The payments market is hotbed of competition, as established companies and newcomers alike try to ride the growing wave of consumers who are comfortable paying for items not just online, but on their phones and tablets too. A flurry of new services has cropped up in the last year and with consolidation inevitable, we look at the top five potential acquisition targets.
Europe's answer to Square, iZettle offers a plug-in card reader that allows merchants to accept transactions using an iPhone, iPad or Android-based device. What differentiates iZettle from its US counterpart is the nature of the credit card market in Europe, namely that most consumers are armed with cards that make use of chip-and-PIN technology, rather than magnetic strips and signatures. iZettle claims to have overcome the security challenges associated with chips, and the difficulties in launching in numerous European countries that all have different payment methods and speeds at which they embrace technology shifts.
This makes it a prime candidate for any firm looking to enter the payments market without the hassle of securing partnerships or dealing with security. There is a possibility that US rivals could be interested in an acquisition, but currently this seems unlikely as most US mobile payment startups are still at a relatively early stage and are concentrating on establishing their business in the US. A major player with an existing interest in payments looks more likely, and if it were looking to expand its Google Wallet payments service to Europe, Google would be a potential fit.
One of Europe's latest entrants to the mobile payments space, SumUp's pedigree could make it a desirable target. Its CEO Daniel Klein masterminded Skrill (formerly Moneybookers), giving him a decade of experience in payments (and negotiating deals with acquirers). SumUp offers merchants a small card reader that plugs into their mobile phones and takes payment, a service that puts it in direct competition iZettle and Square.
Since SumUp's launch, competition in Europe has intensified, with Rocket Internet's Square clone Payleven, and US mobile payments service Braintree both expanding in the region. However, it remains ahead of direct rival iZettle, which is still largely focused on the Nordics, compared with SumUp's presence in the UK, Germany, Austria and Ireland. Both are particularly fighting for the UK market, with iZettle launching a UK pilot programme. SumUp's attraction as an acquisition target will likely depend on the legwork it is putting into its merchant relationships, with AmEx a potential interested party, given SumUp's focus on small businesses and AmEx's existing interest in the same organisations.
Payleven is an exact replica of Square, produced by notorious clone specialist Rocket Internet, which has copied the likes of Groupon, Fab, Wrapp and Etsy, among many others. Like Square, Payleven offers a small card reader that plugs into smartphones, giving merchants a quick and cheap way to process payments.
Historically, Rocket Internet does not produce innovative startups, instead focusing on well-executed takes on existing ideas that either result in hefty profits or a lucrative acquisition. Its strategy is to produce something that is known to work, and then take it to untapped markets such as Africa, before then selling to bigger players looking to gain international footholds. In 2010, the firm sold its Citydeal business to the very firm it was cloning, Groupon.
Tellingly, Payleven is not targeting the US, focusing instead on Europe and possibly on Asia too. While Europe is looking increasingly crowded, success in Asia could attract established Western players in a number of industries looking to expand. Given VeriFone's apparent jealousy of Square's progress in its home market, it could be a potential candidate as a buyer, especially given its interest in Asian expansion.
US service WePay is nipping at PayPal's heels, gunning for the 95% of small businesses that it claims don't yet accept online payments. It has raised about USD20m in funding and says it is signing up 1,000 news businesses each week, and processing "hundreds of millions" in payments annually. The firm has some way to go before it reaches anything like PayPal's scale, but its momentum could make it attractive both to payment startups that don't yet focus on online payments or the growing number of social media firms mulling e-commerce as a way to monetise their businesses.
WePay could make sense as an addition for mobile-focused Square, though at this stage in Square's life, it may not be looking to buy anyone. It could also make sense for a site such as Pinterest, which has seen phenomenal growth over the last year, but appears to be struggling to find a way to make money. Pinterest's most obvious route is to edge towards becoming an e-commerce platform, given the product-oriented nature of its content, and the acquisition of a growing payments business would be a key step in that direction. Other more established e-commerce platforms could be potential acquirers too.
TrialPay focuses on driving e-commerce and social gaming revenues by offering consumers a free product if they buy a product from one of TrialPay's 10,000 merchant partners. The startup says that it has 100m users, of which 70m use the service at least once a month, and it already has a footprint in 180 countries. The firm has attracted USD40m in investment from Visa, as the card company in a bid to up innovation in payments.
Visa isn't the only firm that finds TrialPay an attractive proposition; the startup also powers offers for Facebook's virtual currency, Credits. With Facebook famously attempting to drive up its relatively meagre payments revenues, TrialPay could prove a tempting acquisition, or at least the team and tech behind it, as seems to be the social network's M&A strategy.
TrialPay's focus on deals and commerce of course makes it an interesting target for players such as Groupon and Amazon, should they feel that the service's partners and user base could benefit them. Groupon in particular has been particularly active in recent months, as it strives to move beyond simply deals to become "the OS of commerce". Backed with a total of USD56m from investors such as Greylock Partners, Visa and DFJ, and a presence in a number of spaces from advertising to commerce to payments, TrialPay is an increasingly attractive target for the right buyer.
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