Tag: Nexi

Newsletter – September 2025

Geoffrey BarracloughLeave a comment

A person standing at a podium Description automatically generated

The Payment Business

Worldline’s half-year results disappointed investors as its core merchant services division once again underperformed the broader European market. Net revenue in the division fell 7%, while EBITDA dropped 19%, prompting a colossal €4.1 billion impairment, a remarkable figure considering Worldline’s current market cap is just under €1 billion.

chart, line chart

The bad news kept coming. Worldline took an additional €142 million write-down on its minority stake in Ingenico, S&P has downgraded its bonds and the Financial Times raises questions about whether the parent company has ready access to cash held in subsidiaries.

The sales slump in merchant services is blamed on a tough SMB environment, particularly in Germany and the Benelux, where Worldline is struggling against the “Tap Pack” of SumUp, Viva.com, myPOS, Flatpay as well as ISV’s offering payments bundled with their retail or restaurant software.

Still, there are some glimmers of hope. External auditors brought in following the “Dirty Payments” scandal reported no further issues. Worldline has successfully offloaded its mobility and e-ticketing unit for €410m, and there are signs of life in markets like Australia, Italy, and Greece. The company also reports solid progress in platform consolidation and has re-entered the UK acquiring market. Worldline’s new management team remains upbeat, targeting a return to growth in 2026, though that promise may sound familiar.

Adyen’s H1 results were quite a contrast. Worldwide revenues grew 20% while EBITDA margins remained above 50%. Very few companies can boast such strong financial results but the stock price fell 18% as the Amsterdam-based acquirer reduced H2 guidance citing the impact of Trump’s tariffs on its Asia-Pacific clients selling goods to the USA. This is thought relate to Shein and Temu suffering from the imposition of customs duties on small packages.S

A graph of a number of countries/regions AI-generated content may be incorrect.

Despite years of effort and tens of millions of dollars in incentive payments to PSP’s, Discover’s global acceptance network had made little progress in attracting volume. Capital One, Discover’s new owner, is now looking to create a rival to American Express. The CEO said “there are only 2 banks in the world with their own network, and we are one of them. We are moving to capitalize on this rare and valuable opportunity. We need to achieve greater international acceptance and then build a global network brand.”

Dojo has established itself as arguably the UK’s leading SME payments provider but 2024/25 results show growth is slowing – revenue up just 11% and merchant numbers flat. Successful launches in Italy and Spain are critical to the future of the group because, despite a new $190m equity injection, Dojo must run fast to escape the interest payments on its £649 million debt mountain. Read more on the Business of Payments blog.

A graph with numbers and a line AI-generated content may be incorrect.

Today’s CEO normally boasts about using AI to cut staff numbers but FlatPay, the fast growing Danish-HQ’d PF, is delighted to have reached 1000 employees. The hiring spree is linked to new market entry into France and Italy where it is signing 2,400 merchants a month and expects to capture 3% share within 12 months.

The German Sparkasse are some of the few incumbent banks making a success of payments today. Revenue at S-Payment – which provides merchant services to the 353 member banks – was up 17% in 2024, the terminal estate grew 5% and girocard transactions increased 12% – well ahead of the market. Read more on the Business of Payments blog.

Bar chart showing S-payment sales revenue (€m) from 2022 to 2024, with increasing values in each year.

Secupay is another German payment business producing good numbers. Based in Dresden, Secupay is the country’s largest remaining independent PSP and processes c.€2bn annually from over 300,000 merchants. 2024 sales almost doubled to €19m. Secupay has recently secured full scheme membership and has built an acquiring capability using Silverflow software.

Deutsche Bank also uses Silverflow and has won its first large customer – Bolt – since relaunching its own merchant acquiring proposition.

Global Payments stock price improved after management reassured investors on the near-term outlook which included Q2 results showing European revenues up 6%, flattered by the weaker dollar.

chart, line chart

Global is performing best in central Europe. NBG Pay, the joint-venture with National Bank of Greece inherited from the acquisition of EVO Payments, processed €14bn of in 2024, grew net revenues 25% to €40m and reported a maiden operating profit. Global has entered Croatia with the acquisition of the acquiring unit of Erste Card Club,through its existing Vienna-based JV with Erste Bank.

Although Global has reported positive progress with regulatory matters in the US relating to the acquisition of Worldpay, it’s not commented on the situation in the UK where the combined business will probably have a >40% share of the acquiring market. Competition authorities in London have not yet decided whether to mount a full investigation.

In a busy month for payments-related fundraising, here are some highlights:

  • Bumper, based in Sheffield in the UK, secured an additional £8m from the venture arms of Jaguar Land Rover, Suzuki, Porsche and others to expand its car repair software and payments platform to new European markets including Germany, Ireland, Netherlands and Spain. Bumper bought Cocoon Payments, an open banking specialist earlier this year.
  • Appcharge, a Tel Aviv based merchant-of-record specialising in helping mobile games publishers take money directly from consumers (avoiding app store charges) has raised $58m, bringing total financing to $89m. Appcharge claims $500m annual payment volume and growing quickly.
  • Reckon.ai, from Porto, has raised a further €5.1m (total of €8.5m) to grow its business selling autonomous smart cabinets – best thought of as walk-in vending machines where shoppers pay via an app or by tapping a payment card before entering.
  • Handwave, based in Latvia has raised $4.2m for its biometric payment products – hardware and software. You first must link your card credential to your palm print and then you can pay by putting your hand on a special reader. Palm payments make sense for saunas and swimming pools but, otherwise may be a solution looking for a problem.
  • MyPinPad, the Cardiff-based SoftPOS vendor, has raised a further £4.6m.
  • Papercut, based in Sofia and led by ex-SumUp execs, has raised €2m for its BNPL aggregation service for SMEs. Embed is providing the payment infrastructure and money movement.

Turning to corporate activity, Payroc, a highly acquisitive US acquirer/processor, has bought Bluesnap, an online PSP and payment gateway based in Dublin and Boston. Payroc processes $115bn from 190,000 merchants and the deal gives it significant reach into Europe for the first time.

PayRetailers, a Barcelona-based PSP specialising in cross-border sales into Latin America, has acquired Celeris, an Amsterdam-based payment orchestrator. The deal should help PayRetailers improve authorisation rates.

Finally, Nexi has retained its partnership deal with Crédit Agricole in Italy, despite the bank’s French parent having bought a 7% stake in Worldline in 2024. This will come as a relief to Nexi’s management as it has been under pressure from Worldline for bank partnership in Italy. The Crédit Agricole deals covers processing for 100,000 POS terminals and 3m payment cards.

Scheming

Q2 2025 was another storming quarter for the schemes in Europe. Combined Visa and Mastercard payment volume rose 18% although the headline figure was flattered by the weak dollar. But 12% in Euro terms is still very impressive and reflects 10% growth in transactions and 2% uplift in ATV.

chart, line chart

Mastercard and Visa have been neck and neck for a while but in Q2 Mastercard processed (marginally) more volume in Europe than Visa for the first time. This will be cause for a small celebration in Waterloo although Visa still managed a slightly higher number of transactions.

Cross‑border volumes remain robust for both networks; despite Adyen’s issues, neither reports geopolitics hurting demand with Visa’s CEO saying: “We see no meaningful impact from tariffs.”

Europe’s reliance on Visa/Mastercard – 13 of 20 eurozone countries use them for most POS payments – is spurring work on the digital euro (see below) and the European Payment Initiative’s wero wallet.

In Germany, the savings banks, which have integrated wero into the Sparkasse app, now claim 1m active users. For now, wero only works for P2P payments but eCommerce is coming later this year and merchants will certainly like the pricing. S-Payment is proposing 0.77% + gateway charges: rather cheaper than cards or PayPal. And, unlike open banking payments, wero comes with a payment guarantee.

chart, bar chart

Launching any new payment method is difficult but consumer awareness of wero has grown from 12% to 30% in Germany over the last 12 months thanks to some sustained marketing such as this determined effort to have wero adopted at flea markets.

Wero is also live in France although pitched as something rather cooler and cosmopolitan.

Turning to domestic schemes: Poland’s Blik, which has Mastercard as a key shareholder, posted standout 2024 results with revenue up 93% to €98m (~€0.06/tx) and profit at €48m.

A graph of a company AI-generated content may be incorrect.

Growth continued in H1 2025: total transactions were up 24% including almost €2bn of POS volume, managed through a virtual Mastercard which also allows Poles to use Blik at terminals abroad. Feel the chemistry as Mme Curie buys supplies in Paris.

Customers of Caixa Bank, BBVA and Santander can use Bizum, the fast-growing Spanish mobile payment wallet at POS for the first time. In contrast to Blik, the Bizum user experience is clunky – shoppers need to type their phone number into terminal to be sent a payment link.

Brazil’s Pix mobile wallet has attracted global attention for its stratospheric growth but seems to be taking share from cash, not cards. Since Pix launched in 2020, card transactions have been growing faster than ever – an annual growth rate of 20% compared to 14% in the previous years. Despite this, Donald Trump has launched an investigation into Brazil’s unfair trade practices including Pix which he says discriminates against Visa and Mastercard. Brazil’s President responded: “PIX is Brazil’s. We will not accept attacks on PIX, which is the patrimony of our people.”

ISV

The shift in payments distribution from banks to software vendors (ISVs) is one the biggest disruptions in the industry and is delivering big numbers to processors that have invested in building the right relationships.

Shopify, which provides websites for over 5m merchants worldwide, has aggressively shifted volume from 3rd party gateways (chosen by the merchant) to its in-house product – Shopify Payments. Processed via Stripe, Shopify Payments’ volume was up 38% in Q2 to $41bn and accounts for two-thirds of all sales made by Shopify merchants.

A graph of a bar chart AI-generated content may be incorrect.

Stripe tends to be the partner of choice for eCommerce ISVs but Adyen’s platforms business is the go-to acquirer for vendors serving online and store-based channels. Latest results show Adyen’s payment volume from platforms up 80% to €27bn in H1 2025 from 255,000 terminals. 31 of its partners now process over €1bn each annually.

A graph with blue and orange bars AI-generated content may be incorrect.

Adyen’s deployment capability in multiple countries and across channels is very attractive to retail software specialists that need a single solution for their multi-national clients. Sitoo from Sweden is a great example. From Sitoo’s perspective the key USP of partnering with Adyen is an increase in first-time help desk resolutions and reduction in time taken to troubleshoot faults. 

Other payment processors want a piece of the action. Worldpay is finally taking the European ISV market seriously with some strong marketing support for the launch of Worldpay for Platforms. The proposition is based on the acquisition of Payrix in 2022

Electronic Payments, has bought Handpoint the Iceland-based mPOS vendor. Handpoint, which claims 100 ISV partners, processes $2bn annually from 18,000 devices in Europe and the USA. Electronic Payments is known for giving generous commercial terms to its partners (URL = www.residuals.com) and could be a disruptive new entrant to many European markets.

New shopping

Agentic commerce has potential to transform online shopping; replacing the established online commerce journey which begins with a Google search and ends at a finely honed checkout page with a chat-based conversation between you and an agent that has delegated authority to spend money with your payment card.

In surveys, 50% of Americans are already using AI agents for shopping which is leading to a speedy reassessment of online retail. Anecdotal evidence suggests that small speciality retailers are seeing 20-40% drop in visits as AI prefers to funnel shoppers to large brands. Here’s a good round-up of what merchants are finding.

A16z, a top US venture capitalist, looks at the scenarios and concludes that Amazon and Shopify (which together account for 50% of US eCommerce sales) have strong enough differentiators to prosper in this coming shift. The retail giants want agents to play on their terms and interact based on published APIs. Both have blocked AI bots from crawling their extensive data.

Instead, Shopify has given each of its 5m merchants a “chatbot accessible storefront API”and launched Shopify Catalog which aggregates products across all Shopify merchants to enable AI agents to search, recommend and (in the near future) transact. Shopify claims 12.3% conversion on AI-assisted shopping compared to 3.1% the old-fashioned way.

The payment industry has begun to launch product. Worldpay has introduced a Know Your Agent (KYA) framework to help merchants determine whether an agent is good (working for a genuine shopper with funds to complete the purchase) or bad (working for a scammer). Trulioo, the global ID vendor, is behind the product and has a helpful white paper here.

Open banking

Industry commentators have focused on the positive aspects of the UK’s National Payment Vision, notably a commitment to form a new delivery company, create a payment guarantee and find a commercial model that rewards all market participants. These all may take some time. Meanwhile, investors worry whether the open banking industry – suffering from low volumes and lower margins – can remain solvent long enough to see the fruits of these endeavours.

One example is Ordo, a high profile open banking startup which featured in last year’s Fintech 40. Ordo was bought by Neonomics of Norway in 2023 but the new owners have given up on UK open banking and Ordo has ceased trading. Writing on LinkedIn, Neonomics CEO said VRP (the open banking equivalent to direct debit) had been too slow to arrive resulting in a UK market size of just c.30m transactions/month. This is not enough to sustain an industry.

Mollie, the very well-funded Dutch PSP, is reported to be close to acquiring GoCardless, the loss-making London-based direct debit specialist after Trustly declined the deal. If true, this indicates investor nervousness as Mollie would be unlikely to match the $2.1bn valuation attached to GoCardless 2022 funding round.

Thanks to partnerships with FIS and Visa, and backed by blue-chip investors including NAB, Citi and Rapyd, Banked – another high profile open banking start-up – will be well positioned if/when A2A merchant payments become mainstream. Meanwhile, 2024 accounts show that Banked generated just £700K revenue and will likely need yet more capital to supplement the £55m already raised.

chart, waterfall chart

On the positive side, it’s increasingly common to see open banking offered at checkout. Ryanair, working with TrueLayer, has started putting “pay by bank” first on its payment page as you can see below.

graphical user interface, application, email

Open banking’s current lack of consumer protection will aways be an issue in travel payments. Meagan Johnson gives an example of an A2A transaction for which neither Air France, Trustly or Monzo will take responsibility. Next time, she says she will use a card.

It’s clear that open banking needs “scheme rules” that give clear guidelines for managing disputes. Following two recent product launches, it’s increasingly likely these will be card scheme rules. Following the announcement of Visa Protect earlier this year, Mastercard has followed suit with A2A Protect. Early adopters include NatWest, Santander and Monzo in the UK.

Crypto corner

Plans for the digital euro are accelerating. Regulators already worried about European over-dependence on American payment schemes are now equally concerned about a possible tsunami of dollar denominated stablecoins arriving from the USA.

However, Central Bank Digital Currencies, like the digital euro, are a very different proposition to commercial stablecoins. CBDC’s are designed as cash-substitutes that bring direct benefits to citizens rather than as infrastructure-level plumbing to facilitate international trade. The European Central Bank hopes to have a political deal on the digital euro by early next year.

The commercial banks aren’t happy and paid PwC to write a study that put the cost of digital euro adoption at €30bn if the digital euro sucks deposits out of current accounts leading to banks making fewer loans.

The Bank of England, apparently unbothered about payment sovereignty, is said to be cooling on the digital pound.

Turning to crypto proper, Stripe has begun developing its own blockchain. Simon Taylor is very excited about this.

There are still few signs of crypto (stable or unstable) being used for retail payments. Undeterred, SpacePay, based in London, is raising $1.1m from the sale of its $SPY tokens, to promote crypto currency acceptance on its Android payment terminals. SpacePay says it charges just 0.5% and settles in fiat currency.

Coinbase, a platform that allows people to buy/sell crypto, is running adverts in the UK suggesting that investing gambling in crypto is the solution to inflation, stagnating wages, crumbling infrastructure and a withering welfare system. This won’t end well. 

In other news

Numia won the merchant acquiring business of Banco BPM from Nexi last year. One of the first deliverables is “100 kiosks in 100 churches” allowing the faithful to make contactless donations.

100 totem in 100 chiese”: il digitale entra nei luoghi di culto - Pagamenti Digitali

German banks stopped €10bn of suspicious direct debits from PayPal following a failure in the US giant’s security systems.

Netherlands Railways has blocked virtual cards issued by Revolut, Paysafe and Vividfollowing discovery of a loophole that allowed passengers to travel for free. People would create a virtual card, take a trip, and then delete the card before the overnight settlement run.

Pedro Carvalho, sales director at Primer, which supplies payment infrastructure to large merchants, has spent the summer posting checkout crimes on LinkedIn. Here’s my favourite – the merchant asking shoppers to choose the processor. Why?

graphical user interface, text, application, email

It’s been a busy summer for payment outages. In Denmark, Nets went down and paralysed traffic at the Great Belt Bridge. In France, SocGen and La Banque Postale went down two days in a row with Crédit Mutuel and CIC also failing for two hoursone Saturday evening.

Shopify’s head of engineering gives advice on how to use AI. He says get your lawyers to default to “yes” and don’t skimp on letting your staff subscribe to the best tools. “If your engineers are spending $1,000 per month more because of LLMs and they are 10% more productive, that’s too cheap. Anyone would kill for a 10% increase in productivity for only $1,000 per month.”

Sam Altman says AI will kill KYC as we know it. Risk systems need to be “always on” to cope with the growing wave of deepfakes, spoofing and voice-cloning, he says.

The team behind PayEye, a high-profile facial recognition payment solution, are now in a legal dispute in Poland about who owns the intellectual property.

And finally

How does a Shift4 logo get on an Adyen terminal? An Adyen exec responds: “What you’re seeing is an odd choice of background image, which is fully customizable on any of our terminals.”

No alternative text description for this image

Photo credit: James Lloyd

Where to find me

I’ll be at the Checkout.com’s conference in Venice 7-9 October, at the ESPM meeting in London on 23 October, at the ePay Summit in London on 28 October and MPE in Berlin next March.

Takeover battle delays Sabadell sale of merchant services to Nexi to 2025

Geoffrey Barraclough1 Comment

Banco Sabadell remains committed to selling its merchant services business to Nexi although the deal is on hold as the Catalan bank focuses on defeating a hostile takeover from BBVA, a larger Spanish competitor.

Speaking during the Q2 2024 results call, Sabadell CEO Cesar Gonzalez-Bueno confirmed that, “all necessary regulatory approvals have been secured, and the deal will be finalised following the conclusion of the hostile tender offer.” He went on to say that there are no break clauses, and the sale to Nexi is expected to proceed around mid-2025, approximately almost two years later than initially planned.

BBVA has not made any statement about whether the sale to Nexi would proceed should it be successful in buying Sabadell. BBVA has a good in-house merchant services offer. It could deliver considerable synergies by merging the two businesses and has less need of Nexi’s technical expertise and product roadmap. Nexi has indicated that the deal is “not automatic.”

Nexi had agreed to pay €350m for Sabadell’s merchant services unit which processes about 20% of card payments in Spain through 380,000 merchants. The sale price was reported to be based on a run rate of €30m EBITDA. However, Sabadell also disclosed that the delayed sale is not expected to impact the bank’s profit and loss statement, implying that its merchant services business is currently operating at breakeven point.

Profitable or not, Sabadell continues to display healthy topline growth. Merchant payment volume increased by 9% to €14bn in Q2 and consistently maintains a yearly run rate of over €50bn. Meanwhile, the average transaction value has decreased by 3% to €31.50 as the adoption of contactless payments continues to drive the conversion of low-value cash transactions to card payments.

Newsletter – July 2024

Geoffrey BarracloughLeave a comment

The Payments Business

Klarna has sold its gateway business to a local investor consortium for $520m. Klarna Checkout (KCO) claims 40% share of its home market of Sweden and 20% across the Nordics as a whole.

It’s obvious why Klarna is selling. KCO competed with key distribution partners such as Stripe and Adyen and the very generous sale proceeds will bolster Klarna’s balance sheet and help grow its lending business.

But it’s less clear how KCO’s new owners will make a return on their investment. Stand-alone gateways have been under considerable pricing pressure in recent years, and many have ended up vertically integrated into the larger merchant acquirers.

In banking news, BNP Paribas and BPCE, which together handle c.30% of card payments in France, will invest €100m each and pool their payment capabilities to create a joint-venture with the scale to compete with Worldline and Nexi. Technology will be “home grown” and most likely a continuation of Partecis, an in-house platform based on ACI products. While there’s plenty of scope for synergy in France, the JV will find its hoped for international expansion rather more challenging as PagoNxt, Santander’s payment unit, demonstrated when it recently closed its German operations.

As predicted in last month’s Business of Payments, Sabadell has postponed the sale of its merchant services business to Nexi. Sabadell is subject to a hostile takeover from BBVA, another Spanish bank. BBVA has a good in-house payment offer and has less need of Nexi’s products.

IDC, a London-based research firm, has published vendor evaluations for online and omni-channel retail payments. The full reports cost $20,000 each but the top ranked firms have helpfully made their sections available free of charge. Stripe comes top for online payments although is marked down for being expensive. Adyen is first for omni-channel but customers are warned that its all-in-one solution may lack flexibility.

Stripe is notably missing from IDC’s omni-channel evaluation but is quickly becoming a very credible option for cross-channel merchants in Europe. Stripe has launched a suite of new enterprise services in France including its S700 POS terminal, acceptance of Carte Bancaire and an integration with CEGID, a leading local retail ISV. Stripe claims half the CAC-40 companies as customers and announced that Accor, the hotel group with over 5,600 locations worldwide, is standardising on Stripe for its new, centralised booking system. Stripe obsessives will enjoy this detailed history of the business.

Viva Wallet’s lawsuit with JP Morgan ended in a London courtroom with both sides claiming victory. JPM paid an eye-popping $800m for 48.5% of Viva in 2022, primarily to gain access to SME customer onboarding tools for European markets. Haris Karonis, Viva’s founder, claimed that JPM then deliberately blocked his company’s launch in the US so that the giant American bank could buy the rest of Viva on the cheap. JPM counter-claimed that Karonis failed to understand how far Fintech valuations had fallen.

Financial results of listed payment companies have settled down post-pandemic into a phase of steady but unspectacular growth. FXC have crunched the Q1 numbers so you don’t have to.

A wero for your thoughts

A female white soul singer with big hair sings "I need a Wero" in a German beer cellar while holding a phone displaying a QR code

It’s taken four years and 14 of the original 31 banks have exited the consortium but the European Payment Initiative (EPI) has finally launched wero, the long-long-awaited domestic European payment champion. Wero, a combination of “we” and “euro”, is live for person-to-person money transfer, initially for customers of co-operative and savings banks in Germany and KBC in Belgium. French banks come on stream in the autumn.

Shoppers will be able to make eCommerce payments with wero from early 2025 and Computop, the German PSP, has already begun asking merchants to register to be part of a pilot. In-store payments will follow in 2026.

Payments & Banking, a German blog, explains what wero is and what it is not.

The consensus from payment experts is that for wero to succeed the EPI needs to focus ruthlessly on user experience and keep the member banks firmly in the background. And “I need a wero” is the only song that will do as you can hear in this short commercial. 

Paydirekt and Sofort axed

Even though wero is at least six months away from being ready for eCommerce, its launch sparked the unexpectedly early closure of Paydirekt/Giropay, a domestic competitor to PayPal launched by the German banks in 2016. 

Insiders tell me that the service termination was badly handled. Giropay switched off its old integration interface at the end of June even though many acquirers had not yet migrated to the new version.

Meanwhile, Klarna has announced the closure of Sofort, the German online bank transfer service which it bought for $150m in 2013. Merchants will be migrated to Pay Now, Klarna’s open banking product. This includes buyer protection which is great for shoppers but less exciting for Sofort’s many merchants in the gambling and adult sectors. These customers will be looking for alternatives.

Klarna’s new wrapper doesn’t come cheap. In Germany, Adyen is charging 1.35% + €0.20 for Klarna Pay Now transactions. For UK merchants, Mollie is asking a punchy 4.99% + £0.30.

If that wasn’t enough disruption, Shopify is deactivating Amazon Pay as a payment option from all European merchants. No reason was given and merchants are really unhappy.

Scheming

Blik, the wildly successful Polish mobile payment standard, continues its stunning growth with payment volume up 53% in 2023 to €29bn. Blik is jointly owned by Mastercard and a number of local banks who have suddenly woken up to the importance of their investment. From now on, the banks will send their CEO’s to Blik’s board meetings.

Bancomat, the Italian domestic debit scheme, is finally getting its act together. Milan-based investment fund FIS has made a €100m investment, the board has been slimmed down to speed decision making and a new CEO appointed from Mastercard. Nexi runs the technology for Bancomat and has put the card scheme live on Apple Pay and as a payment option on Amazon.

Read more about Bancomat’s 2023 results on the Business of Payments blog.

ISV

We’re taking a keen interest in the convergence of software and payments. Flagship Consulting’s latest report shows quite how dependent many American ISV’s have become on payment and other financial services revenue. 

In response, payment processors know they need to partner with ISVs and some have gone further, buying or building an in-house range of vertical software. 

Intriguingly, the stock market value of payment processors that offer software is rather lower than software vendors that offer payments processing. Jevgenijs Kazanins looks at why Toast (an ISV that offers payments) is valued more highly than Shift4 (a processor that offers software) even though Toast makes much less money. His conclusion is that ISV’s are better at securing recurring revenues under contract.

European ISV’s have now realised they too can make money from processing. The  opportunity is smaller than in North America because payment margins in Europe are much lower. Nevertheless, a savvy commerce software vendor can still double profit margins by embedding payments in its core merchant offer.

With so many acquirers and PSP’s pivoting towards ISV’s as their primary distribution channel, a number of start-ups have begun offering key parts of the technology stack as-a-service. Here are a few that have caught my eye.

  • Chift, based in Brussels, offers PSPs connections to a range of leading accounting, eCommerce and ePOS software though a single API. The company just raised €2.3m
  • Shape Technologies is offering payments-platform-as-a-service to payment facilitators with capabilities including onboarding, KYC and billing. Shape is founded by alumni from Cardstream and is helping put Taunton, Somerset on the Fintech map.
  • Fung, in Amsterdam, offers a similar product set to Shape but is also a payment institution and can handle the money flow too.
  • Dublin/Vilnius based Paynt, goes one step further with a full acquiring-as-a-service proposition.Subscribe

New shopping

We’re keeping a close eye on the progress of autonomous stores as one possible driver of a seismic shift in grocery transactions from POS to the shopper’s phone.

Rewe is leading the deployment of “just walk out” formats in Europe. The German supermarket giant has opened a 1200 sq metre autonomous store in Hamburg using technology from Trigo which can even identify fresh meat and cheeses picked from the deli counter. Showing confidence in the concept, even where labour costs are much lower than Germany, Rewe has also opened an autonomous store in Bucharest.  

Although sceptics point out that frictionless checkout often involves more manual intervention than the vendors let on, the use cases are multiplying. For example, in a village store in Switzerland a shipping container is transformed into an unmanned convenience store (or walk-in vending machine) using technology from FastaXs.

Biometric payments

With early pilots looking positive, there’s growing momentum behind new biometric payment technology in the US, including palm payments (favoured by Amazon) and even face payments. JP Morgan is taking an interest in the latter with a partnership with PopID, a Californian start-up which has an early lead in the technology.

In Europe, Mastercard is backing PayEye, a Polish start-up which is piloting its iris/facial recognition product at five locations of Empik, a large retailer of books, toys and games.

@android.com.pl

Płatność spojrzeniem. Już dziś żyjemy w Cyberpunku #payeye #empik

♬ oryginalny dźwięk – Ulubiony portal technologiczny – Ulubiony portal technologiczny

Digital reciepts

A number of start-ups are trying to make it easier for merchants and consumers to move to digital receipts. Habits are hard to shift. Despite a new legal requirement in France that paper receipts should be opt-in only, Auchan, the grocery chain, reports 60% of shoppers still ask for paper.  

  • In the UK, Slipp, which boasts JD Sports as an early client has raised £750K. Slipp integrates with the ePOS software to send the shopper a text or email. JD Sports says using Slipp’s SMS receipts to promote its loyalty programme is increasing the number of customer sign-ups.
  • Anybill, from Regensberg in Germany, asks customers to scan a QR code presented by the ePOS. Pricing ranges from €4.49 to €35.99 per month per outlet.
  • Yocuda, a French start-up acquired by Global Blue, claims to have delivered over 2m electronic receipts to over 200,000 identified shoppers. Clients include Halfords and Decathlon.
  • Receipt Hero, based in Helsinki, has raised additional funds to supplement the $5.7m already invested. Receipt Hero offers cardlinking as well as QR scans. Partners include PayOne.
  • Pi-xcels from Singapore has an elegantly simple product that delivers an e-receipt automatically when the shopper taps their phone on the payment terminal. The product integrates with the terminal not the ePOS software and is available on Ingenico and PAX.

There’s an open question whether digital receipts can establish themselves as product category in their own right or whether merchants would prefer to buy the capability as a feature of existing POS or CRM software.

Artificial Intelligence

Artificial Intelligence is moving up and down the hype curve faster than any previous technology as Benedict Evans explains. McDonalds has already hit the trough of disillusionment  and shut down a pilot with IBM that used AI to automate order taking at 100 drive-thru restaurants. The robots made too many mistakes such as adding bacon to ice cream.

Worldline is taking a more measured pace and has detailed how it is managing its AI initiatives. This is 1500 words of big company governance, stage gates and committees. I wish them luck.

SoftPOS

This technology, which allows any off the shelf consumer device to accept contactless card payments, was originally touted as a micro-merchant proposition but is proving most popular with large enterprises.

LVMH is leading the innovation. Liberated from the need to locate the nearest payment terminal, sales associates at Christian Dior, an LVHM brand, each have their own iPhone to serve customers wherever they are in the store. Dior has worked with Adyen, Global Blue and Vo2 Group, a Paris HQ’d tech consultancy, to add instant VAT tax refunds to the proposition.

In vendor news, Rubean, based in Munich, has raised an additional €2m capital to finance its strong growth. Sales are forecast to rise to €2.2-€2.5m this year from €1m in 2023 on the back of new distribution deals.

Rubean’s partnership with Global Payments may be threatened by the Atlanta processor’s unpublicised purchase of Yazara. The Global/Yazara tie up is likely also to be bad news for MyPinPad  which local sources suggest may be replaced as supplier to eService, Poland’s largest acquirer, which Global bought last year.

In better news for MyPinPad, Ur&Penn, a leading chain of jewellers in Norway, is using its SoftPOS application to take store payments on the associate’s Android phones. 2izii is the integrator and Elavon the acquirer.

Phos, acquired by Ingenico in 2023, is making good progress building out its distribution network, announcing a key partnership with Shift4, a US processor with big ambitions in Europe. Phos is also the technology partner for BORICA, which provides SoftPOS to the three largest banks in Bulgaria. BORICA claims 1,500 “terminals” live today.

In Italy, Ultroneo has implemented MarketPay’s PayWish SoftPOS application for its Get Your Cash merchant proposition. Volumes are growing swiftly (see below) but it’s not been plain sailing. Writing on LinkedIn, one Ultroneo director explained “For nearly 12 months now we have been struggling with the teething problems of this new technology. Bug after bug, incident after incident, we have managed to stabilize the SoftPos to the delight of our customers.”

Image preview

Openbanking

The UK’s incoming Labour government is making very positive noises about fintech. Quoting from its manifesto: “Financial services are one of Britain’s greatest success stories. Labour will create the conditions to support innovation and growth in the sector, through supporting new technology, including Open Banking and Open Finance and ensuring a pro-innovation regulatory framework.”

There is much that a new regulatory approach could deliver, including an open banking acceptance mark, “scheme” rules to ensure common standards for authorisation codes, refunds etc, the introduction of consumer protection and a recognition that all this cannot be provided free of charge.

Positively, the number of open banking payments made in the UK rose c.50% year-on-year to 17m in May 2024. Variable Recurring Payments (VRPs), the open banking equivalent of direct debits, now account for 11% of the total.

The increase is encouraging but compared with the 2bn debit card transactions made in the UK in a typical month, volumes remain very small.

The slow take up of open banking has implications for the large number of vendors operating in this sector. There are twenty listed on the UK government’s procurement framework alone. If revenues don’t arrive soon, only the best capitalised will be able to keep trading until the product goes mainstream.

Truelayer, hopes to be one of the survivors, having raised a remarkable total of $271m from its investors. Truelayer’s CEO has given an interview  to explain that he is playing a long game, saying “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,”Subscribe

Cash

Germany is often cited as the last hold-out of the cash economy but the latest Bundesbank payment survey shows a further decline in the use of paper money. The cash share of transactions fell 7% points in 2023 to 51% and its share of volume by 4% points to 26%.

Old habits die hard. A Bavarian bar-owner called the police after a Latvian customer paid for 16 beers with 16 separate card transactions.  

It’s no surprise that policy-makers in many countries are grappling with the implications of the world going cashless. For example, Ireland has passed an “Access to Cash” law which gives the government powers to set minimum numbers of ATMs for each area. The local banks, and their customers, will bear the cost. Revolut, wildly popular in Ireland, will likely get a free ride.  

Without this kind of subsidy, independent operators will stuggle. In Poland, Euronet, which manages 50.000 ATMs, limited withdrawals to PLN200 (€46) for one day as a protest at the government’s refusal to let it to charge for transactions. Euronet complains that it is losing money because local banks pay just PLN 1.2 (€0.28) per withdrawal. We assume that Euronet probably more than makes up for the shortfall with its eyewatering DCC charges for tourists.

An enterprising British artist commented on his struggles to find a place to withdraw cash by fixing an ATM to a bridge in the middle of a river.

Facade of grey atm machine with screen, buttons on brick buttress with rippling water below

Of course, even if cash is available, retailers may decide not to accept it. This British pub says it has saved 12 hours work each week by going cashless. Cash is expensive to handle and the costs grow as volume declines. The Portuguese Central Bank believes cash costs merchants 2.96% compared to 0.78% for debit cards.

Image preview

Crypto corner

Crypto currencies are assets not money, yet vendors persist in bringing forward payment acceptance solutions at POS.

“Few have heard of SpacePay, but give it a year, and it will likely be a household name” is the bold claim from this London based start-up which graduated from Barclays’ fintech accelerator. SpacePay, which has raised $750K, says it will allow people to spend crypto at “most existing point of sale card machines.” It’s not clear how this would work in practice.

If there is a user base for crypto at POS anywhere, it’s going to be in a cross-border market such as Luxembourg where some shoppers may not want their home country authorities to know what they are buying.

Done4You, an ISO based just across the border in Namur, Belgium, has implemented crypto at POS for a petrol station in the Grand Duchy using GoCrypto’s technology. Crypto transaction are 1.25% compared to interchange + 0.5% for credit cards.

In other news

Fiserv’s brand association with the Republican National Convention in Minneapolis is dividing opinion.

Good news for travellers. International cards are finally accepted at 97% of Dutch payment terminals and will reach 100% by the end of this year.

The Netherlands experienced its longest payment outage for five years as 30%-40% of PIN transactions failed over a three hour period. The problem was blamed on Equens (Worldline), the domestic inter-bank network. Worldline is also reportedly behind a shorter outage affecting UK grocers earlier this month.

A sign of the times. Such is the consumer uptake of Apple and Google Pay, one French bank has found that 20% of customers opt not to be sent a physical card.

Advent, whose portfolio companies include MangoPay, Planet and MyPOS, is excited about vertical payment/software bundles, specialist tools to support eCommerce and solving cross-border challenges.

Follow the money. European VCs have picked their top payment start-ups. 

We’ve not seen many layoffs recently but Rapyd, the Israeli acquirer/processor, is cutting 30 posts in its home country. 

TSG, an American consulting business, runs an annual payments API competition. Adyen is the overall winner with Square as runner up.

And Finally

Stripe has opened a new London office and is celebrating with a rather mystifyingbrand advertising campaign aimed at enterprise customers.

Image

Photo credit Jevgenijs Kazanins

How to get in touch

Geoffrey Barraclough

geoff@barracloughandco.com

www.businessofpayments.com

FSI invests €100m in Bancomat to refresh core technology and fund international expansion

Geoffrey BarracloughLeave a comment

FSI, a Milan-based private equity fund, has completed its c.€100m investment into Bancomat, Italy’s domestic card payment scheme. With the new capital, Bancomat will engage Nexi to refresh its core technology infrastructure and accelerate plans to expand operations outside its home market.

FSI has quickly become one of the largest forces in Italian payments, having been active in the creation of BCC Pay from assets purchased from Iccrea Banca and Banco BPM.

Bancomat is currently owned by an unwieldy consortium of 105 Italian banks led by Intesa San Paolo and Unicredit. After its investment, FSI will hold 44% of the shares and has installed a new, streamlined board of directors which, it is hoped, can take decisions more quickly and be better placed to compete with Visa and Mastercard. 

Fabrizio Burlando, a former BCG consultant and long-time Mastercard executive has been appointed as Bancomat CEO. He will need to oversee a sharp change in its business model. The scheme has operated for years as a co-operative organisation working largely to recover its costs. Now having accepted private equity backing, Bancomat will need to focus on growing its top line. 

Bancomat’s 2023 results demonstrate that, despite its scale, the scheme generates relatively little revenue. Total sales were up 8% to €52.5m with the bulk of this turnover coming from the operation of Pago Bancomat, its core debit card issuer and acceptance business.

30m Pago Bancomat cards in circulation today, issued by 190 member banks, and can be used at 2.5m points of sale. Total payment volume processed was €119bn in 2023, up 4%. In common with the rest of Europe, Italy has seen a marked shift to contactless transactions, stimulating card use for lower value purchases. Bancomat’s ATV was down 4% to €47.20.

Pago Bancomat revenue was up 11% to €35.8m amounting to just 1.4 cents for each of its 1.85bn transactions. This equates to 3bps of turnover compared to the c.20bps or c.$0.12 made by Visa on its worldwide card business. .

Bancomat works on a conventional four party model with Interchange set at 0.2% although there is a discount to 0.1% for transactions under €5. Merchants typically pay c.1% per transaction, leaving the balance for the costs and margins of the acquirers such as Nexi, Worldline and many small banks. 

Bancomat’s recent innovations include adding acceptance to Nexi’s SoftPOS application with 22.000 devices activated in 2023 and its inclusion in the Google Pay wallet. Apple Pay is reportedly coming shortly. Bancomat has also started issuing commercial cards.

Bancomat Pay, a new mobile-app based payment product offered through member banks allows both P2P and P2B transfers. Bancomat Pay is growing swiftly from a low base. Volume was up 83% to €0.44m although revenue rose just 19% to €0.5m, equivalent to 5 cents per transaction. 

FSI will likely be looking to grow Bancomat Pay internationally. Bancomat has already signed an agreement with Bizum (Spain) and SIBS (Portugal) for interoperability of their products. It is taking a similar approach to working with Bluecode (Austria) and Twint (Switzerland) and has a pilot working for the European football championship in Germany.

Reflecting the long-term decline in cash transactions, ATM volume was down 4% to €106bn and ATM revenue fell 5% to €4.4m.

Bancomat has an existing partnership with Discover, has added Discover to its ATM service and is working with Italian acquirers to put Discover live at POS. In 2023, Discover paid Bancomat €2.2m incentive fees.

Despite the higher revenues, Bancomat’s EBITDA fell from €16.6m to €5.9m due to higher operating costs. 

Staff numbers rose slightly to 81 at an average cost of €104K, up 12% on 2022.

EBIT swung from a profit of €12m in 2022 to a loss of €4m in 2023 due to €16.6m write-downs and break-fees associated with the termination of its plans to create a new business unit, a “payments hub” joint venture with SIA, a technology supplier subsequently merged into Nexi. 

Bancomat’s new strategy is to commission Nexi to build a new payments infrastructure but as a vendor rather than business partner. 

Newsletter – April 2024

Geoffrey BarracloughLeave a comment
A person standing at a podium Description automatically generated

The Payment Business

Forrester’s latest analysis of merchant payment providers makes for fascinating reading. The scoring can be a little incoherent at times but the report includes unparalleled direct feedback from Forrester’s clients. Stripe and Adyen come out best but don’t escape criticism. Stripe is “expensive” and Adyen’s support “can be hit and miss.”

Image

Global Payments and Worldline, neither of whom participated in the research, score badly. Forrester doesn’t think either has done enough platform integration.

To celebrate its top spot, Adyen has made the report available free of charge. It’s worth a read and a reminder to always engage with analysts. The more you communicate – product roadmaps, customer testimonials, invitations to events etc – the better coverage you get.

Forrester aside, Worldline had a good month by recent standards. The beleaguered processor has won the fight with arch-rival Nexi to become the exclusive partner of Cassa Centrale Group. The deal doubles the size of Worldline’s Italian business by adding more than 90,000 POS terminals processing €9bn annually.

The next Italian bank up for grabs is Banca Popolare di Sondio which is reportedly considering selling its merchant services business and ending its partnership with Nexi. Worldline is said to be in poll position to pay €70-€100m for 25K POS processing €2.2bn. Nexi, BCC Pay and Market Pay are also in the running.

Worldline has also finalised its JV with Credit Agricole in France. Meriem Echcherfi, currently head of merchant services at the French bank, will run the new business which will should be live in early 2025. This is smart move. The first rule of bank partnerships is to hire your general manager from the bank.

Nexi reported decent full year results with merchant services revenue up 6% in Q4 2023 and a particularly good performance in Germany. Management will be relieved that Unicredit, Italy’s largest bank, looks set to renew it partnership with Nexi and extend the relationship to additional countries.

Stripe celebrated becoming cashflow positive for the first time. This takes the pressure off a possible IPO. “We’re not in a rush,” said the CEO. Stripe’s 2023 letter to shareholders was very bullish but didn’t disclose the company’s revenue or profit numbers.

The letter did reveal that payment volume rose 25% in 2023 to exceed $1tn and that the business is increasingly servicing larger merchants. More than 100 of Stripe’s clients process over $1bn and it has been signing good omni-channel customers such as Hertz. The car rental giant is moving its worldwide payment acceptance to Stripeincluding installing BBPOS terminals in 3,000 locations. The big win for Hertz is to be able to accept Apple Pay. Although this seems a low bar, it’s a real pain point in the US.

PAX Technology had a difficult 2023 as key customers showed “increased prudence in payment terminal deployment.” Revenue was down 18% to $860m and profits down 12% to $150m. In Europe, PAX called out good performances in Italy, the United Kingdom, Turkey, Spain and France but Germany proved more challenging.

Although than 50% of sales are Android terminals, PAX is struggling to generate revenue from services. Sales of SaaS solutions associated with the 11m devices connected to MAX Store were just $13m.

Paypoint, one of the UK’s leading ISO’s, will consolidate all its processing with Lloyds Bank Cardnet. Paypoint’s 20,000 merchants deliver around £7bn volume and the acquiring relationship had been at risk, notably from Global Payments Inc., which inherited a chunk of Paypoint’s merchants when it bought EVO last year. It looks like Lloyds’ ability to extend its offer to include a bank account and commercial card won the deal.

We saw several interesting fund raises this month.

  • PPRO, the white label local payments platform, raised €85m, taking its total investment to an eye-popping $462m. PPRO has some great customers including Stripe and PayPal and insiders tell me it hopes to be EBITDA positive by the end of 2024. 
  • Flowpay, the Czech merchant cash advance specialist, raised €2.1m to expand out of its home market. Already boasting key local ISV partnerships including Dotypos, Storyous and Shoptet, Flowpay is one to watch.
  • Bezahl, a Cologne based supplier of payment acceptance to car dealers, raised €22m. The business already has 130 clients serving 1,100 locations. Bezahl charges a monthly fee per location and sends most transactions to Adyen for processinghttps://www.youtube-nocookie.com/embed/zplTu4QN3zA?rel=0&autoplay=0&showinfo=0&enablejsapi=0

Staying in Germany, REWE, the supermarket giant, has spun out its payment acceptance team with the brand name of Payment Tools. REWE’s strategy mirrors that of its French rival, Carrefour, which demerged its payment division as MarketPay.

Finally, GoCardless has bought Nuapay, a specialist in SEPA Instant, UK direct debits and open banking, from EML Payments, the hapless Australian processor, for €34m. Nuapay, based in Ireland processes €44bn of A2A transactions annually and is forecast to lose €1.2m EBITDA this year. GoCardless also revealed its latest financial results in an exclusive interview with Sifted. Discussing a substantial loss of £80m on sales of £92m, the CEO said “The results demonstrate that we’re moving from strength to strength.”

MPE 2024

This year’s Merchant Payment Ecosystem conference in Berlin was as good as ever. Read this special edition of Business of Payments to discover more about the end of cards, digital Euro and the slow uptake of open banking. 

I moderated an entertaining panel discussion nominally about consumer behaviour but actually covering a variety of topics from Saudi investment in Fintech to why Finland’s largest retailer chose Adyen for its payment processing. The panelists were Adil Riaz from NearPay, a SoftPOS vendor, Gábor Bujáki from OTP Bank, Hungary’s largest acquirer, Janine Kaiser from The Payments Association EU and Kai Lindström from S-Group, Finland’s largest retailer. Watch the conversation below..

Schemes

Visa and Mastercard’s landmark deal to end 20 years of US litigation on “swipe fees”attracted much press coverage. The schemes have conceded an average 7bp reduction in Interchange paid to card-issuing banks. Although retailers will have more freedom to introduce surcharging, it’s likely that large merchants on IC++ pricing will see most of the benefits. Consumers may be annoyed by some potentially rather complex POS flows as merchants attempt to calculate differential surcharges by card type.

Immediately after this announcement, Mastercard revealed it was increasing scheme fees in the US. Just like a casino, the house always wins.

On this side of the Atlantic, leading French retailers including SNCF and Auchan report that the transaction share of Carte Bancaire, the domestic card scheme, has fallen from 97% to 85% in just three years. Shoppers are increasingly choosing to pay with mobile wallets or Visa/Mastercard branded cards issued by the neo banks. The retailers are not happy, saying that international cards cost 1.2% on average compared to 0.9% for CB.

JP Morgan has become the first US bank to join Carte Bancaires. A spokesman said the move was “mainly a request from our customers, the use of the [CB] network being less expensive than that of other card networks.” 

Ireland no longer has a local scheme so it’s hard to understand recent thinking in Dublin. Ireland’s Central Bank announced that the country’s payments strategy “needs drastic change” only months after the competition authorities killed an attempt to do just this by outlawing the introduction of a domestic mobile payment scheme. Revolut, which is wildly popular in Ireland, will likely profit from this regulatory confusion.

Blik, the fast-growing Polish mobile payment standard, has restated its international ambitions. With launches already planned in Slovakia and Romania, management believes “Blik Euro” could become a pan-European payment system. Local vendors are innovating with Blik. Posnet is offering Blik acceptance at cash registers without the need for a payment terminal. eService (Global Payments) is providing the processing. Fees are 0.6% + 1.4c.

Wero, the new QR based mobile payment scheme promoted by the European Payment Initiative is supposed to launch in June. However, the EPI has not posted any news on its website since December. We await updates with interest.

Capital One has revealed more of its plans for Discover, the US card network it hopes to acquire later this year. The new owners want to “fix” the network’s international acceptance, “which is not quite where it needs to be, for the entirety of our card business today,” said its VP Finance.

New Shopping

Amazon shocked the industry by axing its “Just Walk Out’ Stores in the USA, resulting “a few hundred” layoffs in its technology team. Instead, the company will focus on its new range of Smartcarts. Retail analysts conclude that Just Walk Out technology does not scale for large format stores – it’s too expensive and needs too much manual intervention. Amazon had previously revealed that 1,000 staff in India acted as “virtual cashiers” for its autonomous stores.

While there still seems a strong business case for Just Walk Out in small format stores, Amazon’s decision will come as a blow to other retailers that have bought its technology, presumably to benefit from Amazon’s well-funded roadmap. One of these may be Delaware North, a hospitality vendor that has just installed Just Walk Out technology to sell beer at London’s Wembley Stadium.

Other vendors are available. Lekkerland has installed three AI-based smart fridges at an EV charging station in Saxony. You tap your payment card, open the door, remove the items and are automatically billed. Portuguese start-up, Reckon.ai is providing the technology.

We’ve been talking about RFID to automate grocery checkouts for over twenty years but it’s still not ready. Walmart has withdrawn a pilot in which it used RFID to verify whether customer’s self-scanned purchases were accurate. 

Sometimes simpler is better. Take a look at Sticky, a Manchester-based start-up which allows consumers to pay by simply tapping a cheap NFC label. “You can get a drink in five seconds with our physical digital labels. It’s faster than a card,” says the CEO. Sticky charges £60/month for eight “flows.”

Product

Retailers say that returns abuse is the leading source of fraud, overtaking phishing for the first time. Here’s a good round up from Edgar Dunn which shows the scale of the challenge. Unsurprisingly, this trend is leading to a big increase in chargebacks so why don’t retailers dispute more of them?  One reason may be the risk of offending good customers. This New York restaurant complained when a customer used a chargeback to reclaim a deposit for a cancelled booking and the ensuing argument became very public.

The UK has a cunning plan to fight fraud. New legislation will make Faster Payments slower to give PSP’s time to investigate suspected bad transactions.

Dwayne Gefferie lays out the strategic case for PSP’s to move into orchestration or infrastructure-as-a-service. Or both. However, it’s not clear how much money is in orchestration. One analyst says the market will grow from $846m today to $4.8bn by 2032. Aite, a more reliable source, suggest the actual revenue reported by dedicated fintech orchestrators today is less than $25m. Looking on the bright side, Aite says “there’s plenty of room for providers to grow.”

Merchants are divided on whether to go with a single payment provider or use “orchestration” to manage a series of best of breed vendors. Hugo Boss is using Adyen for all its in-store and online requirements. Why not use multiple suppliers? “We are not a petrol station. We are Hugo Boss,” explains the retailer’s head of payments.

InPost, Poland’s last mile delivery specialist, has launched a payment wallet called InPostPay. It could do well as it builds on an installed base of over 9m mobile app users.

Many are sceptical about Click to Pay but the schemes’ much delayed attempt to compete with one-click wallets is finally coming to Europe. ING is offering Click to Pay with Mastercard, initially in Spain. Visa has launched Click to Pay in Francewhere Adyen is the first PSP to offer the product. It claims 4% points increase in authorisation rates compared to a standard transaction.

ISVs and their payment partners are scrambling to offer pay-at-table. Toast, the US restaurant software vendor, has launched in the UK with an impressive solution running on Adyen’s POS hardware. “Long battery life and durable,” says one IT Director.

Revolut launched its acquiring business in 2021 but we heard little news until it launched point of sale software with integrated payments. Aimed at retail and hospitality, Revolut POS is based on Nobly, the ISV it bought in 2021. The software appears to be free and transactions start from 0.8% and 2c for domestic cards. International cards are 2.6% which is pricey for any merchant in a tourist location.

Here’s a good case study from the introduction of contactless ticketing across 60,000 validators covering the whole Dutch public transportation network. The new system is saving money and travellers seem happy. EMS (Fiserv) is the acquirer. Meanwhile, Getnet has resigned the Madrid bus network including acceptance, gateway and acquiring.

There’s a small but growing category of software vendors aiming at making life easier for people who run payment businesses. Kani, founded in Newcastle, reconciles PSP transaction data with the information provided by the card schemes. Torus, started by an ex Mastercard consultant, won the innovation competition at MPE with its pricing software that gives acquirers better control over their portfolio profitability. Both are worth a look.

SoftPOS

SoftPOS is a downloadable payment application that turns any Android or iOS device into a payment terminal. The standards regime is quite complicated. Matt Jones gives a good explainer of how it all fits together.

This technology seems finally ready for prime time. Tabesto, a vendor of intelligent ordering tools for restaurants, says 90% of sales are a new product called Fox, an integrated all-in-one kiosk with no external POS or printer. Customers can choose SoftPOS payment apps from Worldline or DejaMobile. Here’s it is in action at Waffle Factory.

https://https://youtu.be/JvCK_AV0mQg

Deja Mobile, based in France and now owned by MarketPay, has some good case studies. Two months after launch with Rabobank in the Netherlands, 1,200 micro-merchants have activated the service of which 80% are generating transactions.

I’m not convinced PSPs can make any money out of micro merchants but if you want a mass-market customer base you will need to spend money on marketing. Best of luck to Viva, the mPOS vendor partly owned by JPMorgan, which has launched a major advertising campaign in France.

No alt text provided for this image

Softpay is another vendor in the news, announcing a partnership with Elavon, targeting SMEs in the Nordics. SoftPay is now listed on the Sunmi app store giving access to a broad range of merchants.

Rubean, the German softPOS vendor quoted on the Munich stock exchange, expects 2024 revenue of c.€2.5m, doubling year on year but below expectations. The company predicts sales rising to c.€10m by 2027 on the back of new contract wins including Commerzbank Global Payments.

BT, still the UK’s largest telco, is offering SoftPOS to its 1m SME customers with Adyen is providing the technology. The service is good value. All transaction are priced at 1.4% and there is no monthly fee. BT’s move could start a trend. Ericsson says mobile operators worldwide want to offer financial services to their customers.

Openbanking

Growing disquiet at the UK’s slow progress on open banking was highlighted by a speech made by Chris Hemsley of the Payment Systems Regulator to the Pay360 conference.

Referring to emerging rules for variable recurring payments (VRPs), widely believed to be the best hope of driving mass market adoption, the regulator says it has asked the industry to “get on with it.” Jack Wilson from TrueLayer takes issue with this and writes the industry is now “moving at the pace of the slowest” and that the slowest is the regulator itself. The industry is complaining that it is in limbo waiting for the results of a consultation on how open banking should be priced and without a clear way of making money, has little incentive to commercialise new products.

The lack of an acceptance mark or scheme brand is also major stumbling block. Looking at the checkout page below, how would consumers know they can pay with their banking app? Clue: Vyne is an open banking vendor.

Despite the current uncertainty, there is some good news. Ecospend, Trustly’s UK business says that 30% of payment volumes at Hargreaves Landsdowne, a retail investment manager, are made using open banking. 

Ecospend has been the supplier to HMRC (the UK tax authority) which has long been the poster child of UK open banking payments. With Ecospend’s initial 3 year term completed, HMRC is retendering its banking contract. The winner is likely to be one of the 15 vendors selected to join the Government’s framework contract.

In partnership news, Nexi has selected Mastercard as its open banking provider. Mastercard’s product is based on a white-label of Token’s service. Visa-owned Tink has won a contract from Deutsche Bahn for direct debit setups to power its bike sharing service and also a deal with Micropayment, a Berlin-based PSP.

A number of vendors are building an interface to allow open banking payments at POS using contactless NFC in place of cumbersome QR codes. Kevin, the Lithuanian fintech which made some high-profile layoffs before Christmas, has demonstrated A2A NFC payment on iPhone. Click through and read the comments which indicate some scepticism.

MultiPay, the UK POS focused PSP is doing something similar. Acquired.com is providing the open banking connections. Assuming the technology works, is there a business case? Alexander Peschkoff explains why A2A payments at POS don’t have commercial appeal.

More importantly, A2A payments may just be too slow for POS. A killer table from the UK Future of Payments Review shows the time it takes for a user to initiate a payment. PIX is regarded as best in class but, with Apple Pay as a comparator, even 20 seconds is too slow for POS merchant payments. Shoppers will keep using cards for a long time yet.

Artificial Intelligence

Klarna’s CEO has clarified that although the company’s AI chatbot is doing work equivalent to 700 people, this is entirely unrelated to the 700 people he layed off in 2022.

It doesn’t matter how clever your chatbot. RSR Resarch says consumers want to talk to a real person.

A bar graph with text Description automatically generated

But the AI demos keep getting better. This ChatGPT video certainly passes the Turing Test.

Possibly, one of the most appropriate uses of AI is to count the number of mentions of AI in corporate earnings calls. Hat tip to PayPal. And to FXC for asking its robots to research this pressing question.

How often did payments companies mention AI in 2023? AI mentions across Q1-Q4 2023 earnings calls by payments company

In other news

In a disastrous week for the UK payment industry, there were outages at Greggs, Sainsburys, McDonalds and Tesco. Although the incidents do not seem connected, the regulator is investigating. McDonalds blamed a “configuration change” but Burger King had the last word.

Rapyd’s Icelandic boss hit back at calls for a merchant boycott following the Group CEO’s strong support for Israel’s war in Gaza. “Claims such as that Rapyd works in Israeli settlements in the West Bank and that the company supports the Israeli army’s war on Gaza are completely false”, he wrote.

A fascinating piece from Matt Jones on the rise of Ali/Wechat Pay and the implications for Chinese soft power. On a similar theme, FXC looks at Asian QR code payment schemes and asks what happens when they become interoperable.

It’s been a good month for bloated corporate buildings. Fiserv has finally opened its new $37m HQ. “Welcome to Milwaukee. We have been waiting for you Fiserv,” said the mayor. PAX went bigger. Its new $46m HQ in Shenzen is 18 storeys high. 

Payments from a Merchant Perspective – useful (and free) research from Arkwright. Standardised and low-friction open banking is their number one ask.

We may think of payments as an environmentally friendly business but Edgar Dunn calculates transaction processing generate 3.3m tonnes of greenhouse gases each year. And card production releases a further 1m.

Wirecard latest. Dan McCrum, the FT journalist who broke the story, gives a good interview to Chris Skinner. Four years on, the story itself gets even stranger. It seems that Jan Marsalek, Wirecard’s fugitive COO, was working for Russian intelligence and has recently been living in Russia under the assumed identity of an Orthodox priest.

And finally

Kevin Hart, the US comedian, bought a bored ape NFT in January 2022 for $200,000. This is a particularly fine ape which sits under a rare “spinner hat.” Hart just sold the NFT for $47,000. Which still seems a lot for a jpg, even one as fine as this.

Newsletter – February 2024

Geoffrey BarracloughLeave a comment
A person standing at a podium Description automatically generated

The Payment Business

February 1st will be remembered as Worldpay’s Independence Day as it separated from FIS after the catastrophic $43bn acquisition in 2019. Worldpay has been spun off into a joint-venture with GTCR, a large Chicago based private equity fund, at a valuation of $18bn. You may have noticed $25bn missing. This is a loss to FIS shareholders for which nobody has apologised. 

GTCR, which has little previous apparent interest in fintech, bought 55% of Worldpay for $13bn in cash and has committed a further $1.3bn for “strategic acquisitions.” These will likely focus on closing Worldpay’s product gap with Adyen and Stripe through extra capability related to servicing platforms/ISVs and on expanding Worldpay’s international POS capability to serve global, omnichannel retailers.  

I asked Bing’s image creator to comment on the news. Surprisingly, Worldpay haven’t yet been in touch for the image rights.

A scene from the movie Independence Day with a large sign saying "Worldpay" and an alien carrying a card payment terminal

Share

Barclays, owner of Barclaycard, the UK’s second largest acquirer, has turned to private equity to rescue its underperforming payment division after having failed to find a trade buyer. Worldline, Nexi or Global Payments aren’t interested but Barclays is reportedly still looking for £2bn at 6.5x EBITDA.

The French do things differently. One week after Worldline appointed bankers to help avoid a possible hostile takeover triggered by its collapsing share price, Credit Agricole appeared as a white knight, taking a 7% stake. Worldline and Credit Agricole recently announced a JV and the French bank has a strong interest in ensuring Worldline goes through with the deal. 

In Italy, Nexi is vying with Worldline for the merchant business of Cassa Centrale Banca, a group of 66 regional co-operative banks. CCB processes €2.2bn annual volume from 25,000 POS terminals and is looking for a valuation of €70-€100m. BCCPay, which recently scooped Nexi for a partnership with Banco BPM, and Market Pay, an aggressive new acquirer spun out of Carrefour, are also believed to be in the running.

Turning to Germany, Global Payments is forming a JV with Commerzbank. The new business, snappily called Commerz Globalpay, is 51% owned by Global Payments and will sell products to the bank’s large domestic corporate and SME customer base. While Commerzbank could be a great distribution channel, German banks are notoriously bad at lead generation. Fiserv launched a similar venture last year with Deutsche Bank which is reportedly underperforming.

There seems little prospect of many payment companies floating on public markets this year. According to one VC, many still haven’t adapted to today’s business conditions: “Where you have massive… processing volumes, but you’re still making negative margins, [this] is no longer acceptable.”

One exception maybe Klarna which looks likely to IPO in the US in the first half of this year but may have been making pre-flotation cost cuts too enthusiastically. Klarna’s new outsourced customer service operation has been leaving merchants to wait up to a month for their support requests to be reviewed. Staff say they no longer have direct access to Klarna systems and are using a “desperately slow” virtual desktop.

Stripe is also an IPO candidate for 2024 and rumoured to be preparing for floatation by raising prices and being much more discriminating about which customers it is prepared to onboard. One industry expert reports Stripe’s “out of the box API pricing” is 2x3x higher than a year ago. Higher prices and more cautious risk policies may trouble some of the fintechs and ISVs which have built their businesses on Stripe.

In case you missed these stories from from the Business of Payments blog:

Elavon Europe posts its first profit since 2019 and revealed it had €3.2bn of airline tickets sold but not delivered on its books.

Allpay, the UK public sector specialist, reported a very positive set of results. Few other payment companies can boast 21% revenue growth and 16% operating margins.

Lemonway, one of the last marketplace payment specialists still in independent hands, impressed with revenue doubling and a maiden operating profit in 2023.

A graph with blue and orange squares Description automatically generated

Trustly, one of the European leaders in A2A payments, reported a difficult 2022 as it recovered from a tricky situation with the Swedish regulator.

January trading updates had contrasting impacts on two London-listed payment companies with roots in carrier billing and names like childrens’ TV characters. 

Boku, which is shifting its business towards global APMs competing with Thunes and dLocal, reported payment volume up 16% to $5.0bn and sales up 26% to $38m for H1 2023. Less happily, Bango, which has stayed closer to its original telco customer base, downgraded earnings expectations and lost 40% of its market capitalisation. Management says that new, value-added services are proving slow to deliver cash profits.

Checkout.com is the latest vendor to be designated a “significant provider” of card-acquiring services to SMEs in the UK and brought within scope of the Payment Systems Regulator’s directions.  Checkout is normally associated with enterprise merchants, but its good performance is thought to be thanks to a growing PF relationship with Mollie, the Dutch PSP which has begun selling to UK small businesses.

Ant Group, the giant Chinese technology group behind Alibaba and Alipay, has made a smart move into European merchant payments with the proposed acquisition of MultiSafepay. This Amsterdam-based acquirer brings a modern omni-channel technology platform (with Sunmi POS terminals) and 18,000 SME customers but the $200m price tag is expensive. MultiSafepay made a net profit of just $1.4m on sales of $50m in 2022.

New shopping

Just walk out is the new self-checkout, concluded Primark’s Chief Architect after a visit to this year’s NRF Retail Show in New York.  Although we’ve not seen much activity in the clothing sector, autonomous grocery and convenience openings are coming thick and fast.

Netto has opened what it claims to be Europe’s largest autonomous store in Regensburg, Germany. The technology is from Trigo and, at 800 sq metres with 5,000 SKUs, this is very impressive. Helpfully, fruit and vegetables are automatically weighed and added to the virtual basket when you take them off the shelves.

Trigo is also behind Aldi’s new SHOP&GO  check-out free store in Greenwich, south London. There’s no need to download an app, just tap your payment card, or phone, at the entry gates.

Image preview

You can get an idea of the potential of autonomous technology with this implementation at a UK football club which could eliminate the long queues inevitable when everyone wants to buy a drink at half-time. Sodexho, the catering company, runs the outlet. The technology is from AiFi.  

In biometric news, Carrefour’s franchise partner in Qatar is trialling a Face Pay product from PopID, a Californian vendor with 73 merchant locations live in America. It’s really not clear why this is better than Apple Pay.  Network International is processing the transactions with payment data tokenised by Visa.

Credit Agricole’s decision to launch a biometric payment card is equally unconvincing. The main advantage is not having to remember your PIN for transactions greater than €50, but this is what Apple Pay is for. Even the French bank’s supplier can see the writing on the wall. Zwipe is shuttering its biometric payment operation to focus resources on access control.

Despite every consumer carrying biometric ID in their personal phone, investors won’t give up on this. Polish fintech, Payvein, just announced fresh funding for its payment service based on Hitachi’s finger vein recognition technology.

What better way to give the thumbs down to biometrics than with AEVI’s suggestion of gesture based payments? The concept seems to involve waving at the payment device with a pre-registered hand signal. Presumably, not a rude one.

Cooking commerce may be a more fruitful concept. Kroger, the US retailer, has partnered with GE so you can buy groceries direct from the LCD screen on your oven. The new service was delivered via a software update to 150,000 domestic appliances.

Product

Apple, under pressure from the EU competition authorities, has finally opened up the iPhone’s NFC chip to 3rd party banking and wallet applications. The move may allow banks to bypass Apple Pay and its c.15bps charges. More excitingly for consumers, this service could facilitate a new market for open banking payments at POS. Mike Kelly explains how this might work. Excitement levels vary across Europe as Apple’s market share ranges from 55% in Denmark to just 10% in Poland. And the ruling excludes the UK. Because Brexit.

For years, PayPal had the best, friction-free online checkout in the business but this advantage has been eroded by Apple Pay, Stripe and others. These new checkouts also move fraud risk to the issuer which makes them more popular with merchants.

PayPal’s set of new product features should help claw back some of the lost ground, especially in Germany where it is still the number one eCommerce payment method. PayPal’s massive global base of 400m customer accounts and 25m merchants means its new one-click checkout recognises 70% of shoppers and is claimed to cut checkout time by more than half.

PayPal may soon need to worry about Shopify too after the eCommerce platform vendor began offering its Shopify Pay one-click checkout to non-Shopify merchants. 

The product could help merchants benefit from faster checkout where Shopify recognises the customer although the fees will likely be higher than a standard payment gateway. Amazon tried something similar with Amazon Pay although this proposition has struggled and recently announced layoffs. Unlike Shopify, merchants view Amazon as a competitor and avoided offering Amazon Pay if they could. 

Shopify is an absolute beast. Its head of engineering says he accepts 23,000 lines of code each weekday and the platform’s app servers handled 60m requests per minute on Black Friday. Blimey.

Irish customers will be delighted they can now use their Revolut card to buy a ticket on the Aer Lingus website. Revolut Pay,  a new product, transforms what looks to the cardholder like a debit card transaction into an account transfer. Aer Lingus is reporting impressive performance. Cart abandonment rates are sub 10% and authorisation rates at 98.5% which is pretty good for the airline industry. Published merchant fees for Revolut Pay start at 1% + 20c.

Back in the real world, one obstacle to the growth of the circular economy is how to pay people for products sent for recycling. The Danish city of Aarhus has a solution with this reverse vending machine for disposable coffee cups. People get their deposits back by tapping their payment card. TOMRA provides the machinery and Shift4 the payment processing in this clever use of the Visa Direct and Mastercard Send products.

Consumer returning a reusable cup at a TOMRA collection point in Aarhus Denmark

In car commerce news, KIA looks to be joining the number of automotive manufacturers launching payment products to help customers purchase upgrades, refuelling/EV charging and parking.  KIA CarPay is likely to be a sister product of Hyundai Pay, already launched in the US.

Computop, the German PSP part owned by Nexi, launched its “Pay to Drive”proposition for EV charging stations using the PAX IM 30 unattended terminals. Computop already has a good customer base in this sector including Compleo and Mercedes Pay for in-car payments.

In scheme news, Carte Bancaire has finally launched an account updater service with the unfortunate Franglais brand of Updat’R. Adyen, MONEXT and Lyra are the first PSP’s to offer the new product. 

https://youtu.be/8n47HeR7im0

FX loading can often be a guilty secret in the payment industry. Many vendors depend on marking-up foreign currency transactions for a considerable proportion of their profits and can be vulnerable if their larger customers start to scrutinise their bills too closely. New research from FXC shows how the US providers charge extra fees to their international merchants.

In rare good news for ACI’s merchant business Co-op, a UK grocer with over 2,400 stores, has moved its payment processing into the US vendor’s cloud in what it describes as a “very challenging and complex project.”

Cash

Public policy is turning to how cash can be saved from extinction. The Swedish government has demanded proposals to safeguard access to cash despite the public’s clear preference for electronic money. Only 8% of Swedes used cash for their most recent purchase.

As usage declines, cash becomes more and more expensive to provide. In Warsaw, the city government is moving to digital payments for parking, saying costs are just 5% of collecting cash from parking meters.

As people need less cash, the fixed costs of running ATM networks are spread over fewer transactions and many locations become uneconomic. In France, three big banks are pooling their ATMs and plan to reduce their number by 30%. 

Ireland will be legislating to stem the decline in ATMs following a 30% reduction in cash withdrawals since before the pandemic. Grocery shops and pharmacies will also be obliged to accept cash payments despite the cost burden this will impose on these businesses.

Financial inclusion is normally the reason cited for mandating cash acceptance but this argument ignores the huge benefits of bringing people into digital money. As this new report from the Atlanta Fed explains, people excluded from digital money are also excluded from much of the rest of the economy too. For a plain English description of financial exclusion, read this description of the business of cheque cashing in the US. A cash economy rips off the poor.

Germany is an exception, of course. Where else would Arnold Schwarzenegger be frogmarched to a bank to withdraw €35,000 in cash to cover customs charges on his Audemars Piguet watch?

The Terminator actor, 76, was seen holding a box in a customs office at Munich airport, in a picture obtained by BILD

SoftPOS

It’s still early days in the emerging SoftPOS market but Rubean looks like one of the European winners, having locked down a number of solid distribution partnerships and two enterprise customers in Spain. Read more on the Business of Payments blog. 

Softpay.io, based in Denmark, is another independent vendor making solid progress, including a potentially lucrative partnership with Nexi. Softpay has put its solution live at the Gebr Heniemann store in Copenhagen Airport. Snabble, a German start-up specialising in mobile ePOS, is providing the software application.

There is €8bn of payment volume on meal vouchers in France so it’s a smart move by Viva (JP Morgan’s European JV) to add Titre-Restaurant to its SoftPOS product.

MagicCube, based in California and one of the first wave of SoftPOS vendors has announced a go-to-market partnership with Shift4. The move comes two years after Shift4 invested in MagicCube and is likely to see the product come to Europe following the American acquirer’s merger with Finaro.

Finally, Worldine’s SoftPOS will come pre-installed on range of Hammer ruggedised smartwatches, tablets, laptops and smartphones supplied by Poland’s mpTech. Customers will still need to open a merchant account with Worldline but the move does open an interesting distribution channel with blue collar trades.

Open banking                                       

Bain, the consulting company, says that 2029 will be the year card transactions finally stop growing. But Dave Birch thinks we might be even closer to “peak card” than this, especially if large merchants integrate variable recurring payments (VRPs) into their apps. VRPs are the open banking substitute for both direct debits and card on file and promise a better customer experience for consumers at lower cost to merchants.

For the moment, open banking reality is some distance from this promise. A new study shows French banks rejecting 47% of payment transactions using their open banking APIs. “Is this the worst in Europe?” “ask the authors. “Far from it” reply the PSP’s. Portuguese banks are certainly worse. With standard bank API’s so difficult to use in many European markets, it’s no surprise that local schemes linked to SEPA Instant Payments such as iDEAL in Holland or Blik in Poland are prospering.

If the banks are to meet the challenge of producing better quality API’s they clearly need some help. Ozone API in London has raised £8.5m to commercialise its service that enables banks to offer open banking APIs.

The UK was first into open banking but, six years after the adoption of PSD2, the sector is having a long, dark night of the soul. As this good round-up demonstrates, there have been plenty of awards for open banking innovation but nobody is generating many transactions.

Ciaran O’Malley from Trustly posted a killer chart on LinkedIn which shows the extent of the commercial challenge for VRPs. In a two-sided market, there are few win-win scenarios.

Commercial Variable Recurring Payments

This is why the Payment Systems Regulator (PSR) is proposing that the country’s largest banks will be mandated to offer VRPs at zero Interchange for government, utility and regulated financial services. 

But at the last count, there were a remarkable 556 third party processors listed in the EU and UK together. This is certainly too many and it’s certainly time for a vendor shake-out. 

Crypto corner

One of the many reasons Bitcoin has not replaced fiat money is that cryptocurrencies are horribly insecure, often run by crooks and with a terrible customer experience. As Dave Birch put it, “no sane person wants to be their own bank.” 

Even though 2023 was a quiet one in crypto land, criminals still made off with $1.8bn worth of digital assets from unsuspecting punters, exceeded only by the $5.8bn of fines paid by crypto and fintech groups for lax anti-money laundering checks. Advances in quantum computing could quickly makes things worse as criminals learn to break encryption even faster. Caveat emptor.

The early hype around crypto set in train projects to launch central bank digital currencies (CBDCs). The Bank of England (BoE) received over 50,000 responses to its public consultation on the digital pound. Many of the concerns expressed were around privacy. The Bank promises that it won’t be able to see your individual transactions, but this won’t placate the zealots.

Any decision to launch Britcoin will be taken “around the middle of the decade” at the earliest but the BoE hasn’t answered the fundamental question of what a Central Bank Digital Currency (CBDC) is for. Neither does this video from the European Central Bank (ECB) shed much light on why anyone would want a digital euro rather than using Apple Pay.

The European Central Bank has begun tendering for some of the components of the digital euro. Worldline, Nexi and the EPI were involved in earlier prototyping exercises and will likely be bidding for the next set of contracts, valued at up to €1.1bn.

Research round-up

Cap Gemini’s payment trends for 2024 places real-time treasury and tokenisation in the top right quadrant. The consultants also see the card market growing in volume but losing share to A2A payments.

A summary up of 2024’s payment topics from the Finanz-Szene blog including wero, real-time bank transfers in Germany (at last) and the implication of TA 7.2 standards for payment terminals. A huge number of devices need replacing in Germany, notably the Verifone H5000s.

An Airwallex survey of SMBs highlights the embedded finance opportunities for payment providers. One interesting finding is that there is very little brand loyalty. 82% of merchants say they would change payment provider if their ISV offered a similar solution.

Chargeback 911’s annual Cardholder Dispute Index is always worth a read, if only to gasp at the average 5.7 disputes raised by each consumer every year in the USA.

35% of global eCommerce sales now go through marketplaces according to an absolute goldmine of omni-channel retail research available free of charge from RetailX. Retail CIOs themselves are planning major system upgrades to meet the needs of channel hopping consumers. This will likely trigger reassessments of their payment suppliers and is yet more bad news for incumbents saddled with legacy platforms.

In other news

UK retailers spent a whopping £1.27bn on card processing fees in 2023 and the British Retail Consortium is particularly annoyed about the 27% rise in scheme fees. The trade body is proposing that larger transactions should be charged as a fixed fee, not ad valorem; an idea likely to meet fierce resistance from the schemes.

Wirecard update – the stooge director of Wirecard’s (allegedly fake) Singapore operation claims he was paid $11,000 a month for signing documents he didn’t read. Nice work.

Your staff no longer need to waste time producing poor quality PowerPoint decks. The robots can make bad presentations too. Watch this demo where Microsoft Co-pilot creates a dull but entirely adequate deck in just 47 seconds. 

One key application of AI is to automate customer service but you need to keep an eye on your robots otherwise they may start thinking for themselves.  One AI chatbot working for DPD, a UK parcel delivery company with a mixed reputation, wrote a poem about how bad its employer was.

Where to find me

I’ll be moderating panel discussions at MPE in Berlin on 12-14 March and ePay Europe in London on 21 May. In between, you can catch me at Retail Expo in London on 24/25 April.

Alternatively, If you liked this newsletter, you can hear me guesting on Worldline’s Navigating Digital Payments podcast. .

Get in touch

Geoffrey Barraclough

geoff@barracloughandco.com

www.businessofpayments.com

November 2023 Business of Payments newsletter

Geoffrey Barraclough1 Comment

The Business of Payments

Last month’s poor results from Worldline and Adyen have not set a trend. Nexi’s Q3 numbers came ahead of market expectations. Management said there was no sign of the slowdown in Germany which has so rattled Worldline’s shareholders. Nexi’s stock price is recovering nicely while Worldine is still bumping along the bottom.

Adyen bounced back after its plain-speaking Dutch management presented analysts with a more realistic assessment of the company’s growth prospects and promised a slowdown in the breakneck pace of new hires. Adyen’s Q3 revenue was up 22% and with the processor now targeting 50% EBITDA margins by 2026, significant cash profits are on the horizon.

The dilemmas faced by European legacy acquirers are well described in Nightmare on Acquiring Street, a new paper from PSE Consulting. This lays out the speed at which the market is moving to “gateway acquirers” such as Stripe, Adyen and Checkout, which offer a tightly integrated bundle of services operating over a single platform.

Source: PSE Consulting

Processors operating with old technology and without modern checkout and boarding tools are struggling. Barclays and Credit Agricole are the only banks remaining in the list of top European acquirers and both now recognise the need for change. Credit Agricole has announced a JV with Worldline and Barclays is exploring options for Barclaycard which could involve a sale or joint-venture.

As well as the impact of technology trends, European acquirers also need to contend with a profound shift in channel buying behaviour by small businesses, the most profitable customer segment. A new report from Flagship Consulting demonstrates the extent of the risk.

Source: Flagship Consulting

Independent software vendors (ISVs) and other platforms are now taking between 40% and 65% of new merchants signed in the US. This trend is coming to Europe and threatens banks ability to sell direct to SMBs. ISVs are demanding increasingly high commissions from the acquirers. Bain estimates that 90% of payment revenue is at risk of changing hands.

The impact on the ISV’s themselves is less well documented but these businesses are now finding they can generate up to half their revenue from commissions on payment processing. This is incentivising bad behaviour and we’re seeing incidents of market abuse where ISVs impose penalties for merchants that use 3rd party payment products.

Shopify, the leading eCommerce retail platform, charges a 2% surcharge if merchants don’t process transactions through Shopify Payments. And Lightspeed, a restaurant POS software vendor with over 10,000 customers worldwide, insists that all new customers take its integrated payments product. Those who don’t will be hit with a 0.5% transaction surcharge. 

This hasn’t gone down well in Canada where one restaurateur reported being charged $300 for using a competitor payment terminal. “It’s not illegal, but it’s unethical,” said the local business association. Lightspeed have now introduced a price pledge to match competitor pricing in any country. But it’s worrying that many ISVs are now treating their customers as hostages. This won’t end well.

Corporate activity

Advent, the US private equity giant has bought London-based MyPOS for $500m.MyPOS, which became a merchant acquirer last year, claims 170,000 mPOS merchants in 30 countries and generated €11m EBITDA in 2022 on revenues of €60m. Advent has bought MyPOS through a newly established “payment and technology platform” called Circle which will be chaired by Laurent Le Moal, ex CEO of PayU. Expect more deals to come.

Total Processing, a small but fast growing ISO based in Manchester, recruited Martin Gilbert of Revolut as a heavyweight chair just six months ago. He has wasted little time in arranging the sale of the business to Nomupay, the well-funded Dublin-HQ’d processor formed from the ashes of Wirecard. Nomupay is clearly one to watch. 

Tencent, the Chinese technology platform, has paid $100m for an 8% stake in Global Blue, the market leader in Tax Free Shopping, at a valuation of $1.25bn. The Tencent relationship will cement Global Blue’s position with high-spending outbound Chinese travellers.

Silverflow, the Amsterdam based payment orchestrator has raised €15m at a valuation “significantly higher” than its previous raise in 2021. The money will be used to support the company’s expansion into Latin American and the Far East.

Shift4 has finally closed the $525m acquisition of Credorax Finaro. The eighteen-month delay, caused by the presence of a sanctioned Russian oligarch on the Finaro share register, has given management plenty of time to plan the integration. The combined business has scale (c.$200bn volume), international reach and the capability in eCommerce which Shift4 has been lacking. 

AIB and Bank of Ireland have abandoned efforts to create a domestic money transfer app to compete with the runaway success of Revolut. The banks had spent a total of €17m on the project which was to be called Yippay (yes, really) but ran into regulatory obstacles. Nexi had been contracted to build the product.

The Irish banks may be better served joining the European Payment Initiative (EPI) which has completed its acquisitions of iDEAL and Payconiq. This gives the EPI a solid basis of technology and transaction flow on which to build a common digital wallet for all European markets.

New Shopping

We’re keeping a close eye on grocery. Shifts in supermarket payments can move the whole market. But not yet. The FT concludes that, twenty years after the debut of online groceries, shoppers still prefer buying food in real life. Despite the pandemic boost only 12% of UK groceries are bought online.

But in-store shopping is changing rapidly with the introduction of self-checkout, Smartcarts and autonomous stores.

Italy’s first autonomous store has opened in Verona. In contrast to many pilot implementations, this one is a large format Tuday supermarket. The technology, supplied by Sensei, a Portuguese start-up, can even detect variable weight items through an integration with the scales. Payments are from Nexi. Shoppers don’t need to use the app. They can pay at a standard POS if they choose.

Tesco is trialling a similar process at one UK store. Again, shoppers don’t need to use the retailer’s app. They just walk up to the checkout which will “magically present them with a list of the products they have picked up”. Shoppers can pay with a card in the normal way. The technology is from Trigo, an Israeli start-up already working with REWE, Aldi and Auchan and in which Tesco has a small stake.

A2Z, the Israeli start-up which is leading development of smart carts, announced the delivery of an initial order of 250 to Monoprix, the French supermarket. These carts contain sensors that automatically record your purchases. A2Z believes it will sell a total of 30,000 smart carts in France alone over the next three years through IR2S, its distribution partner.

There is a live debate about self-checkouts. It’s clear they can work well for small basket sizes but not for the weekly shop. Whether it’s using a handheld scanner or fixed self-checkout terminal, the process puts too much work on the shopper. 

Booths, an upmarket UK supermarket, has removed self-checkouts completely. The customers seem very happy.

In biometric news, PayEye, a Polish start-up which allows people to pay with an iris scan has launched a new range of hardware. Called eyePOS, the terminals include a special camera but also take standard payment cards. PayEye offers them for an introductory price of €11.25 per month.

Despite overwhelming consumer demand to pay at POS by tapping their mobile phone on the terminal, there are still some circumstances when a physical card is needed. One is the M6 toll road in the English midlands. The operator has annoyed tens of thousands of motorists by removing the ability to use Apple or Google Pay. The rationale? A Government dictat that it was illegal have a mobile phone in your hand while in control of your vehicle.

After a predictable outcry, the Government has conceded an exemption for making a contactless payment and the toll road systems will be upgraded for Apple Pay.

In-car payments

The toll road problem would be avoided if all motoring-related payments – parking, charging and fuelling – were brought together in a single app accessed from the car dashboard. 

Mercedes Benz has built its own payment service but Volkswagen is following a different approach of co-ordinating a set of partners. VW has launched “Pay to Fuel” for its Skoda brand working with Mastercard, Parkopedia and ryd, a German fintech that offers a pay-to-fuel app.

Meanwhile, VW has sold PaybyPhone to Fleetcor, a large US B2B payment company for $300m. PayByPhone, generates c.$40m annual revenues from its app which gives access to 4m parking spaces in 1,000 cities across Europe and North America. Payment volume was $900m in 2022, giving a very healthy take rate of 4.4%.

Fleetcor plans to expand the PayByPhone service to include EV charging and automatically buying fuel at service stations.

Product

Alcohol and cigarette vending machines are common in Germany, but age verification can be tricky. It’s  good to see Girocard, the domestic debit scheme, working with Feig, a leading vending machine supplier, to restrict sales to those old enough to buy the products.

Also in Germany, Bluefin has gained Giro certification for the TECS platform it acquired earlier this year and launched a white-label POS service for ISVs. Newland is providing the Android terminals. In other hardware news, ITCARD, a Polish acquirer with 90,000 POS, has started deploying Ingenico’s Axium terminals. This is positive news for Ingenico which has been very slow to market with a workable Android product.

One reason why Stripe is so popular, despite its high prices, is that it makes life easy for its customers. For example, you can now manage Klarna disputes from within the Stripe dashboard. Previously, Stripe merchants needed to deal with Klarna customer services via email.

It’s no surprise that Stripe can get its merchants to write great testimonials. Here’s the CIO of La Redoute, the giant French catalogue retailer, explaining why he chose Stripe as its global PSP/processor. “It has been an incredible and enjoyable journey working with Stripe’s team,” he says.      

Stripes’ platform strategy is sparking interesting innovation. Lopay is a UK mPOS provider built on top of Stripe’s APIs.  Lopay (the clue is in the name) undercuts SumUp and iZettle by charging just 0.99% for debit/credit transactions. It says it has signed 20,000 merchants in 18 months. Lopay charges 0.8% extra for instant settlement and says this is a very popular option. 

DeluPay is targeting a similar market in France with a solution based on QR codes linked to open banking transfers. 1,000 merchants have signed up to benefit from transactions free under €2 and 0.5% thereafter. If you understand French, watch the CEO get quite a grilling on this early morning business TV show. The presenters struggle with the consumer proposition and keep asking why they wouldn’t keep using Apple Pay or Paypal.

The Polish Post Office is looking to capitalise on the 10m users of its mobile app by adding InPost Pay as a checkout button for local web shops. Customers can then pay within the app using Blick, cards or cash on delivery.

Finally, take a look at Shop.app. This is a very impressive AI powered search engine that allows you to construct a basket across over 1m Shopify merchants. Payment through Shopify Payments of course.

SoftPOS

SoftPOS is a downloadable payment application that allows any Android device equipped with an NFC chip to take money on cards. This represents a clear threat to the terminal manufacturers who, together, ship over 100m units each year. Sunmi is the first to respond. It’s latest Android hardware range includes a low-cost terminal designed for SoftPOS and shipped without a PCI certificate.

I think SoftPOS will make a quicker impact in the enterprise market than for micro-merchants. For example, Alaska Airlines is working with Stripe to allow 7,000 crew members to accept contactless payments for food and drink using their airline issued iPhones. This should speed up in-flight service. 

Symphopay, a Romanian POS payment gateway has sold its SoftPOS application to Raiffeisen Bank. The solution is already deployed at 880 easybox lockers of Sameday courier company.

Dotykacka, the Czech retail and restaurant software provider with over 20,000 merchants, has launched SoftPOS  in the Czech Republic and Slovakia. The solution is from Softpos.io, a Danish start-up with Nexi providing the processing.

MyPOS has launched SoftPOS in the UK with merchants paying 1.6% + 7p per transaction and no monthly fee. I think it’s a mistake for vendors to forgo a standing charge as there’s a high risk of attracting large numbers of merchants that never make any transactions.

The steady rollout of Apple’s Tap to Pay as an alternative to Android has reached France. Group BPCE, Adyen, myPOS, Revolut, SumUp, Viva Wallet and Wordline are offering the product at launch. 

Open banking

The latest Open Banking Impact Report shows UK open banking payments doubled compared to 2022 and now running at £4.5bn a month, still small modest compared to c.£65bn on cards and c.£110bn on direct debits.

There are now 45 open banking payment providers in the UK. This is probably rather more than the market needs and many vendors must be wondering they can stay in business long enough to reach break-even.

Who is going to consolidate the overcrowded open banking market? The CEO of Go Cardless, a very well-funded UK direct debit specialist, said it would likely be making acquisitions. Go Cardless already bought Noridgen, a Latvian open banking provider earlier this year.

If open banking payments are going to become mass market, vendors need to provide a superior customer experience to cards. One good example is William Hill, provider of online gambling and sports betting, which will be offering open banking for both pay-ins and pay-outs. This is a sector where bank transfers offer clear advantages over cards, notably the ability to pay winnings instantly. Truelayer is providing the technology.

If the industry doesn’t move quickly, the tech giants will drive the market forward. 

Apple has started using open banking to offer iPhone users the chance to view their bank balance and transaction history before confirming an Apple Pay transaction. Although it would be a small additional step for Apple to start directing Apple Pay transactions over open banking rails, it may be reluctant to lose the 0.15% commission it charges card issuers today.

Cash

We’ve covered the rip-off fees from many ATMs in tourist locations before. Honest Guide (1.3m subscribers) explains the scandal better than we can. Euronet doesn’t come out well.

With the debate raging about whether merchants should be obliged to accept cash, it’s good to see merchants playing an active role for or against. This sign was spotted by Chris Higham in Newcastle.

Image preview

And which button would you press in this Las Vegas taxi?  Photo from Booshan Rengachari.

No alternative text description for this image

In other news

French railways has introduced ticketless transit based on contactless payments for regional trains. This is a wonderful idea which should be adopted by all transit authorities everywhere.

Farewell Dotpay. The pioneering Polish eCommerce gateway was acquired by Nets Nexi in 2018 and its brand is now folded into Przelewy24.

Klarna management has averted a strike by conceding a collective bargaining agreement with its workers. Its CEO didn’t handle a subsequent all-hands call very well, likening union reps to the corrupt pigs in Animal Farm.

CAB Payments has been one of the least successful IPO’s of 2023 with shares down 80%. The FT explains why.

French authorities have levied €414m fines on four Meal Voucher providers for anti-competitive practices in this €6bn market. This is very profitable business – the providers charge 2.5% to the employers and 2-5% for the restaurants.

BCG reports that eCommerce growth, which slowed sharply as real life returned after the pandemic, has now returned to its longterm trend.

If you watch one video this month, check out this US start-up’s application of AI to wearable technology.

One of the rare European banks making a success of payments is Santander whose Getnet unit is now number two merchant acquirer in Latin America.

What??? Nearly 1% of the entire US GDP goes through Delta Airline’s American Express card, generating $5.5bn annual revenues for the airline.

Two slices of archive magic from the BBC. The Future of Credit Cards (1986) and the Future of Banking (1968).  

And finally

Accounting for inflation, this is spending a penny in an Irish toilet. JustTip is providing the attendant service. Spotted by Rónán Gallagher.

A white rectangular device with a screen on it Description automatically generated

Where to find me?

I’ll be at the PSE Merchant Acquiring Conference in London on 5 December and then at MPE 2024 in Berlin on 12-14 March.

Get in touch

Geoffrey Barraclough

geoff@barracloughandco.com

www.businessofpayments.com

August 2023 newsletter

Geoffrey BarracloughLeave a comment

Business of Payments

FIS has given an update on the rescue operation following its catastrophic $43bn acquisition of Worldpay in 2019. Worldpay will be spun off into a joint-venture with GTCR, a Chicago based private equity fund, at a valuation of $18bn. You may have noticed $25bn missing. This is a loss to FIS shareholders for which nobody has apologised.

One of the key reasons for the collapse in Worldpay’s valuation is that when FIS bought the business, it was growing sales at about .9%. However, starved of funds under FIS’s ownership, Worldpay hasn’t been able to keep up with high-spending competitors such as Adyen, Stripe, Checkout and JP Morgan. The result: revenue was up just 1% in Q2, JP Morgan has overtaken Worldpay to the global number one spot and $25bn has disappeared.. More details on the Business of Payments blog.

A graph of a graph showing a line and a line Description automatically generated with medium confidence

In Europe, most attention is focused on battles for bank partnerships. In Italy, Banco BPM, advised by Bain Consulting, rejected its current partner, Nexi. Instead, in a surprise move, the Milan bank will merge its merchant services business with that of BCC Pay. The combined group, boasting 370,000 POS and €90bn volume, will claim number two spot in the Italian market and has the scale to compete with Nexi and Worldline.

Two other large European banks are in the process of finding partners for their merchant services arms. In France, Credit Agricole has now signed the agreement with Worldline to start a new JV. The revenue should start to flow in 2025. Again, there was less positive news for Nexi. The closure date for its acquisition of a majority stake in Sabadell’s merchant acquiring business (the second largest in Spain) has been put back six months to the first half of 2024.

Both Worldine and Nexi’s merchant services businesses themselves, seem in good underlying health. Reporting H1 results, Worldine revenue was up 13%. Management said it was still interested in acquiring merchant portfolios from banks. Nexi grew revenue 10% in H1 and is proving adept at realising synergies from the recent mergers with SIA, Nets and Concardis. It has decommissioned five of 25 processing platforms, says it’s on track to close another five in H2 and, longer term, to reduce the number to just four.

PagoNxt, Santander’s payment business, is also doing well. Volume was up 22% in Q2with increases recorded in all major markets in Europe and Latin America.

In contrast, Barclays, the UK’s second largest acquirer, reported disappointing acquiring volume growth at Barclaycard Merchant Services. Insiders suggest the bank is struggling to bring modern payment products to market and is rumoured to be considering divesting its acquiring division.

We’ve reported previously on the challenging market conditions for pure-play eCommerce gateways. It’s no surprise that privately owned Computop, which claims 30% of the German eCommerce market, has sold a 30% stake to Nexi. There is strategic logic for Nexi which already owns Concardis, Germany’s largest acquirer. Computop’s volume processed fell from €34bn in 2021 to €30bn in 2022. The decline is partly due the company’s decision to exit the gambling/adult sectors but also indicates competitive pressure from Adyen, Checkout and Stripe.

The decline in value of German payment assets was underlined by KKR’s decision to hand Unzer (formally HeidelPay) to its creditors, writing off most of its $668m investment. KKR acquired a majority stake in Heidelpay, a PSP with about 17% of the German eCommerce market, in 2019. Unzer was recently in trouble with BAFIN, the German financial regulator, due to “serious defects” in its risk processes. 

US based Shift4 still hasn’t concluded its acquisition of Credorax Finaro, a European processor. First announced in March 2022, the deal hit regulatory obstacles linked to a sanctioned Russian oligarch on the Finaro share register. Management says it is confident of closing the deal in Q4.

Ryan Reynolds is a much better proposition as shareholder. After taking an undisclosed stake in Nuvei, a Canadian processor with global ambitions, the actor is fronting a witty and self-deprecating brand advertising campaign. Reynolds’ investment is already under water. Nuvei’s stock fell 39% after disappointing Q2 results.

Rapyd, the London based global “fintech as a service” provider, has paid $610m for the slowest growing and least profitable parts of the sprawling PayU empire. The purchase price will be financed by a fresh capital injection into Rapyd in what the company claims could be the largest Fintech fundraise of 2023. Arik Shtilman, CEO, took to LinkedIn to explain the rationale. “If you don’t aim for a big outcome, you won’t get an outsized return,” he says. More details on the Business of Payments blog.

We reported last month that Toast, a leading US restaurant software vendor with integral payment processing, had shocked its merchants by adding a $0.99c service charge to each bill. The fee would have been paid by diners and provide Toast with free money at 100% gross margin. The company has now back tracked with its CEO recognising “we made the wrong decision.”  

Shift4, with time on its hands waiting for the Finaro deal to close, responded with a clever “Don’t get Toasted” campaign.

A piece of toast with a face on it Description automatically generated

Two small French payment companies reported good results. HiPay, an omni-channel PSP quoted on Euronext, grew volumes 14% to €4bn in H1 with revenues up 19%. Business picked up in southern Europe and in the iGaming segment. Lemonway, which provides specialist payment services to marketplaces, broke even in H1 as revenues surged 90% to €14m.

Synch Payments, an attempt by a consortium of Irish banks to produce a domestic mobile money transfer app to rival Revolut, has been delayed once more. Again, it’s Nexi supplying the technology.

Many domestic schemes co-brand with Discover to access a global acceptance network. Surprisingly, 3rd party volume over the Discover Global Network fell 10% in Q2. New management at DGN will be looking to reboot its proposition.

New shopping

While autonomous stores are gaining traction across Europe, Amazon, which invented the technology, is struggling. According to the RTHI blog, Amazon’s stores are in the wrong place, have the wrong products, cost too much to build and are confusing for customers. For example, you can now checkout by tapping your physical payment card but not with Apple/Google Pay. Or with Amex. The stores don’t even accept Amazon gift cards.

Customer satisfaction with traditional self-checkouts is falling. Shoppers resent the ongoing reduction in staffed checkout. With autonomous stores so expensive, smart carts may provide a cheaper and more flexible compromise. Here’s a good round up from Forbes on the state of play. Kroger, the US grocer, says smart cart shoppers spend less time in store but spend more money. Everyone’s a winner.

Shoppers are returning to local stores. As expected, once confronted with the true economic cost of rapid grocery deliveries, people are willing to walk to the shops just like it’s 2019.  The last mile delivery specialists are disappearing one by one. Getir is the latest to urgently need more cash to keep trading. Maybe robot deliveries are the answer.

Fans of biometric payments will be delighted that Amazon is rolling out Amazon One, its palm payment product, to 500 US Wholefood stores by the end of this year. Amazon says the technology has been used 1m times to date with zero false positives and is ideal for high volume locations such as stadiums. Shoppers first need to visit an Amazon One location where they can scan their palm and link it with their Amazon account.

Palm payments are no more convenient for shoppers than Apple/Google Pay. But there is  clear benefit to Amazon of capturing extra customer data and/or being able to steer transactions to lower cost payment methods.

While Amazon can probably be trusted to keep your data safe, other vendors may not be so reliable. For example Worldcoin, a San Francisco-based start-up, is creating a global identity database founded on iris scanning and secured $115m funding in May this year. Its focus has been mainly on developing countries such as Kenya, in which Worldcoin has been asking people to agree to having their eyeballs scanned in return for $50 in tokens on the blockchain. What could possibly go wrong? Bain Capital is one of the VCs which should know better than be mixed up in this madness.

Product

Legacy acquirer like Worldpay and Barclaycard need to make rapid product investments to keep up with the new capabilities showcased by Adyen, Checkout and Stripe.

Optimised checkout is a great example. This uses AI to configure checkout pages with the best selection of payment brands, ensures that transactions contain the correct data and optimises routing to maximise acceptance or minimise cost. Stripe claims merchants moving to its optimised checkout grew sales revenue 10.5% more than a control group which stayed on the old product. Checkout says its Intelligent Acceptance product increased acceptance rates by up to 9.5ppts. Early customers include Klarna.

Checkout.com has also launched Identity Verification which, it says, uses AI to identify individuals within 120 seconds as they video themselves holding up identity documents. Uber Eats is an early customer.  

Adyen announced Data Connect for Marketing which helps merchants identify their in-store customers. Retailers used to this themselves before PCI regulations banned them from storing customers’ card details in their own systems. Impressively, Adyen is also the first Fintech to join FedNow, the new US instant interbank payment network.   

Subscribed

Away from the global processors, Cashflows, a UK eCommerce acquirer, has added a range of Castles POS terminals as part of omni-channel proposition to its ISV and ISO distribution partners. This is a smart move. New UK regulation has outlawed lengthy POS terminal rental contracts but were connected to one of the 14 largest acquirers. Cashflows is not one of the 14 and so will be an attractive option for ISOs looking to continue business as usual.

In case you’re wondering what counts as a POS terminal in UK law, the regulator says this is “an electronic device that a merchant uses to accept a card in a card-present transaction without the need to connect to a smartphone or tablet.” This excludes the typical mPOS propositions from SumUp and others although these devices are normally sold to merchants, not rented.

Far Eastern tourists are back in Paris to shop and the top retailers know they need to offer their favourite ways to pay. Printemps, a leading department store, has integrated Alipay+ into its POS checkout flow. Alipay+ also gives access to Kakao Pay (South Korea), GCash (Philippines), Touch ‘n Go (Malaysia) and TrueMoney (Thailand).

Visa appears to have built its own Blik competitor in Poland, called Visa Mobile. ING, Nest and SGB banks have enabled this within their mobile banking applications.Shoppers just enter their mobile phone number into a merchant checkout page and authorise the transaction in the mobile app.

Fuel cards are commonly issued to staff who drive company vehicles but there’s always a risk of fraud or misuse. A new idea from CarIQ uses vehicle data as a sort of biometric ID. Linked to a virtual card, the vehicle pays for its own fuel, without the driver needing to sign for the gas. CarlQ has just signed a global partnership with Visa.

Access to cash

As cash usage declines, a growing number of merchants are only accepting digital payment. This presents problems in societies where some citizens don’t have access to electronic money. But cash-free stores are also enraging many of the people already angry about vaccines, traffic restrictions, 5G masts and sundry other inevitable aspects of modern life.

Piers Corbyn, a notorious conspiracy theorist, posted a video of himself trying to pay cash at a cash-free Aldi store. It didn’t end well. Lobby for cash if you want, but be careful of the company you keep.

Image

If cash is to be preserved, public policy needs to address the fact that the less cash is used, the more expensive it gets. For example UK convenience stores often host ATM machines with the retailer receiving a commission of 15p per withdrawal. One store reports  transactions down 70% at a “free” ATM. The result: the retailer is not making enough revenue and is switching to an ATM that charges customers a withdrawal fee. The likely outcome is that transactions will fall further.  

Meanwhile, in Germany where cash is still plentiful, 496 ATMs were blown up by criminals last year who got away with a total of €30m in bank notes.

SoftPOS

SoftPOS has only been available on Android so news of the European launch of Apple’s “Tap to Pay” on iPhone made the headlines. Apple’s SoftPOS is based on the $100m acquisition of Montreal-based Mobeewave in 2020. Architected differently to Android SoftPOS, Apple offers an SDK to developers/PSPs allowing them to build payment acceptance capability into their own iPhone apps.

Commercial launches on Apple have quicky followed from Natwest Tyl, Dojo, Viva Wallet and Zettle.  

With Apple SoftPOS, there’s still a need for an acquirer (or payment facilitator) to process the transactions but no obvious role for the specialist payment app/gateway providers such as MyPinPad or Phos. Happily for the SoftPOS start-ups, the Android market is large enough to keep them all busy for some time.

In Android product news, Oona, a Finnish start-up, has some interesting enterprise SoftPOS ideas such as this kiosk, for which Rubean provided the payment application. Getnet (Santander) has launched SoftPOS in Spain although only for larger business customers. Finally, Worldine is now live with SoftPOS in Italy via its new Banco Desio partnership supported by a clever TV commercial.

Open banking

Natwest, which has modestly taken the URL www.bankofapis.com, commissioned a report to identify the key obstacles holding back the wider adoption of Open Banking. It concludes the problems lie in “lack of commercial incentives” to develop or enhance the core APIs and “lack of alignment between.. .banks.” Or as Nick Dunse, former CMO of Pay with Bolt wrote on LinkedIn, “Nobody is leading it and there’s no money in it.”

Some Fintech lobbyists are asking the regulator to lead by expanding the number of services available but Oliver Wyman, the management consultant, thinks its time for banks to introduce financial incentives for themselves by monetising the APIs. The consultants suggest that a typical bank could make $50-$75m per annum if it charged PSPs for value added services linked to the open banking APIs.

Variable recurring payments (VRP) – an open banking equivalent to direct debits – were meant kick start the sector in 2023 but have also been rather slow to take off. Here’s a good podcast from Edgar Dunn which explains how VRPs work and what the opportunities might be.

In corporate news, NuaPay, an early open banking leader may be for sale. Its parent company, Senteniel, was acquired by EML, the accident prone Australian fintech for €70m in 2021. Account to account payments are meant to be hard to spoof but Senteniel was then hit by A$8.5m merchant fraud in August 2022. Now the Irish regulator has raised anti-money laundering concerns and asset sales look likely.

Banked, a London based white label API aggregator which has raised £36m from investors including Bank of America and NAB, reported revenues of just £45K in 2022 as losses widened to £15m. Management says it will need to raise fresh capital this year  

Munich-based Ivy has raised €7m for “instant bank payments your customers love.” It sits on top of Tink, TrueLayer or Token.io and looks like a very well thought-through proposition. Merchants need vendors to build compelling customer experiences on top of the raw capabilities provided by the API aggregators so this could be a winner.

Crypto corner

PayPal is hoping to legitimise crypto with its newly minted Paypal dollars but opinion is divided. Bank of America thinks PayPal is unlikely to win significant crypto market share but I suspect its analysts are missing the point. PayPal will focus on customer experience, global deployment, and ease of use in a sector notorious for operational complexity.  If PayPal can’t make this work, nobody can.

Meanwhile, the regulatory clampdown on unbacked crypto is bringing results. Sex workers are complaining that crypto exchanges have been terminating their accountsciting reputational risk. One adult star left with a pile of unsaleable crypto tokens said “the whole ‘crypto is permissionless and censorship-resistant’ thing is a bunch of bullshit.”

With crypto exchanges now behaving (slightly) more like respectable institutions, the criminals are moving on. Bitcoin is no longer the currency of choice for laundering money.

No criminal could possibly need the new “No KYC Visa card” available to anyone with an Ethereum wallet. Jason Mikula explains that this wholly noncompliant boondoggle is most likely built on banking-as-a-service capabilities from Stripe.

A screenshot of a credit card Description automatically generated

Other news

Edgar Dunn writes on payment orchestration platforms (POPs). The consulting company counts 27 multi-acquirer platforms available today plus eight acquirers marketing their eCommerce gateways as orchestration platforms. The sector has attracted over $650m investment in recent years.   

It’s helpful occasionally to remind ourselves of the difference in commerce between the US and Europe. Watch this report on the world’s largest gas station. It has 120 pumps and is in Tennessee. Where else?

Research from Justt shows UK consumers are “now as trigger happy toward chargebacks” as their American cousins.

Poland is a fintech hotbed. There are over 80 payment businesses referenced in the 2023 Map of Polish Fintech.  

If you want to become a wealthy payments sales person, here’s a handy guide from the US Electronic Transaction Association. Because independent sales agents are rewarded with small but long-lasting commission payments, the best advice is to be patient and love your customers.  

The British Government has launched (yet another) Future of Payments Reviewalthough without clearly stating the problem it is trying to solve. No matter. The UK Payment Association has a handy survey for you to give your views.

What if generative AI turned out to be a dud? A must read from Gary Marcus

Sifted lists nine payments start-ups to watch. Four are from the UK and two from the Netherlands.

The collapse of Railsr has caused havoc at Irish shopping centres, many of whom had sold open-loop gift cards issued by UAB Payrnet, a Ralisr subsidiary whose licence was revoked by the Lithuanian regulator.

Latest Wirecard news. Two ex-employees have been jailed in Singapore, the first criminal convictions anywhere in the world relating to the scandal. Meanwhile, Jan Marsalek, the fugitive COO, has claimed that Wirecard’s third party operations, whose existence or lack of existence, brought down the company, have continued to trade.

And finally

Worldline kindly invited me to join its Navigating Digital Payments podcast. If you’ve enjoyed this newsletter, give it a listen. Although I was certainly flattered to be asked to participate, my head isn’t normally this large.

No alternative text description for this image

Acquisition synergies deliver 10% EBITDA growth at Nexi. No update on Sabadell.

Geoffrey BarracloughLeave a comment

Nexi, which is vying with Worldine for the title of European payment champion, posted revenue of €835m in Q2, up just 3% on an unadjusted basis. Good growth in Merchant Solutions, up 10% to €474m, and Issuing Solutions, up 7% to €270m was dragged down by declining sales in the Digital Solutions division, which has been hit by the impact of banking consolidation in Italy. 

Paolo Bertoluzzo, CEO, said revenue growth would have been 8% when adjusted for currency fluctuations, acquisitions, businesses held for sale etc and “confirms solid and profitable growth in all our businesses and in the different geographic areas in which we operate, despite the ongoing uncertain macroeconomic situation.”

The merchant division interests us most at Business of Payments. Like Worldline, Nexi is becoming increasingly dependent on sales to merchants as their traditional business model of process outsourcing for banks comes under pressure. Merchant Solutions accounted for 57% of total revenue, up from 53% in the same quarter of 2022.

Bertoluzzo was pleased with the “acceleration of revenues in Merchant Services in the DACH region, and acceleration in e-commerce, broadly across geographies.” However, Bernardo Mingrone, CFO, added that merchant services growth was “a touch lighter than what we might have expected” and blamed tough comparisons from 2022. For example, the growth in high-margin foreign card transactions in Italy, Nexi’s largest market, slowed to just 6% in June as you can see below. 

There was more positive news further down the P&L. Nexi is proving adept at realising synergies from the acquisitions of SIA, Nets and Concardis. It has closed five of 25 processing platforms, says it’s on track to decommission another five in H2 and, longer term, to reduce the number to just four. Similarly, it has closed 11 of 45 data centres and is on track to shut another two in H2. 

Total expenses fell 3% to €399m yielding a welcome 10% increase in EBITDA to €436m. 

Looking in more detail at Merchant Solutions, payment volume rose 8% to €209bn in Q2. Over half Nexi’s volume still comes from Italy but growth in its home market was just 6% compared to 11% elsewhere. The DACH region was particularly buoyant and recorded “strong double-digit” increases across the quarter. 

Two thirds of Nexi’s merchant volume is from SMEs with the remainder split between eCommerce and Large/Key accounts. Highlights include:

  • SME – volume up 14% in H1 driven by 145K extra POS terminals and 250,000 additional customers compared with a year earlier. Management called out significant growth in Italy and Poland. The SoftPOS roll out is progressing across geographies.
  • eCommerce – volume up 8% in H1 and revenue up double digits as client numbers rose 10% year on year. Sales accelerated in Italy and Nordics. There was good performance from A2A (the old P24 business) in Poland. Management is pleased with progress signing new ISV partnerships. A commercial agreement with Shopware, the German eCommerce platform, is now live in Italy and DACH. Nexi says it has been selected as Shopify’s preferred partner in Poland.
  • Large account/key account (LAKA) – volume up 10% with most new wins in omni-channel retail, hospitality/restaurants and mobility/petrol. 

Alongside the results, Nexi announced it had taken a 30% stake in Computop, the German eCommerce gateway. The purchase price was not disclosed. This partnership is highly complementary to the Concardis acquiring business and reinforces Nexi’s presence as market number two, behind Worldline/PayOne. Computop claims 30% of the German eCommerce payment market but processed volume fell 12% in 2022 to €30bn. The poor performance partially mirrors a general fall in eCommerce volumes in Germany but Computop also lost customers when it exited the adult and gambling segments. Nevertheless, Computop is also believed to be under pressure from international acquirers with integral gateways such as Adyen, Stripe and Checkout.com.

Speaking about potential future corporate activity, Bertoluzzo said that Nexi was not interested in entering the UK market where Barclays is reportedly looking a strategic options for Barclaycard. “At the moment, we are not looking at the UK, we have other priorities and that’s not necessarily a market that we consider for us attractive.”

We would expect one of these other priorities to be the merchant acquiring business of Spain’s Banco Sabadell which announced a JV with Nexi in February this year. Surprisingly, Nexi gave no update during its results announcements, but Sabadell has suggested that the deal may now not close until H1 2024, six months later than scheduled. 

BancoBPM, is certainly no longer a Nexi priority. The Italian bank has chosen to ignore its long standing partnership with Nexi and opted for a joint-venture with BCC Pay, a local newcomer. Bertoluzzo said the revenue impact of losing the bank is expected to be zero this year and negligible next year. He felt that BPM customers were “used to Nexi products and propositions that are quite advanced for Italian standards, and quality of service” indicating confidence that Nexi can defend its existing customer base. 

Asked whether he felt that PE firms were inflating valuations for payment companies, Bertoluzzo explained that “the multiples that we see around these days are probably far too low, given the potential value generation of the sector.” He went on “we’re not particularly worried about private equities coming in and inflating price and so on and so forth, because honestly, buying additional assets is not our priority. So we are very selective on what we’re looking at and currently, we are looking at a very, very small number of potential small opportunities, where honestly, we don’t see private equities around.”

Discussing progress divesting non-core businesses, management said that the sale of NetsDBS had been delayed by the unexpectedly early publication of EU draft directive on electronic ID wallets. However, they still hope to close the transaction “in the coming weeks.” There was less positive news about Ratepay, the German BNPL business inherited from the Concardis acquisition. Berltoluzzo said “It’s not the most ideal market to sell a consumer finance business.” 

Finally, commenting on the Italy’s progress towards electronic money, Bertoluzzo said “Personally, I’ve not been using cash for the last many, many, many weeks… but as soon as you go outside the metropolitan areas, there is still a lot of cash payments around. …the overall penetration of digital payments in Italy, is probably today in the low mid 30s, which is still very much behind what you see in the rest of Europe…There is a long, long run in front of us in terms of cash to digital payment conversion. It’s happening. It’s good it’s happening, but there is a long, long way to go.”

Steady progress for Nexi in Q1, indicates more acquisitions ahead

Geoffrey BarracloughLeave a comment

Nexi’s revenue and profits picked up in Q1 after a quiet final quarter of 2022. 

Total revenue increased by 9% to €742m excluding two businesses now “held for sale” – Nets NBS and Ratepay, the troubled German buy now, pay later (BNPL) unit which Nexi inherited with its purchase of Nets.

All geographies contributed to growth in Q1 including Southeast Europe, where Nexi has now completed the acquisition of the Intesa Sanpaolo merchant book in Croatia. This deal brings an additional 13,000 merchants and €5bn in annual payment volume, at a cost of €180m and an implied EBITDA multiple of 10.5.

Extending its reach into Iberia for the first time, Nexi announced that the €350m purchase of 80% of Sabadell’s merchant services business will close in Q4.  Sabadell boasts 20% of POS market share and has been growing volume swiftly as Spain rebounds from the pandemic. 

Paolo Bertoluzzo, CEO, said “”Everywhere … banks continuously revisit their payments strategies” and he predicts more acquisitions in the next 12 months. This may include Nexi’s home market of Italy where two banks have announced possible divestments of their merchant services arms. 

Banco BPM will select a partner for its card business by the end of June. Nexi is said to be in the running although the bank is looking to stay “in the driving seat” by selling only a minority stake. This is not Nexi’s normal operational model which may leave the door open for a competitor to enter the Italian market in alliance with Banco BPM. 

Italy’s second largest bank, Unicredit, is also reviewing its payment operations across 13 markets. The bank expects the process to be complete by the end of September and Nexi, as the incumbent partner, is likely in pole position. 

Speaking about the Italian government’s plans to regulate and cap merchant service charges for small businesses, Bertoluzzo said the the process was “taking longer than we expected” but he didn’t anticipate material impact on Nexi’s financial results.

Turning to Nexi’s Q1 financial results, Merchant Solutions once again outperformed the two smaller divisions, showing an 11% increase in revenue to €413m, representing 45% of total sales.

Merchant Solutions volume grew by 11% to reach €181bn, with higher-margin international scheme volume growing at 17%, rather faster than domestic card volume. Nexi’s Italian revenues are still boosted by the rebound in foreign card transactions (see chart below). These grew over 50% in Q1 with the good performance persisting into April.

A picture containing text, line, diagram, font Description automatically generated

Outside Italy, volume grew by 13% to €79bn. Average transaction value (ATV) declined across the board, down 7% to €58 in Italy and falling 2% to €34 elsewhere. Across all markets, Nexi expanded its total point-of-sale (POS) base by 170,000 compared to the previous year.

Turning to Nexi’s two other business units. Issuing solutions revenue increased by 8% to €246m, benefiting from the post-Covid rebound in international travel and commercial cards. Digital banking solutions revenue remained flat at €82m. Strong volume growth was offset by the ongoing impact of consolidation among Nexi’s Italian clients.

Total group costs rose by 6% to €406m, primarily driven by a 9% increase in personnel expenses as Nexi invested in “high-growth areas” and was hit by wage inflation. In contrast, operating costs only rose by 3%, benefiting from efficiencies and synergies resulting from Nexi’s recent acquisitions.

EBITDA rose by 14% to €336m.