Global Payments European merchant revenue growth dropped to 7% in Q2 as the effect of the EVO acquisition dropped out of the year-on-year comparisons. The Atlanta based acquirer/processor reported “notable strength across our faster-growth geographies, including Poland and Greece” and said it was “pleased to see trends start to stabilize in the United Kingdom.”
The integration of EVO’s European businesses has enhanced Global Payment’s existing strong footprint in the UK (where Global inherited a decent merchant portfolio from its 2009 acquisition of HSBC merchant services), Spain (80/20 JV with Caixa Bank) and Czech Republic (partnering with Erste Bank). EVO also brought two extra joint-ventures with local banks – PKO BP in Poland and National Bank of Greece.
Starting with the UK, management says that, after several years of weaknesss, business is showing “some signs of stability” and Global Payments now has a “strong pipeline of new business.” Hospitality and unattended are the bright spots and Cameron Bready, CEO, highlighted winning Virgin’s hotel business.
Although Global Payments has spent heavily in the US on buying a number of vertically focused ISVs, most of these businesses do not actively market their products in Europe. However, Global did buy a UK software business called Bleep which provides an ePOS solution for high-capacity retail such as stadiums. Rebranded as Global Payments, it is winning deals at a number of UK football clubs such as Birmingham City.
Commerz Global Pay, the joint venture with Commerz Bank in Germany, went live and is “off to a fantastic start.” Bready said he was “already seeing strong lead generation” and confident of building “a scale business in this attractive market.” Management says it will launch its POS software in Germany later this month and will bring it to Ireland, Poland, Austria and Romania over the next 12 months.
Global also reported the acquisition of “an early-stage technology development company” which it did not name. This is Yazara, a SoftPOS vendor originally from Turkey, which was already supplying Global in a number of markets. Bready said it was “strategically important for us to bring this technology in-house to unify our offerings globally and to control the entire value stack enabling our solutions.” This is a good move although Yazara’s other customers may not be so happy with a key competitor controlling the business.
Looking ahead, management recognises that a business built primarily from acquisitions needs rationalising. Bready said “we remain committed to sharpening our strategic focus and simplifying our business.” Global has begun a “thoughtful and methodical assessment of our assets” and promises to give more details at an investor day in September. Analysts expect the sale of a number of under-performing US software businesses.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.”
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%.
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.
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.
