Payments Tech
A data-driven look at the private company financing and exit activity in the payments tech industry
Copyright 2014 CB Insights
Payments Tech
A data-driven look at private company financing and exit activity in the payments tech industry
Table of Contents
Payments Companies See $780 Million of Financing from VCs and Angels
Will 2013 Be the Year for Mobile Payments? Don’t Hold Your Breath
Payment Processing Dominates Exits in the Payments Space
Private Company Payments Exit Valuation Multiples: Median 5.3x and Average 22.6x
Payments Tech Goes Global: International Payment Startups on Track for 6-Year High in Venture Capital Financing
Disrupting Western Union: VCs Increase Their Bets on International Money Transfer Startups
Payments Tech Startups Raise $1.2 Billion Across 193 VC Deals in 2013 – A Five Year High
iZettle vs. Payleven vs. SumUp – A Look at European Mobile Payment App Store Data
PayPal Climbs in App Store; Square, Google Wallet and LevelUp Show Little Momentum
Mobile PoS Upstarts Seeing Increased Investment Interest from Giants in Financial Services, Tech, Telecom and Retail
Square Wallet’s Slow and Steady Demise
Unlike MasterCard & Visa, American Express Looks Far Beyond Payments for Venture Investments
July 11, 2013
Payments Companies See $780 Million of Financing from VCs and Angels
Financing activity to the payments space is growing 25% annually on the back of a boom in early stage financing activity.
Payment tech firms, which cover a wide range of technologies ranging from payments processing to digital wallets to point of sale devices, have received over $780 million of investment in the last year across 140 financing deals.
These new firms are seeking to disrupt the traditional methods of moving and transacting with money through technologies including:
Mobile Payments – Mobile payments technologies utilize the extensive penetration of mobile phones in society to allow customers to use these cell phones as extensions of their wallets.
Hardware Solutions – These solutions focus on improving traditional point-of-sale terminals in brick and mortar stores and fall primarily in two camps: NFC (near field communication) and mobile point-of-sale technology.
Money Transfer – Money transfer services involve the direct movement of money internationally.
Services for the Underbanked – A large portion of the world’s population does not have access to traditional banking or payment solutions and represents a massive opportunity for organizations who are leveraging solutions such as prepaid cards, cash-based services and direct mobile billing.
Transaction Processing – Transaction processing includes both traditional point-of-sale payment processing and card not present processing.
There has been an almost 25% annual growth rate in deals and a 12% annual growth rate in funding over the last five years. There are, on average, 24 deals and $24 million in funding per quarter.
While deal activity into the payments space has climbed, funding from quarter to quarter has not grown quite as much. While there were spikes in funding during a few quarters, these were driven by mega-financings to the likes of Square and Klarna. In fact, the vast majority (~68%) of deal activity in the space over the last five years has been at the seed and Series A stages which are typically much smaller (average transaction sizes of $0.93 million and $5.84 million, respectively).
July 17, 2013
Will 2013 Be the Year for Mobile Payments? Don’t Hold Your Breath
Deal growth in the mobile payments space has decreased 30% YoY. Are investors tiring of the hype around mobile payments?
It seems every year in the recent past has been the “year for mobile payments.” Each year, the promise and allure of mobile payments grows, but is it really taking off? While the payment space overall has grown from an investment funding perspective, mobile payments investment activity has actually contracted in the last year as shown below.
Specifically, mobile payments includes the following technologies:
Point of Sale Hardware – Point of sale terminals in brick and mortar stores are more accessible due to mobile solutions, both chip and pin and magnetic stripe scanners for smart phones.
Near Field Communication & Digital Wallets – NFC, or near field communication, is a set of standards for establishing connections between devices through touch. The increase in NFC presence at brick and mortar point of sale terminals has created the need for digital wallets which store credit cards and interact through NFC to facilitate payments
P2P Transactions – Many new companies have tried to tackle the ease of P2P mobile payments, using the Automated Clearing House to process transactions directly from bank accounts rather than using credit cards to minimize fees.
Direct Mobile Billing – Popular in Europe and Asia, direct mobile billing allows users to charge purchases directly to their cell phone bill, minimizing risk exposure by publicizing credit card numbers.
Mobile payment investment trend (last 2 years)
Over the past two years, mobile payments deal growth has been anemic and funding, outside of a few large transactions to “rockstars” in the space has also been poor. In fact, there has been a massive decline in both the number of deals and funding, -30% and -23%, respectively. While the promise of mobile payments remains, could it be that investors are just tiring of the “year for mobile payments” never seeming to arrive?
July 22, 2013
Payment Processing Dominates Exits in the Payments Space
M&A activity in payments technology is dominated by payments processing, including such companies as Evertec and Qiwi. These companies represent nearly 65% of M&A activity and 75% of IPO activity.
The payment technology space has seen a great deal of investor interest, with deal activity growing at 25% YoY. That deal growth has been paralleled by strong acquirer interest. In the past year, 40 payments companies exited via M&A or IPO, representing an 11% jump in YoY exit growth over the 36 exit transactions in the prior year.
Over the past two years, 64% of exits in the payments space have taken place within the payments processing sub-category. These are companies which are involved in accepting credit or debit card information and relaying the information to a merchant bank or third party processor in order to get confirmation of transaction. As shown below, 42% of payments processing firms provide both point-of-sales and eCommerce solutions, while nearly 58% specialize in just one of those areas.
Payments processing has seen significant activity on the M&A side with huge deals including Verofone System’s acquisition of Point, a major European payment processor for $870 million in 2011 and Cielo’s acquisition of Merchant e- Solutions for $670 million in 2012.
In addition, payments processing companies took three of the four IPOs in the payments space over the last two years. These include:
Universal Business Payment Solutions Acquisition (NASDAQ: UBPS), an eCommerce payment processor, IPO’d in 2011.
Evertech (NYSE: EVTC), a payment processor in Latin America, went public in April 2013.
Qiwi (NYSE: QIWI), a payment processor in Russia, also went public in April 2013.
August 22, 2013
Private Company Payments Exit Valuation Multiples: Median 5.3x, Average 22.6x
Average exit valuation multiples (price/sales) of private payments companies have bumped up since 2010, while median exit valuation multiples have stayed level.
Since 2007, the payments space has seen strong exit activity from firms specializing in money transfer services to transaction pr
ocessing to mobile payments. And the range of exit valuation multiples for private payments companies varies widely as well from going from 0.41x at the very low end to a lofty 240.0x. Over this period, the average price/sales (aka P/S or price/revenue) multiple has stood at 22.6x and the median at 5.3x. (Note: the underlying transaction level data is available on CB Insights using valuation multiples search).
More recently, average payments P/S multiples have risen from 17.6x between 2007 and 2009 to 28.1x since 2010. Interestingly, the median exit valuation multiple has held at 5.3x over both periods. The chart below shows the distribution of exit valuation multiples in the payments market since 2007.
September 17, 2013
Payments Tech Goes Global: International Payment Startups on Track for 6-Year High in Venture Capital Financing
Between 2011 and 2012, venture capital deal activity to international payments tech firms grew 114%. Venture capital funding to international payments startups is now 38% of all VC funding to the payments space.
From digital wallets to mobile point-of-sales devices, the payments tech space is growing fast. In just 12 months, investors put nearly $780M into payments startups across 140 deals. But while many of the largest private payments companies reside in the U.S. including Square and Braintree, investors are increasingly betting on the growth of international payments upstarts. (On an unrelated note, Braintree was recently rumored to be