Major acquisitions in the payments industry – 2020 retrospective (part II)

After addressing the consolidation of omnichannel capabilities and disruptive technologies, now it’s time to analyse the new markets opportunities and the progress of Buy Now Pay Later (BNPL) companies

The quest for new market opportunities

After supporting Paystack in 2018 via a funding round of USD 8 mln, Stripe bought the company this year. Paystack is a strong African player in Nigeria that lets businesses accept payments via credit card, debit card, money transfer and mobile money. This is a great opportunity for Stripe to penetrate one of the biggest emerging market in Africa – online commerce in the region is growing 21% year-over-year, 75% faster than the global average. Paystack will continue to operate independently, growing their operations in Africa and adding more international payment methods. In due course, Paystack’s capabilities will be embedded in Stripe’s Global Payments and Treasury Network (GPTN), a programmable platform for global money movement that is currently spread in 42 countries.

Checkout.com checked off a second acquisition with Pin Payments to support Australia-based small and medium merchants. Pin Payments is an all-in-one multicurrency online payment system operating in Australia where B2C ecommerce market is worth USD 33.1 billion. The acquisition offers the region’s business community access to Checkout.com’s unified global acquiring footprint. For Checkout.com’s merchants, the acquisition brings regional expertise and engineering resources to its workforce across APAC. Pin Payments currently serves more than 12,000 businesses across Australia and New Zealand, and it supporst online commerce platforms such as WooCommerce, Shopify, BigCommerce and Magento.

While its merger partner Nexi expresses its interest into the Nordics, Nets is looking to expand in Poland, with the acquisition of merchant acquirer Polskie ePłatności. Poland is the most developed market in Eastern Europe (depending on where one perceives the location of Russia), with a steady growth in ecommerce, so one could say this is a smart move for the company to advance its merchant services to Polish businesses.

Buy Now Pay Later is a big deal

Given the spike in ecommerce sales, the BNPL segment is also thriving – apart from several acquisitions, BNPL companies hit the headlines in 2020 with their investments rounds, with Klarna’s funding of USD 650 million being the biggest deal of last year, followed by Affirm, which raised USD 500 million. Companies such as Afterpay, Laybuy, Sezzle, Splitit,  AfterPay by Arvato, tabby, and many others have filled their pockets in 2020 with one or more investments rounds, thus stressing on the high-margin products in this sector. According to Bank of America, the market for these payment services will grow 10 to 15 times by 2025, and will eventually process from USD 650 billion to USD 1 trillion in transactions.

Four BNPL players have been involved in M&A deals this year, proving once more this segment shows a lot of promise.

Affirm has acquired PayBright, a Canada-based BNPL provider. Pay later options are not known as a preferred payment method among Canadians, but credit cards account for 60%, which means consumers prefer a form of ‘pay later’, tough, to accommodate their finances while shopping. Both companies aim to reach out to a larger merchant network across the US and Canada. This move may be actually in PayBright’s benefit, because its leading position in Canada could be shaken by Afterpay’s arrival in August 2020. Afterpay drives the BNPL competition further in Canada, by offering the same financial flexibility and already working with brands such as  Roots, American Eagle, Dermalogica, FragranceX.com, Native Shoes, Nixon, and many more.

Germany-based PSP Unzer, formerly Heidelpay, made its fifth all-time acquisition this year with Paysafe Pay Later. Paying in instalments is one of the most popular payment methods in Germany since decades, so HeidelPay took an inspired decision, however, Klarna and Ratepay are currently the main pay later players in Germany.

Klarna, a regulated bank offering consumers interest-free financing on retail purchases has acquired Moneymour, an Italy-based BNPL provider. This acquisition also marks the first step in launching Klarna's latest product development hub in Milan. In October 2020, Klarna continued to strengthen its new presence in Italy and rolled out the ‘Pay in 3’ shopping solution that enables consumers to buy online and split their purchases into three interest-free equal payments. The company seeks to further accelerate ecommerce in a market where this trend has started to slowly grow in 2020 due to the pandemic. Klarna is currently operating in Australia, the US, and in several countries from Europe with a significant coverage in the Nordics.

Afterpay is set to challenge its competitors in Europe. The Australian-based company – in which Tencent took 5% stake worth USD 300 million – bought Pagantis in August 2020 to expand its services in Italy, France and Spain. Afterpay will offer Pagantis’ BNPL products under its European brand, Clearpay. By entering Italy and Spain, the company will rival Klarna, and become visible for a large base of consumers whose shopping habits don’t necessarily include BNPL. In France, Afterpay will compete with PayPal, a popular payment method which expanded its BNPL solution in the country in July 2020, and with Alma, a BNPL startup with all the prerequisite to become ‘France’s Klarna’.  So, the question is how Afterpay will make a difference. Before finding out the future journey of Afterpay in Europe, maybe we will learn the way it plans to integrate into Southeast Asia – immediately after purchasing Pagantis, Afterpay bought EMPAT KALI INDONESIA, an instalment payment solution based in Singapore, but focused on Indonesia.

Looking ahead

Few businesses ventured in foreign markets last year, maybe because most of the regions worldwide were highly affected by COVID-19. We can’t know for sure what regions would businesses look to expand operations and services to, but we have noticed the Middle East conveys an untapped potential. Players from the West (Adyen, Mastercard, i2c, HPS, Zwipe, and more) have started to penetrate the region and contribute to the growing fintech culture there, so we can at least foresee that the Middle East is the next emerging market to watch alongside Asia-Pacific and Latin America.

The BNPL sector has flourished, but sceptical opinions emerged saying that if not handled carefully, this service can be risky for both consumers and the banks that serve them. However, it remains a good alternative to credit cards for consumers, so pay later companies are still challengers that traditional financial services should keep an eye on. In 2020, the acquisitions in this field were more like a closed loop, where a BNPL company bought another one to cover more regions or expand the merchants network, but in 2021 we may expect card networks, or banks to absorb (or invest in) fintechs that offer this type of lending service, to consolidate their own instalments products.

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. Anda has used her position of senior editor at The Paypers to analyse the hottest topics, and to discuss them with thought leaders in order to get the pulse of the payments environment.