cleverly built the Dojo brand around the PAX A920. Other providers can re-sell PAX devices but only Paymentsense sells Dojo. In just a few years, the eye-catching white terminals have become ubiquitous on Britain’s high streets. Initially, known for its keen pricing and generous contract-buyouts, Dojo has begun to increase prices and the service, based on a branded PAX A920, is no longer cheap. Standard pricing is £30/month for a terminal (rental + “platform fee”) + 5p per transaction + 0.75% debit or 1.2% credit for processing.
Dojo has made a push into integrated payments in partnership with software vendors (ISVs) and claims 400 ePOS partners. This brings a better quality of merchant – higher transaction volumes and less likely to churn. And the customers seem happy. In this case study, a small restaurant chain reduced till discrepancies by 90%, saving 10 hours of admin per week.
The combination of price increases and ISV distribution is making Dojo’s underlying metrics look very good indeed. Although Dojo only grew customer locations by 3% to 150K, volume per location was up 25% at £284K and revenue per location up 34% at £2,700.
Total gross profit rose 36% to £218m.
In advance of the refinancing, management took steps to reduce costs saying that the business has “undergone a restructuring process…. streamlining various business units, optimising the organisational hierarchy and reallocating resources to key growth areas.”
30% of the sales team was axed although with additional recruitment in back-office functions total staff numbers rose from 960 to 1136. Employee costs were up 17% to £83m at an average of £73K each..
Management continues to invest in scaling the “cloud native next generation card acquiring Dojo platform” which it hopes will allow the business to expand into larger merchant segments as well as new territories. The business says that becoming an acquirer was a critical support for its growth strategy. Paymentsense has now received an e-money license for Ireland which it uses for a new Dojo business recently launched in Spain. Paymentsense believes that the hospitality-heavy Spanish payment market is ripe for a modern restaurant-focused payment proposition.
There is an intriguing subplot revolving around the company’s swanky central London office in the Brunel Building at Paddington, a location shared with the Premier League. Management reported £6.8m of property income generated by subletting unused floors of the Brunel building but has now committed to staying in the Brunel and leasing additional space. Before this decision, Paymentsense looked seriously at moving to the nearby Paddington Cube and is in dispute with its prospective landlord. The case will go to trial in 2025 although these matters are normally settled out of court.
Adjusted EBITDA rose from £69m to £94m with margin held steady at 23%.
Net debt rose £98m to £596m requiring interest payments of £91m, up from £62m in 2022. Paymentsense will need to maintain its fast pace of growth to support the higher interest payments associated with its new, long term debt. Total debt is equivalent to 6x EBITDA, still chunky, but down from 7x EBITDA in 2023.
Paymentsense made an operating profit for the first time of £32m, a very welcome milestone but not yet enough to cover the increasing cost of servicing its expanding mountain of debt. The business remains loss making at a pre-tax level although deficit was cut to £59m in 2023 from £141m the previous year. Accumulated losses now stand at an eyewatering £644m. Paymentsense has consumed a remarkable amount of capital.
Nevertheless, with its debt refinanced, management will be delighted with the 2023 results. All UK metrics are looking positive and the business is getting good at converting additional payment volume into profits. Continued growth in the UK will be challenging as Dojo maintains its higher price points and new entrants such as Shift4, Toast and a revitalised Global Payments compete for SME POS payments. Much may be riding on the Spanish expansion.
PAX, registered in Bermuda, listed on the Hong Kong stock exchange and with its main operations in China, blamed “global economic uncertainty” for its steadily declining topline. Although profitable and generating plenty of cash, PAX’s share price is bombed out. The market capitalisation is just $625m and the stock yields 10% at a PE of 5.
On the positive side, over 50% of sales are now Android “smart terminals.” This is a segment in which PAX, with a range of elegant keenly priced devices such as the A920, had early market leadership. Android offers terminal vendors the opportunity to upsell value added services – such as app stores – to bank and PSP customers. Critically, service revenue is recurring and can be secured under long-term contract.
PAX’s turnover from services, including maintenance and installation, is growing quickly from a low base, up 33% to $21m. Of this, $8m was software as a service revenue linked to the Maxstore product which brings together terminal management, reporting and a white-label app store. The apps themselves are supplied by 3rd parties and include booking, loyalty, labour scheduling and many more. Here’s a full list.
Maxstore generates big numbers. The service connects 12m terminals, 2m merchants, thousands of app developers and manages 215m push tasks annually.
Yet total service revenue of $21m in the last six months equates to less than $4 per installed terminal each year. There is a long way to go for Maxstore to make up for the long-term decline in device sales which fell 17% in H1 to $365m.
Competitors – notably Castles, Newland and Ingenico – are releasing new Android devices themselves and PAX will need to innovate to retain its leadership. PAX has launched a number of new models including the A8900 and A99 portables and the IM25 for unattended. The company is, very sensibly, extending into ECR hardware with new Elys series.
The devices are put together at the new PAX Smart Terminals Industrial Park at Huizhou, China, built at cost of $91m and featuring production lines, R&D and “well equipped dormitories” with a total floor area of 261.000 square metres.
Although PAX sells its product worldwide, most revenue comes from Europe and Latin America. In H1, the business was hit by a notably poor performance in LATAM where sales fell 21% to $137m. Brazil was particularly weak which management blames on the economy as well as slowing demand as the terminal market has matured. EMEA was more resilient, revenue was down just 4% to $137m with the region now accounting for 37% of global sales.
The best European markets were Italy, UK and Hungary with “fluctuating demand” reported in Germany and Spain. The A920PRO is reportedly selling well. PAX believes it has a major opportunity with the growing deployment of EV charging points following the EU’s AFIR directive.
In the US, PAX has seen a sharp slowdown in demand from ISOs and banks. Like many other payment businesses, it is reorientating sales to ISVs.
In APAC, PAX is buying its Australian distributor for up to $20m, depending on performance.
Cost of sales fell 19% to $205m resulting in a 10% decline in gross profit to $180m. Gross margin rose 2ppt to 47%, mainly due to the depreciation in the Renminbi reflecting PAX’s cost base in mainland China.
Management has taken a firm line with controllable costs. Employee expense was cut 18% to $50m. Staff numbers have been cut by 10% to 1596 staff, earning on average 9% less at an average of $31.4K.
R&D spend was steady at $39m.
Operating profit fell 21% to $69m. The operating margin fell just 1ppt to 18%, an impressive performance by most standards. But investors won’t be questioning how PAX makes money today. The worry is how it will continue to generate cash if terminal sales keep falling.
