#280
In With The Old!
For years, a slew of high growth payments upstarts - from Stripe in the US, to Ant Financial in China and Adyen in Europe - have been grabbing share from incumbents. The upstarts have ridden the wave of e-commerce and digital payments, while squeezing margins and offering developer-friendly products. They've also commanded massive valuations - with Stripe valued at $20b, Ant at $150b, and Adyen over $22b.
However, the old boys are closing ranks. On Monday, FIS announced that it would buy Worldpay for $43b. This comes just two months after Fiserv and First Data agreed to their own $39b combination, bringing the value of this year's payments deals to a whopping $85b.
In many ways, the recent megadeals are a bet that, through scale and efficiency, the established players can protect their lunch by cutting costs and broadening their product offerings.
Worldpay was spun out of an embattled Royal Bank of Scotland in the aftermath of the financial crisis. Today, less than a decade later, the same business is being bought in the biggest financial services takeover since the recession - a deal equal to all of RBS’s current market value.
Despite the higher profile upstarts, Worldpay has also grown to become the largest merchant processor, processing over 40 billion transactions a year across 146 countries. JP Morgan Chase comes in second at 22 billion transactions.
So despite all the success of the new kids on the block, the older players may still have some tricks left to protect their turf!
Portfolio News
Fast Company gives Flutterwave the #2 slot on the list of most innovative companies in Africa - After identifying the problem of fragmented payments in Africa, Nigerian entrepreneur Olugbenga Agboola started Flutterwave in 2016, a digital payment API designed to make it easier to do business across the African continent by allowing users to make international payments in their own currencies. Read more
In With The Old!
Banking’s back-office workhorses are merging as technology reshapes finance - A global shake-up in the humdrum business of payments has set off a merger frenzy among the giant but obscure companies that connect banks, merchants and consumers. The latest deal is FIS acquisition of Worldpay. Read more
Growing payments firms may pose systemic risk - The speed and scale of the FIS and Worldpay, First Data and Fiserv, PayPal and iZettle, Earthport and Visa deals is creating complex groups that may lack the sophistication of governance to manage them. Read more
Industry News
Startups aim to overhaul trading in Treasuries - A handful of startup trading platforms are trying to reshape the $15t U.S. Treasuries market. The idea is to create exchange-like trading of Treasuries, which, unlike stocks, are still bought and sold OTC. Read more
Proof-of-stake projects see a rise in interest as Cosmos Hub launches - With the much anticipated recent launch of the Cosmos blockchain for interoperability, there are now over 70 projects using PoS to some extent, and they have seen 40% of their supply staked on average. According to Diar, almost $4 billion is staked, nearly half of it with EOS. Read more
Juniper Research: commercial virtual card payments to exceed $1tn by 2022 - A new report from Juniper Research found that the annual value of virtual cards (temporary card numbers only available for a single transaction or limited time) used by businesses will grow 90% over the next four years; exceeding $1 trillion by 2022. Read more
Potential criminal sanctions sharpen fintech CEO’s Brexit focus - A number of London based fintech CEOs received a “Dear CEO” letter this week from the Irish central bank setting out the implications for any firm that continues to operate in the Irish market without local authorisations in the event of a hard Brexit. Read more
Brexit hits ability of UK fintech to lure top talent: report - The report by TheCityUK says companies are struggling to fill roles in coding, cloud computing, machine learning, cyber, artificial intelligence and blockchain with net migration of tech graduates heading back to the EU. Read more
BlockFi receives $25m in crypto deposits - In just two weeks after launching its ETH and BTC deposit accounts with interest payment rates of 6.2% (compounded annually), the non-bank lender has seen deposits explode. The products have been quite controversial in the community given the concept of 'rehypothecation' and counterparty risk. Read more
JPMorgan Chase exec: crypto innovators will 'ultimately have to use a bank to move funds' - Ron Karpovich, Global Head of eCommerce Solutions at JPM, says it will be more partnership than competition between financial institutions and crypto disruptors in the payment space. He thinks there will be a high amount of consolidation as scale is needed to lower cost and increase efficiency. Read more
Asset managers slash expenses as ‘feemageddon’ bites - Fees on US equity funds fell to a new record low last year, as relentless pressure from cheaper index-tracking rivals forced asset managers to slash costs in a bid to slow heavy outflows. Read more
Select Financings
Figment Networks - Canadian provider of institutional grade proof of stake infrastructure services raised $1.3 million in Seed funding from investors including Bonfire Ventures, FJ Labs, and XDL Capital Group. Read more
HoneyBook - San Francisco based CRM and payment platform for freelancers has raised $28m Series C led by Citi Ventures. Read more
Marqeta - California based payment platform has raised a $250m Series E by undisclosed investors. The valuation on the round was $1.9bn. Read more
Point - Palo Alto based home equity financing platform has raised a $22m Series B led by Prudential and DAG Ventures. The company also raised a $100m credit facility in conjunction with the financing. Read more
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