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Some consolidation is afoot among the payments behemoths of Europe, as they continue to go head-to-head with smaller, newer fintech companies eating into their market dominance by adapting faster to changing spending habits, while also looking to capitalise on economies of scale.

Today Worldline, a financial services company that provides everything from in-store point-of-sale terminals through to online payments, data analytics, banking and fraud protection, announced that it would acquire Ingenico, the huge point-of-sale terminal provider that controls 37% of the market globally, in a cash and share deal that gives Ingenico a valuation of €7.8 billion ($ 8.6 billion at today’s rates).

The deal underscores two big themes in fintech, and specifically payments. The first is that the shift in payments and spending habits to more digital platforms has meant an increasing amount of fragmentation in the payments space, with each player getting a cut of the transaction: this means that a company doing business in this area needs economy of scale in order to make decent returns. This deal will give both companies a lot more economy of scale.

The second is a bigger theme of consolidation among larger players in part to better compete with the long tail of smaller and more fleet-of-foot fintech companies that have found a lot of traction in this new wave of commerce. While Stripe, Adyen, Google and Apple, Amazon and many of the others may not individually do enough competitive damage against Worldline or Ingenico, their collective presence could.

Worldline said that Ingenico shareholders will receive 11 Worldline shares and €160.5 in cash for every 7 Ingenico shares, working out to a 24% premium for Ingenico’s average share price over the last month. Pending regulatory and shareholder approvals, the deal is expected to close in Q3 of 2020, with Gilles Grapinet, Worldline’s Chairman and Chief Executive Officer, to lead the combined business.

The companies — both based in France — are incumbents that were established in the first big wave of electronic financial services that formed in the 1970s and 1980s (Worldline was spun out of Atos, Ingenico has been independent up to now). The combined company will have 20,000 employees across 50 countries with 1 million merchant and 1,200 financial institution customers, and Worldline said it expects combined pro-forma 2019 net revenues of €5.3 billion out of the deal.

Although both work in online payments and related frontiers in commerce, the size and scale of being a legacy player means that Worldline has worn some of those evolutions awkwardly. Is ‘futuring’ actually a word?

On the part of Ingenico, the business has been profitable — today, it has some 30 million terminals installed worldwide and works with 550,000 merchants — but growth has been slowing with gradual shift away from brick-and-mortar shopping towards online purchasing.

Specifically, consumers and those making and selling goods and services are using a number of new channels that have taken the focus away from traditional retailers, leading to a rise of new competitors that include smaller fintech startups (see: Stripe and Adyen), tech platform operators (see: Google Pay and Apple Pay) and e-commerce behemoths (see: Amazon and Alibaba). That has had an impact on Ingenico in particular — which has dabbled in partnerships with various tech companies like Google and Groupon, but has never led the charge on. More recently, under a new CEO, it had been looking for a buyer.

“Over the past decade through several transformational acquisitions and partnerships, we have repositioned Ingenico as a key player of the payment ecosystem,” said Nicolas Huss, CEO of Ingenico, in a statement. “In a fast moving global payment market in which scale matters, the combination of Ingenico with Worldline is completely aligned with our strategic vision.”

Catching up with changing tides is not only about increased competition from many fronts; it’s also the strong theme of economies of scale that come out of digital transactions: in an ecosystem that often has a number of components, with each getting a cut of a payment, a company needs either to control more links in that chain of processes, or handle an ever-bigger amount of transactions — ideally both — in order to make strong returns, and that is also playing a big theme here.

“Together we create the European World-Class leader in digital payments,” said Grapinet in a statement. “I am convinced that the combination of our respective remarkable talents [SIC] pools, joint capabilities and state-of-the art offers will procure our combined Company an outstanding value proposition to pursue an exceptional growth benefitting to all our clients, banks and merchants alike and to all our business partners. This is a landmark transaction for the industrial consolidation of European payments, highly value creative for all our stakeholders and for the shareholders of both companies, and which ambitions to reinforce the role of Europe within the global digital payment ecosystem.”

There has been a larger wave of consolidations in the payments and wider fintech space in Europe, which have totalled some €83 billion since 2013 (now over €90 billion with this deal). Worldline acquiring Ingenico is an outsized deal among these. Most recently, in November, Elavon announced it was acquiring Sage Pay in the UK for about $ 300 million.


TechCrunch

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. This week, a lawsuit sparked a debate over the deployment of China’s pervasive facial recognition; meanwhile, in some good news, foreigners in China can finally experience cashless payment just like locals.

China’s first lawsuit against face scans

Many argue that China holds an unfair advantage in artificial intelligence because of its citizens’ willingness to easily give up personal data desired by tech companies. But a handful of people are surely getting more privacy-conscious.

This week, a Chinese law professor filed what looks like the country’s first lawsuit against the use of AI-powered face scans, according to Qianjiang Evening News, a local newspaper in the eastern province of Zhejiang. In dispute is the decision by a privately-owned zoo to impose mandatory facial recognition on admission control for all annual pass holders.

“I’ve always been conservative about gathering facial biometrics data. The collection and use of facial biometrics involve very uncertain security risks,” the professor told the paper, adding that he nonetheless would accept such requirement from the government for the purpose of “public interest.”

Both the government and businesses in China have aggressively embraced facial recognition in wide-ranging scenarios, be it to aid public security checks or speed up payments at supermarket checkouts. The technology will certainly draw more scrutiny from the public as it continues to spread. Already, the zoo case is garnering considerable attention. On Weibo, China’s equivalent of Twitter, posts about the suit have generated some 100 million views and 10,000 comments in less than a week. Many share the professors’ concerns over potential leaks and data abuse.

Scan and pay like a local

The other technology that has become ubiquitous in China is cashless payments. For many years, foreign visitors without a Chinese bank account have not been able to participate in the scan-and-pay craze that’s received extensive coverage in the west. But the fences are now down.

This week, two of the country’s largest payment systems announced almost at the same time that they are making it easier for foreigners to pay through their smartphones. Visitors can now pay at a selection of Chinese merchants after linking their overseas credit cards backed by Visa, MasterCard, American Express, Discover Global Network or JCB to Tencent’s WeChat Pay.

“This is to provide travelers, holding 2.6 billion Mastercard cards around the world, with the ability to make simple and smart payments anytime, anywhere in China,” Mastercard said in a company statement.

Alipay, Alibaba’s affiliate, now also allows foreign visitors to top up RMB onto a prepaid virtual card issued by Bank of Shanghai with their international credit or debit cards. The move is a boon to the large swathes of foreign tourists in China, which numbered 141 million in 2018.

Also worth your attention

Didi’s controversial carpooling service is finally back this week, more than a year after the feature was suspended following two murders of female passengers. But the company, which has become synonymous with ride-hailing, was immediately put in the hot seat again. The relaunched feature noticeably included a curfew on women, who are only able to carpool between 5 a.m. and 8 p.m. The public lambasted the decision as humiliating and discriminating against women, and Didi responded swiftly to extend the limit to both women and men. The murders were a huge backlash for the company, and it’s since tried to allay the concerns. At this point, the ride-hailing giant simply can’t afford another publicity debacle.

The government moves to stamp out monopolistic practices of some of China’s largest e-commerce platforms ahead of Single’s Day, the country’s busiest shopping festival. Merchants have traditionally been forced to be an exclusive supplier for one of these giants, but Beijing wants to put a stop to it and summoned Alibaba, JD.com, Pinduoduo (in Chinese) and other major retail players for talks on anti-competition this week.

Iqiyi, often hailed as the “Netflix of China,” reports widening net loss at $ 516.0 million in the third quarter ending September 30. The good news is it has added 25 million new subscribers to its video streaming platform. 99.2% of its 105.8 million user base are now paying members.

36Kr, one of China’s most prominent tech news sites, saw its shares tumble 10% in its Nasdaq debut on Friday. The company generates revenue from subscriptions, advertisements and enterprise “value-added” services. The last segment, according to its prospectus, is designed to “help established companies increase media exposure and brand awareness.”


TechCrunch

Ebanx, the newly minted Brazilian financial services unicorn, expects to process $ 2 billion in payments by the end of the year and is looking to expand its offerings into domestic payments as it grows.

Since its launch in 2012, Ebanx has primarily focused on helping international merchants sell locally in Brazil. The Brazilian business accounts for nearly 90% of the company’s revenue, but as it expands into other markets the company is also broadening its suite of services.

The company moved into local payment processing in Brazil in April of this year, and recently closed on a new financing round from previous investors FTV and Endeavor Catalyst that values the company north of $ 1 billion, according to chief executive Alphonse Voigt. 

The money will be used to continue an aggressive hiring push in new markets and the launch of the company’s local payment services in other geographies, beginning with Colombia in the new year.

As credit cards penetrate the Latin American market, approval rates for local companies are increasing, which represents an attractive new source of revenue, Voigt says.

In addition to the local payment processing, Ebanx recently announced that it became a payment partner for the Uber Pay ecosystem in Latin America and would start processing cash voucher and bank transfer payments for Uber in Brazil and across Latin America. The company also inked deals with Coursera, Scribd, Trip.com and Shopify throughout Latin America. Finally, the company partnered with Mastercard on an initiative to increase electronic payments in the Brazilian state of Parana.


TechCrunch

Manila-based financial tech startup PayMongo has raised $ 2.7 million in seed funding to give merchants in the Philippines and other Southeast Asian markets simple ways to set up online payments. Investors included Founders Fund, Peter Thiel and Stripe, with participation from Y Combinator (PayMongo is the first Philippine fintech company it has funded), Global Founders Capital, Soma Capital, Tinder co-founder Justin Mateen and other angel investors.

PayMongo was launched in June by a founding team that includes CEO Francis Plaza, COO Edwin Lacierda, CTO Jamie Hing and chief growth officer Luis Sia. Since then, more than 1,000 businesses have started using its platform and the startup says its total transaction value processed is growing at an average of 117% week over week. PayMongo’s seed round will be used for hiring, product development, business acquisitions and strategic partnerships.

paymongo founders

PayMongo founders

The startup will focus on the Philippines first, where the country’s central bank has set a target of increasing the rate of cashless payments to 20%. Plaza says PayMongo’s goal is to become the largest payment service provider in the country before expanding to other markets in Southeast Asia.

Prior to launching PayMongo, its team spent several years working on other projects. During that time, they realized payments were the hardest feature to integrate into products and services. Even though the Philippines’ Internet economy is growing quickly (a report from Google expects it to increase from $ 5 billion in 2018 to $ 21 billion by 2025) and more people are using e-commerce, online payments have lagged behind the rest of the world, Plaza says.

“When you want to launch something online for a payment gateway, you have to deal with banks and many different financial institutions. It takes months, we tried it ourselves, from negotiating rates to submitting paperwork. It takes a long time, and then in the end you are charged high fees,” he tells TechCrunch.

Even after businesses finish dealing with banks, they need to figure out payment gateways that are often difficult for people with little tech experience to start using.

PayMongo has already partnered with several financial institutions and its technology, including a payments API that Plaza says can be set up in minutes, is designed to be user friendly. Since many online merchants in the Philippines sell through social media platforms and messaging apps, like Facebook, Instagram, Viber and WhatsApp, PayMongo also provides customizable payment links that they can send to customers.

The credit card penetration rate in the Philippines is only about 6%, Plaza says, so PayMongo also supports e-wallets like GCash and PayMaya and services that allow people to pay for online purchases in cash at convenience stores. PayMongo’s products for micro-entrepreneurs, like freelancers and people who sell items through social media, help it differentiate from competitors like Paynamics, Dragonpay and PesoPay that typically focus on serving larger businesses (though Plaza says PayMongo has also been adopted by large retail chains).

In a statement, Y Combinator partner Kevin Hale said “At YC, we love companies who build services that empower startups. We believe PayMongo will provide the infrastructure that is needed for more Filipinos to become founders who are in charge of their own destiny.”


TechCrunch

In China, striving for accuracy in a piece of facial recognition software isn’t enough. As Alibaba’s e-wallet affiliate Alipay has recently demonstrated, the way software presents a user’s look is also crucial to its success.

On Tuesday, Alipay announced on social media platform Weibo (in Chinese) that it’s added beauty filters to its pay-with-face system inside the app. Within a week, the feature will roll out across retail stores equipped with Alipay’s face-scanning solutions.

“We are going to make you look even prettier than with a beauty camera. I bet you’ll be impressed,” Alipay wrote on Weibo.

The new feature was created to address complaints that facial recognition machines make people look ugly. A new poll (in Chinese) ran by news portal Sina Technology showed that more than 60% of respondents think they look uglier through the next-gen payments method than on a regular camera. This could be a real concern for beauty-obsessed people who, at a busy supermarket checkout, find their face displayed unflatteringly on a large computer screen.

The chase of beauty in China has spawned a handful of movers and shakers in the internet space, from Hong Kong-listed selfie-app maker Meitu to plastic surgery marketplace Soyoung that recently raised $ 180 million from a Nasdaq public listing.

Will WeChat Pay, the payments solution of messaging giant WeChat, follows Alipay’s shadow to build a similar offering? Beauty filters can be a competitive advantage to a business, if not a necessity. In an effort to draw more female users, smartphone maker Xiaomi recently joined hands with Meitu to develop new models that place more focus on selfies, stickers and graphics.

Alipay boasts more than one billion monthly active users of late. WeChat doesn’t break out the number for its payments segment but said in March the service processed more than one billion daily transactions.


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