Payments Tech
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on-the-block with Square and Paypal interested in the company)
In 2013 year-to-date, international payments startups captured 31% of deal activity in the industry compared to just 12% in 2008. And on a year-over-year basis, international payments deals jumped 114% from 2011 to 2012, while domestic deals ticked up just 7% over the same period. The chart below highlights the strong deal growth from the international markets within the payments tech space.
Venture capital funding to international payments startups is also growing at a rapid clip. 2012 saw internationally-based payments firms garner over $300M in funding, including China-based LianLianPay’s $125M corporate minority investment from American Express and Sweden-based iZettle’s $31M Series B round from investors including MasterCard and Greylock Partners. And funding to international payments firms is continuing to climb in 2013. After capturing 29% of all funding in the payments tech space in 2012, international startups have taken 38% of overall funding in 2013 YTD.
November 11, 2013
Disrupting Western Union: VCs Increase Their Bets on International Money Transfer Startups
Year-over-year deal activity in the international money transfer market has jumped 60% on the back of healthy early-stage activity.
Traditionally, international remittance and money transfer has relied on physical outposts to facilitate transactions. The most dominant player in the money transfer market has been Western Union, which today has a market cap of over $9.5B.
Now, venture investors are seeing a big opportunity in startups bringing new technologies that can help eliminate some of the forms, fees and time attached to the traditional money transfer process. In the past eight quarters, funding to money transfer startups hit $104M across 39 deals.
On a year-over-year basis, deal activity in the international money transfer space has jumped 60%. The successful IPO of money transfer service Xoom Corp. (backed by NEA and Sequoia Capital) in February may be one reason for the notable rise in deal activity.
In the past two years, early-stage deals (Seed/Series A) have taken 79% of deal activity in the money transfer market. In fact, seed deal activity has accelerated 160% on a year-over-year basis with recently seeded startups including TechStars grad Moni Technologies and e.ventures-backed Azimo. The growth in seed activity in the space is highlighted in the declining average and median deal size over the past several quarters. Since Q4’11 which included a $25M round to Xoom, the average deal size in the space has declined 70% and the median deal size has fallen 88%.
Interestingly, the increasing contingent of venture-backed international money transfer startups is largely based in markets outside Silicon Valley. As shown below, over 50% of deal activity in the past two years went to geographies outside of major U.S. tech hubs including a strong presence of startups based in London such as TransferWise, The Currency Cloud and Azimo.
January 8, 2014
Payments Tech Startups Raise $1.2 Billion Across 193 VC Deals in 2013 – A Five Year High
The payment space stayed hot as a mix of VCs and corporate venture firms ranging from Intel Capital to Google Ventures to American Express all continued to jockey for a piece of this massive industry.
2013 saw continued interest by venture capital and corporate venture investments into payments companies ranging from mobile point of sales solutions to parking payment apps to international money transfer. To clarify, companies included in this analysis span the following markets:
Mobile and Online Payments – Mobile and online billing and payments startups utilize Internet technologies and the penetration of mobile phones to allow customers to use their cell phones as extensions of their wallets.
PoS 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 including both traditional point-of-sale payment processing and card not present processing.
This brief examines venture capital financing activity, the most active investors and exit landscape for the growing batch of startups hoping to disrupt the payments industry.
Payments Financing Activity
In 2013, payments startups raised $1.2 billion in funding across 193 deals. On a year-over-year basis, venture capital funding and deals to payments tech companies ticked up 5% and 6%, respectively, from 2012 levels.
Deal growth in the payments marketplace has been heavily concentrated at the early stage (Seed/Series A). Over the past two years, seed activity has taken 42% of all deals in the payments space. When we look at payments startups that first received a seed round between Q1 2010 and Q3 2012, we see that 35% have already gone on to receive Series A funding.
Overall payments tech deal activity has trended upward as well, with each of the past four quarters seeing over 60 deals. Among the largest U.S.-based payments deals in 2013 were $50M rounds to retail point of sales EMN8 and Zuora, an online subscription billing and payments startup, backed by investors including Benchmark Capital and Greylock Partners.
Boosting funding growth in the payments space last year were major cash injections into international companies including the $75M investment into UK mobile payments startup Powa Technologies. As shown in the chart below, over 1/2 of all payments deals in the past two years were outside of major U.S. venture hubs. Silicon Valley firms took 17% of deals, while New York saw 9% and strong YoY deal growth in the payments space.
The Top Investors
Since 2012, there has been a diversity of active investors in the payments space spanning pure-play VCs to the corporate venture units of financial services firms (American Express Ventures, Citi Ventures) to those of cash-rich tech companies (Google Ventures, Intel Capital). It is clear that a variety of corporates, beyond those you might think of as finance/payments companies, see massive opportunity in the payments space. The most active investors in payments over the past two years have been Accel Partners, which counts Braintree, Gumroad and GoCardless in its portfolio and Andreessen Horowitz which has invested in firms including Dwolla, Boku and Jumio.
The chart below highlights a handful of the most active venture capital investors over the past year, two years and five years in the payments marketplace.
To keep up, stay ahead of or at least not fall behind the innovation in payments, financial services firms including AmEx, Citi and MasterCard have all been active as well investing in Square and iZettle. Interestingly, American Express has invested in competitors in the space – iZettle and SumUp. Both of these firms compete with Rocket Internet backed Payleven and of course Square. Interestingly, the most active corporate investor in the payments space was not in financial services but Intel Capital, which has done a handful of deals since the start of 2012.
Exit Trends
On a year-over-year basis, the payments space has seen a 16% drop in M&A and IPO activity. While 2013 saw a number of small-ball payments acquisitions for both technology and talent, there were a few notable exits including PayPal’s $800M acquisition of Braintree and FIS’s buyout of Ignition Partners-backed mFoundry. Moving forward, the anticipated 2014 IPO of Square may provide another shot in the arm for the payments industry.
January 20, 2014
iZettle vs. Payleven vs. SumUp – A Look at European Mobile Payment App Store Data
In Germany's heated mobile payments race, iZettle and SumUp seem to be distancing themselves from Payleven based on an analysis of our iTunes app store data.
In Europe where tech IPO candidate Square does not
operate, there is a heated race between several venture-backed upstarts in the mobile payments arena.
Three of the mobile payments operators jockeying for position in Europe are iZettle, Payleven and SumUp. Each offers a wireless chip-based solution paired with a mobile app and each are backed by notable strategic investors including American Express Ventures, BBVA Ventures, Banco Santander, Groupon and Silvio Burlusconi’s family office, B Cinque. Together, the three mobile payments processors have raised over $80M in funding as shown below.
Interestingly, American Express Ventures has invested in 2 direct competitors in iZettle and SumUp.
To get a better sense of how the three respective payments firms are faring against each other, we turned to CB Insights’ data tracking over 1M mobile apps in the iTunes App Store. Interestingly, despite iZettle’s wide financing advantage, SumUp leads the three based on the number of total countries with an app ranked by primary genre in the App Store Top 1000 as of January 7, 2014.
Among the countries where all three of the apps are competing for foothold is Germany. In fact, both Rocket Internet-incubated Payleven and SumUp were founded in Berlin. Within Germany, during Q4 2013, we see Sweden-based iZettle running close to SumUp, the market leader in Germany among