The Payments Industry had another amazing year, so amazing that recapping on everything would probably provide enough content to write a book. That’s why I decided to break down some of the biggest trends, players, acquisitions and mergers to give you a recap on 2017.
New Banks are Challenging the Status Quo
The first thing that strikes me is that 2017 has been the definitive breakthrough of the “New Banks”. Revolut, N26 and even Monzo have had an amazing year, and I am seeing more and more challenger banks rise up to truly disrupt the payments space.
Revolut, a UK based startup founded in 2013, has achieved many milestones this year and is on track to truly revolutionize the cards issuing business. They have launched a long list of new features and services including; Bill Splitting, Current Accounts, Chatbots, Credit Cards, Business Accounts and Cell Phone Insurance. But they were also able to apply for a banking license, raise money from both VC’s and Users, as well as reach the milestone of one million customers.
Not far behind is N26, a German based startup, that is a little less flashy but able to make significant impact in Europe as well. Where they launched in 6 new countries at the end of last year, they have been adding features by focusing on partnerships with other FinTech companies. Their product offerings now include Contactless Cards with Maestro, International Transfers with Transferwise, Investments with Vaamo, Insurance with Allianz, Savings with Raisin and Credit with Auxmoney and Younited. By adding about 1000 users per day, they have grown their customers from 300.000 in March to over 500.000 in August, they will be launching in the UK in 2018 and in the US in mid-2018, which will only further fuel their growth.
Smaller but equally interesting is Monzo, a challenger bank that is mostly focused on the UK, who has raised over €70 Million to compete with established and other challenger banks including Revolut and N26. I am expecting 2018 to be a breakout year for Monzo, but with Revolut and N26 growing as fast as they do, it will be a challenge.
Vantiv and Ingenico Buy Up the Competition
2017 was also the year of impactful acquisitions and consolidations. The two most notable ones were Vantiv and JP Morgan acquiring Worldpay, and Ingenico acquiring Bambora.
After a not so spectacular 2015 IPO, Worldpay, processing over 31 million transactions a day, was still facing a lot of competition from PayPal, Stripe and Square. Having dealt with malicious hacking of its services, Worldpay was desperately trying to find new ways to compete by focusing on innovations like smartphone-based payments and VR payments. After being acquired by Vantiv and JPMorgan, it will be interesting to see what will happen to Worldpay. JPMorgan has been mostly focused on being an Acquiring Bank and not on Payment Services that could help them differentiate, whereas Vantiv is looking for Worldpay to help them expand their global coverage.
Another acquisition that caught our eye was Ingenico acquiring Bambora. Ingenico who originally focused on selling terminals to banks and acquirers has been shifting their business model over the last decade to becoming more of a payments service provider. With the acquisition of Bambora, Ingenico has acquired a company that has a strong footprint in the Nordics market, and will most likely become the template for further global expansion in the omni-channel space.
Investments into Technology Disrupters Increases
Unlike what many sources would like you to believe, investments in FinTech are still happening. The four most interesting according to us were; Visa leading the investment round in Marqeta, Dimebox getting a strategic investment from BillPro and iZettle almost getting to Unicorn status.
Marqeta, a developer and provider of payment processing technologies, has raised $25 million in a new round to fund the expansion and democratization of payments in the U.S. and overseas. Focused on developing technologies that allow companies like Affirm, Square, Kabbage, Instacart and Doordash to issue and manage “just-in-time” payments as well as virtual card numbers to facilitate payments at online vendor’s point of sale. In an interesting move Visa decided to lead the investment round, and with investments in Chain, DocuSign, Klarna, Square and Stripe, the future looks bright for Marqeta.
Another democratizer of payments processing technologies is Dimebox, who raised €5 million to develop card acquiring processing capabilities. Even though several PSP’s have made the transition into becoming Full-Stack Acquirers, 80% of the market is still owned by lesser known banks and acquirers, who mostly rely on out-dated technology. To resolve the technology issue, Dimebox provides these banks and acquirers with a white-label full stack acquiring solution, that is build with the latest technologies and data analytics capabilities.
Finally, iZettle the commerce platform based out of Stockholm, has raised another €40 Million on a €806 Million / $950 Million valuation, with most of their growth coming from the highly competitive market of the UK, they expect to further their growth by expanding invoicing and cash advances. Whereas iZettle’s main competitor Square is still focused on the US and UK market, iZettle has already expanded throughout Europe and hopes to continue their growth.
2017 was great, but is just the beginning of what is coming
Of course there was a lot more that happend in 2017 in the Payments Industry, which makes it very interesting and exciting to be a part of. As new technologies and players emerge, consolidation will continue and investments will reach new heights, I will keep track of them and provide insights and feedback as they happen.