Voice of the Industry

Acquisitions and investments in the payments industry: challenges and opportunities

Friday 3 June 2022 07:38 CET | Editor: Irina Ionescu | Voice of the industry

Anda tackles the M&As and investments from Q4 2021 to Q1 2022, focusing on challenges and opportunities and what should businesses consider when looking to acquire capital or companies.

Most M&As and investments emphasise the opportunities that lie ahead for the companies involved. However, various challenges may occur related to market movements, competition, consumers demand and preferences, as well as regulations, and other emerging factors. However, a bit of strategic assessment can turn these challenges into opportunities This is why it is imperative to consider deals and fundings from both perspectives. For the last six months, the dynamics of M&As and investments revolved around the following trends: 

  • Buy Now, Pay Later versus credit cards models;

  • The accelerated rise of startups in Asia;

  • New scaling and expansion strategies from incumbents. 

After a comprehensive M&As and investment roundup in 2021 published on The Paypers website, we’re continuing from where we left off, by creating another overview from Q4 2021 to Q1 2022, this time mainly focused on challenges and opportunities with unique views on what should businesses consider when seeking to acquire either capital or companies.

Buy Now, Pay Later – business as usual, but with a twist 

There has been some controversy on BNPL offerings in the last few years, with many regulators across the world commenting on the risk of debt traps among consumers. Even the word ‘Klarnage’ was used to emphasize the damage that these financing services may cause to those that overspend without a warning. Despite all the discussions on whether these companies have fair and regulated policies, a significant wave of investments happened throughout the last two years, with companies such as Klarna, Afterpay, Sezzle, and more rounding up their funds significantly. 

In the meantime, the home-grown BNPL market in Australia seems to be saturated, and companies that raised a lot of capital like Afterpay and Zip, for instance, are now losing it – Afterpay reported a USD 156.3 million loss for the last fiscal year, while Zip reported a USD 652 million loss. Klarna also confirmed USD 748 million operating losses in 2021, which means a 408% loss compared to 2020. 

The perception around the BNPL is yet a bit altered. BNPL is not all about debt and consumerism. Beyond these issues that, indeed, do exist in this field, BNPL is here to stay, especially for younger generations that prefer to avoid the long commitments of a traditional credit.  From the last analysis on investments and M&As in the BNPL market, in the current roundup, we observe fewer big players involved in funding and more startups eyed by investors, a rise in credit card-based services, and high interest for expansion.

The credit card business model on the rise

This card-based business model is, in fact, a credit card challenger one, where consumers are connected to a financing entity, yet the payment execution is facilitated by the BNPL provider. Consumers pay with a card that is issued by the provider and usually co-branded by an international card network. The key benefit is that these providers offer customized perks that include cashback, spending tracking, the 0-interest plan for those who pay on time. 

India-based fintech Slice has raised USD 220 million in a Series B funding, valuing the business at more than USD 1 billion. Slice currently offers credit cards to India's young adults. Among the Slice card's key features is the ability to split a bill into three interest-free monthly instalments. The company is also working on launching payments through Unified Payments Interface (UPI), a state-backed system that streamlines inter-bank payments.

Mexican credit card issuer Stori has secured USD 125 million during an oversubscribed Series C funding round. The company has focused on investments in the last two years with a total fund of USD 200 million and plans to broaden its suite of products. 

Another LATAM-based startup, ADDI, raised USD 200 million valuing it at more than USD 700 million. The company is now well-rooted in Colombia, with operations in Mexico and Brazil as well. With so many opportunities in the whole region, ADDI is looking to further expand in other LATAM countries. 

British startup Zilch raised USD 110 million quadrupling its valuation at USD 2 billion, to expand footprints into the US. Considering that credit cards are a popular payment method and a means of financing in that market, Zilch might be able to successfully take on other players there.   

Established players 

Zip, one of the well-known players in Australia, has been on a shopping spree in the last 12 months. More recently, the company bought its rival Sezzle for USD 352 million. The financial loss hasn’t stopped Zip to gather around as many BNPL providers as possible, and the new acquisition aims to be part of a strategic plan of investment that could turn out into a profit in two years. Zip also bought Twisto, Spotii, and Payflex, thus expanding more into Europe, the Middle East, and Africa, respectively. 

Another major deal regards PayPal’s acquisition of Japanese player Paidy for USD 2.7 billion, in a bid to consolidate its position in Japan. The company is constantly seeking to build strong connections with Asian markets through acquisitions, being able to enter even China via GoPay. 

In Europe, Scalapay raised USD 497 million in a Series B funding round, totalling USD 700 million to date. According to most press releases, the company hit unicorn status, in spite of financial data not showing a valuation of over USD 1 billion. Scalapay is also looking to strengthen its digital transformation strategy by launching Magic, a platform that aims to boost the checkout experience for customers – with a very colourful interface and features like cashback, this new product seems to go straight to a certain group: Gen Z. 

Challenges. The BNPL business model has been embraced at a global level by hundreds of companies, while only a few have a large market share, and out of this category, most are a long way from reaching profitability. Absorbing the competition and infusing capital is no guarantee of success, so both companies and investors should take into account the following aspects:

#1 It seems like the credit card-based model could be a new emerging trend among BNPL services able to overpower other business models, as pay later cards offer engaging apps and more transparency when it comes to spending patterns and cashback; at the same time, as detailed by McKinsey, players integrating card- based instalments would make a difference on a competitive market if they know how to monetize the pre-purchase offerings as well. 

#2 Providers are focused on expansions, but the global market is highly fragmented when it comes to customer experience and adoption. For instance, this new move from PayPal might bring some challenges, as unlike other countries where with high adoption of BNPL services, in Japan, people generally avoid debt cycles as well as instalments payments;

#3 New regulations may force providers to trade off the speed and accessibility they now offer for new compliance rules, and adopt new measures of credit checks. Big players such as Affirm, Klarna, Afterpay, PayPal, and Zip are already on regulators' radar, which means growth might be hindered by additional scrutiny and constraints. Moreover, these changes might actually bring opportunities for banks to develop more BNPL services that could be well-received by the market for three reasons: 1) banks have a large consumer database so they can create more niched tailored products 2) they are more trusted by consumers than fintechs 3) with access to extensive data, they are able to do more accurate risk assessments 

Opportunities. Despite all the debates around the reliability of these services, BNPL is here to stay, with high demand among consumers and popularity among key generations: Gen Z and Millennials. Moreover, in India, where more credit-card based models are emerging, the BNPL market is expected to grow rapidly over the next five years. It currently accounts for 2% of total retail sales and is predicted to skyrocket to nearly 7% by the end of 2026.

The unicorn season in Asia 

There has been a successful period for many startups in Asia, particularly in the South-East Asia region, as well as in India. The newly become unicorns have focused on new digital financial services, expansions and investing in e-wallets services. 

Razorpay, an India-based fintech, raised USD 375 million in December 2021, reaching a USD 7.5 billion valuation, which means that it has more than doubled since their last funding round in April 2021. This latest investment is aimed to further scale the company’s Business Banking Suite, RazorpayX, as well as provide new banking solutions. Razorpay also planned to expand in Southeast Asia, and it did so in February of this year, by acquiring Malaysian startup Curlec, a recurring payment platform that enables direct debit Account-to-Account payments. This is an opportunity for Razorpay to consolidate its services and expand in an emerging market where digital payments, especially real-time payments, have become very popular among consumers in the last few years.

E-wallets growth for financial inclusion 

Vietnam’s e-wallet MoMo has gained the unicorn status through a USD 200 million investment, and it plans to further build up its multifunctional payment services that define it as a ‘super app’. MoMo competes with VinID Pay, Airpay, Moca (in partnership with Grab). 

In Thailand, Ascend Money, a fintech providing online payments and micro-lending services, was valued at USD 1.5 billion after raising USD 150 million in funding. The startup has similar missions as MoMo, planning to grow the user base for its TrueMoney Wallet, and expand its financial services across SEA to also drive financial inclusion in the market. 

Challenges. Fintech startups are creating a competitive environment for banks. Nonetheless, in India, the banking industry is deep-rooted in the fintech ecosystem, and banks are investing and offering a lot of digital services to both SMBs and consumers – with RBI’ NPCI being the best example in this matter. Consequently, all the financial services that Razorpay and other startups plan to offer should have a strong unique selling point to fend off competition from banks. Another segment to compete with is bigtech. The battle for dominance between giants such as Google, Facebook or Amazon could also affect the competitive edge that fintech startups fight for. 

Opportunities. Various government initiatives have worked as a booster for startups to scale in Asia to encourage the development of digital payments. Moreover, financial inclusion is still an important objective in the region, and the companies mentioned above in this article are also putting their efforts into increasing the rate in this matter. E-wallets have a high mobile payments penetration in Asia, yet a few adults have access to a bank account, and SMBs have limited access to lines of credit and loans. For this reason, despite the developments and innovation that major banks and bigtechs bring in, there are still financial barriers that unicorns can lower to make a difference for a large pool of consumers through their own technology-driven innovation.

Scaling and expansion

Companies involved in M&As and strategic investments have precise goals that regard consolidation, scaling, and expansions of their payment services. 

The Worldline story

As part of its European consolidation strategy, Worldline, considered the biggest acquirer in Europe, and the 4th worldwide, has bought Axepta Italy, a major bank acquirer in the country. Also bought by Worldine are Handelsbanken's card-acquiring activities in the Nordics, Cardlink, and Eurobank Merchant Acquiring activities in Greece. In addition to offering better rates and expanding services, these consolidation moves that Worldline is making are intended to broaden the geographical scope of acquirers and reduce processing costs. 

Challenges for the acquiring market. At a general level, new regulations related to KYC and AML add more complexity to the merchants onboarding process, so acquirers should focus more on streamlining the underwriting experience in order to gain a competitive advantage. Looking strictly at the new acquisition, Axepta Italy is facing strong competition from Nexi-Sia and Iccrea, two top acquirers in Italy. 

Opportunities for the acquiring market. Nevertheless, the country’s digital payments have grown rapidly as has its engagement and development in fintech, and the Italy has become a conducive environment for instant payments and banking partnerships. Moreover, amid the pandemic, a lot of SMB merchants realised they need more resources to implement new payment methods and omnichannel experiences so companies like Worldline can be there for them.

Expansions and consolidation of PSPs

PPRO is continuing its journey and consolidation in APAC by acquiring Alpha Fintech, a payment technology company that owns a cloud-based platform for the integration of payment processing, merchant management, risk management, fraud prevention, and data analytics. With Alpha's platform, PPRO intends to provide its customers with plug-and-play integration, compliance and risk capabilities, as well as expanding its network in Australia and Singapore. 

In the same competitive space, Rapyd has completed the acquisition of Neat, a cross-border trade enabling platform for startups and SMBs based in Hong Kong. With the great ambitions among PSPs to offer real-time payments, including payins and payouts, Rapyd aims to meet cross-border payments needs for merchants in terms of interoperability and speed. 

Global PSP Checkout.com raised USD 1 billion in a Series D funding round, reaching a valuation of USD 40 billion. The company aims to scale up in the US, where they offer a cloud-based payments platform, to roll out a new solution for marketplaces and payment facilitators, while also exploring the Web3 space.

Challenges. All these companies boast about their ability to improve conversions at checkout. In order to do so, offers and interfaces must be constantly refined, and this can disrupt business growth if not done correctly. Another challenge could regard the fact that the expansions into Asia for PPRO and Rapyd, and Checkout.com’s digging into Web3, means new journeys, and this requires an effective strategic plan. Yet the directions and challenges are of very different nature: PPRO and Rapyd are very familiar with APAC’s markets, while in the case of Checkout.com, the Web3 and NFTs are still something new in the payments world, with a controversial position when it comes to regulations and jurisdictional aspects. 

Opportunities. PPRO has taken on under its umbrella a company with strong connections to banks and payment methods providers in APAC. For Rapyd, Hong Kong is a good choice, as it is a market known for low domestic ecommerce penetration, yet it registers a high cross-border spending rate of 25% of all ecommerce transactions. Checkout.com's new marketplace solution could be a success, since ecommerce businesses are increasingly seeking innovative ways to scale their business by engaging with more partners, as opposed to the longstanding linear selling relationships. Marketplaces also account for a large portion of ecommerce – 47% of ecommerce sales were made through online marketplaces in 2020, totalling nearly two trillion dollars.

Account-to-Account and Open Banking Payments

GoCardless, an A2A payments provider focused on direct debit collections, raised a total of USD 529 million in funding over 10 rounds, the latest one announced on 8 February 2022, when they took in USD 312 million. The company has a clear mission of investing in Open Banking payments and joining the competitive environment of direct bank payments. As part of GoCardless' investment in Open Banking product development, the company launched Instant Bank Pay, a way to instantly collect one-time A2A payments. 

Challenges. The A2A payment market has many players offering multiple types of services to meet consumers' and businesses’ needs all the way. Therefore, any investment in this domain should be directed towards making a difference. In addition, the card-based payments market is still a strong one, and the benefits of A2A payments seem to carry a lot of weight for merchants, due to lower costs, even though the need for more awareness of their benefits among consumers is still stringent. Currently, there’s no clear statement on how safe these payments are and how chargebacks can be handled without a card network in place, for example.

Opportunities. A2A payments would also see a significant interest among subscription-based and other recurring-type transactions. GoCardless has also conducted a study revealing that payments collections by card have a typical failure rate of 8%, while by paying directly from one bank account to another, the rate could drop to under 3%. 

Finally, a widely debated topic this year so far was Apple’s acquisition of Credit Kudos, a credit reference agency that uses consumers’ financial data through Open Banking to measure creditworthiness for credit providers. There has been a lot of discussion across the industry regarding the rationale behind this move, with most of the ideas pointing out Open Banking or BNPL. The reason could regard both options, yet certainly, Apple will make use of Credit Kudos’s capabilities to enhance and complement its own and launch new services. The company's new Tap to Pay solution, which was developed after the acquisition of Mobeewave, illustrates this point. There are a lot of speculations regarding this event – Bloomberg reported that Apple might develop its own payment processing technology to become an independent entity. This comes as no surprise, since most bigtechs express their interest in financial services. Nevertheless, bigtechs are far from taking over the digital economy, as long as public payments infrastructures and systems are continuing to develop. 


The main drivers and trends of the above M&As and investments that will most likely influence the future events like these are: 

  • new BNPL business models 

  • financial inclusion in emerging markets – Asia basks in the spotlight on this front, while LATAM doesn’t lag behind

  • scale and competitive pricing for PSPs 

  • expansions in and access to new markets 

  • embedded technology

  • Open Banking payments

  • removing payments complexity

At present, beyond the challenges and opportunities that seem to equally have their own ground, the Russia-Ukraine war might further provoke global tensions with impacting consequences on economies, making players and other entities rethink any investment or acquisition strategy they initially drafted. Therefore, it is likely we will catch sight of fewer M&A announcements and a slight dip in market size by the end of this year. New trends always tend to develop, however. and maybe new business models or disruptive services will emerge. 

About Anda Kania

Anda is doctor in Political Sciences, currently exploring her research skills to discover the latest trends in the payment and commerce industry. At The Paypers, she is in the wonderful position to analyse the hottest topics, and to discuss them with thought leaders in order to get the pulse of the payments environment. 

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Keywords: payment processing, account-to-account payment, Unicorn, BNPL, acquisition, online payments, payments
Categories: Payments & Commerce
Companies: Affirm, AfterPay, Amazon, Apple, Checkout.com, Facebook, GoCardless, Google, Klarna, Mobeewave, OPay, Payflex, PayPal, PPRO, Radar, Rapyd, Razorpay, Scalapay, Sezzle, Zilch
Countries: World
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