Interview with Simon Black, PPRO CEO, on the recent USD 50 mln investment round led by PayPal

On the 16th of July, PPRO announced a 50 million USD investment round led by PayPal, with participation from Citi Ventures and return investor HPE Growth Capital.

PPRO is one of the fastest growing (and most profitable) fintech companies in Europe. Why did PPRO need a new investment and what will change?

We have very many clear niches in market positions within the digital payments and what we identified was that we have the opportunity to drive growth even faster and we began thinking about the next phase of growth for PPRO. We concluded that if we could find the right partners, it would be really beneficial to get new investment into the business.

I am delighted that we have the best possible partners to move forward with. Not only are we continuing our relationship with HPE, our growth equity investor since 2014, but they are investing additional money into the business. In addition, we have managed to attract PayPal and Citi, two major global brands to have backing from.

In terms of what will change in the future, we’re going to particularly accelerate the globalisation of our alternative payments business. We will be expanding into new regions, building regional product centres, and local teams to work with partners in APAC and LATAM.

So far, we developed a lot of our success by having deep knowledge, which led to deep product propositions. In Europe, for over 12 years we built really deep knowledge in the local markets in payment methods and delivered important products for our partners, PSPs, and acquirers. We‘re going to in replicate this successful model in LATAM and APAC.

What is driving growth of non-credit card payments in Europe and Asia?

The trend is quite different from country to country. For example, in Europe, it is more culturally driven. When thinking about online payments in the Netherlands and countries like Germany, historically speaking, people were averse to credits, they did not want to be in debt. When e-commerce started to take off, it was quite normal for people to want to pay directly from their bank account.

A second factor that is driving growth is related to the products that customers have. In the UK, almost everyone now has a Visa debit card with which they can shop online as easily as they could with a Visa credit card. In countries like Germany with Sofort, the Netherlands with iDeal, local solutions sprung up to make it easy to pay directly from the bank account, because it’s easy and it fits with the cultural preference for debit versus credits.

A third factor could be related to the additional niche products for particular categories, such as Klarna’s pay later, which enables people to pay over a period of time.

When it comes to Asia, we shouldn’t think of it as one homogenous market. There are some interesting trends in Southeast Asia, were wallets are becoming very popular, and also in China. When looking at China, in terms of payment products, many people skipped plastic, whereas in the UK and the US people used to having a piece of plastic card. When ecomerce arrived, they were used to paying that way. In China, it wasn’t the case, because the rise of the better off classes is new and scale. In terms of wallets, Alipay and WeChat Pay in particular, they were not only able to provide people with what they needed online but also developed very good products for the POS. So, it’s a long way of saying actually people didn’t have plastic, but they needed plastic because they already had a small firm and they had wallets which enabled them to do everything they needed to do.

Even though there are many endeavours towards a cashless society, we are starting to witness the emergence of online cash payment options (Paysafecash, YesByCash, PayNearMe Barzahlen.de, Cashly and more). In which countries and verticals are cash payments a relevant option for e-commerce payments?

A big factor when trying to predict cash relevancy is to consider a region’s population that has a bank account. In terms of the global population, our data indicate that only 61% have a current bank account, leaving 39% of the world to utilise payment methods outside of a credit card or bank transfer. Now, we look at countries that are growing tremendously, like Mexico for example. Mexico ranked 2 in e-commerce growth across the globe, showing a 59% increase in one year. Mexico also has a largely unbanked population of 61% and with that correlates a payment split showing 32% of online transactions were made using a cash-based payment method. Trying to capture the whole of the customer base means catering to those populations and regions that still favor cash, including acknowledging the cultural and economic differences of growing markets.

How will stronger customer authentication (as part of PSD2) drive innovation in the way we pay?

Strong Customer Authentication (SCA) is requested by PSD2 to add more security to payment transactions and there are only a few exemptions allowed, which relate to cases of low risk, e.g. transfers between accounts of the same person, transfers to beneficiaries named on a specific white list.

SCA has to be performed by the end-user and therefore reduces the convenience of online payments. In the past, a lot of innovation happened to avoid SCA, in particular for card transactions, where merchants invented and introduced risk mitigation systems enabling them to take over the liability from the card issuing bank and thereby avoiding the customer being bothered with SCA by going through the so-called 3D-secure process.

Unfortunately, PSD2 restricts such exemptions based on transaction risk analysis (TRA) very much meaning that risk mitigation cannot be improved with technology and innovations, but burdens the end-user with ensuring the security needed. Hence, overall, I think PSD2 SCA is bad news for innovations, but on the positive side is that it will provide a very strong underlying security for electronic payments, meaning less fraud overall and hence probably more people paying that way.

About Simon Black

Simon joined PPRO Group as CEO in 2015. This followed a decade with Sage Group PLC where he led the creation of Sage One and transformed Sage Pay as CEO for seven years, driving 10x growth. Continuing this success, PPRO is now one of the most significant fast-growing European fintech companies. Under Simon’s leadership, the company has moved from 60 to 200+ employees and continues to deliver rapid revenue growth.

About PPRO Group

Cross-border e-payment specialist, PPRO Group (PPRO) removes the complexity of international e-commerce payments by acquiring, collecting and processing an extensive range of alternative payments methods for Payment Service Providers (PSPs) under one contract, through one platform and one single integration. PPRO supports international payment methods across more than 100 countries, allowing PSPs to expand their merchants’ e-commerce reach, arrange hassle-free collection and achieve higher conversion rates.