For many fintechs, finding a niche core product is sometimes the easy part. Once a company begins to garner attention and has some success in their home market or segment, a massive question arises. What is the best expansion strategy?
There are a few answers. Some companies opt to individually and organically build out new territories: modifying pipelines for new regulatory rules, applying for business licenses, and hoping the service(s) or marketing can generate adoption in the new market.
Others choose a different approach, opting instead to purchase companies in the market they want to enter. This approach is much faster, allowing acquirers to immediately enter new markets and segments, but also requires more capital up front.
While purchasing a pre-built company or business unit seems like it should cost more, external factors can potentially cause organic expansion costs to skyrocket. In some cases, foreign businesses aren’t even allowed to open shop without spending time to build regulator relationships.
When you factor in the purchased company’s existing infrastructure, technology use-cases, industry talent and business relationships, it becomes clear that acquisitions can add immense value in a relatively short time-frame.
Worldline going world wide
Worldline, the largest payment provider in Europe and fourth largest in the world, is one such company that has decided to push expansion through strategic acquisitions.
Founded in 1970 under the name Sligos, the company has acquired at least 10 companies and multiple business segments in its history. Most of these have come recently, with five occurring since the start of 2020.
While the company’s older acquisitions were mostly focused on adding payment capabilities, the recent string of purchases showcases its ongoing geographical expansion plan and partnership roadmap.
Following its massive €7.8 billion purchase of Ingenico in February 2020, the payment terminal world market leader at the time, Worldline has acquired five full companies or business segments in three new countries.
These include GoPay (Czech Republic), Cardlink SA (Greece), Axepta (Italy) and Handelsbanken (Greece), and show the payment service provider is headstrong in expanding into Southern and Eastern Europe.
Worldline also made a huge splash with its recent purchase of Eurobank’s merchant acquiring business. The binding agreement brings 80% of that business, which leads the local market with a 21% share of transaction volumes in Greece, to Worldline.
Using payments to unify independent software
Looking forward to the upcoming year, Passalaqua thinks that independent software vendors (ISV) will see notable growth and attention from a payments perspective.
“What I mean by that is really honing in and servicing the software providers in niche vertical markets,” he said. “You’re starting to see software for basically anything you can imagine, and that software will now have a payments portion to that.”
While Worldline’s acquisitions may hold their own value at the moment, Passalaqua believes they will become more valuable as payment tech continues to permeate non-traditional segments.
“I see that all these acquisitions, putting together all these pieces that Worldline is acquiring, will then solidify into a nice, one-stop shop for the software companies that want to provide payments through their software.” he said, predicting this trend to multiply throughout next year.
When you look at payments from the merchant side, card-based point-of-sale transactions are still the norm in many parts of the world. This would probably be the case for the next five years, if not for the pandemic.
Instead of that longer adoption trend, pandemic-related restrictions and supply chain issued enabled innovation and growth in digital payments and e-commerce.
“Retailers were able to adapt. … BNPL, online ordering ahead, not-present tap transactions, or even just paying on your mobile phone. I think the changing environment actually helped the supply and demand,” Passalaqua said.
As a result of these adoptions, he believes Card-Not-Present (CNP) transactions will continue to see new growth in the next year.
In other recent fintech news, Equifax unveiled its new OnboardConnect product in an attempt to streamline B2B transactions. AI-powered insurtech platform HealthCare.com also raised $180 million led by Oaktree Capital Management.