The investment money’s flowing into fintech that’s flexible and broad enough to build a bridge between issuers and merchants. For PayU’s investment wing, that’s a $500 million blanket covering cross-border commerce, open tools and markets in dire need of a digital revolution.
As global players such as FIS and Fiserv make multibillion-dollar acquisitions, PayU, a Hoofddorp, Netherlands-based subsidiary of technology investor Naspers, has made a series of strategic plays over the past two years. Its most recent is a $70 million deal to acquire Wibmo, a Silicon Valley mobile and digital payment security company.
Wibmo has integrations with banks in more than 20 countries, covering authentication and risk-based decisioning for billions of yearly online and mobile transactions. Wibmo and PayU will build a digital payment ecosystem that can manage processing for both issuers and merchant acquirers in different jurisdictions.
“We’ll have local teams with access to local platforms and licenses in these markets,” said Mario Shiliashki, global head of payments for PayU.
Part of the larger M&A deals among processors is to provide greater geographic coverage for traditional merchant acquirers and bank technology companies. Both industries are trying to serve emerging needs for international P2P transfers for remittances, online marketplaces and small to medium-sized merchant payments.
This requires a breadth of localized compliance expertise and financial relationships, which the larger legacy processors and bank technology vendors are hoping to serve with scale and consolidation.
PayU’s placing investments in fintechs that can connect to financial institutions and provide partnerships for the existing PayU cross-border online payments hub, creating a broadening network.
“We’re looking to expand our reach in more high-growth markets beyond the ones we’re in, and we’re also looking to enhance innovation capabilities, not just in these local markets but also globally,” Shiliashki said.
Wibmo joins other investments such as PayU’s 2018 acquisition of Zooz, a company that connects merchants to different payment systems globally, as well as provides data analytics for credit decisions and other customer-facing programs.
“Zooz has the ability to enable a single API for a single connection for cross-border merchants that are operating, or wish to operate in our markets,” Shiliashki said.
PayU also invested include $11.5 million in 2018 in PaySense, an India-based digital credit platform that will allow PayU to access emerging markets in India, Poland and Latin America. Other holdings include the lead on a $115 series D financing in Remitly, which processes about $4 billion in transfers yearly; and about $130 million in Kreditech, a Hamburg, Germany-based company that pushes financial inclusion by using machine learning. PayU has used Kreditech to provide loan management and credit underwriting for about 300,000 merchants.
Other fintechs in PayU’s portfolio over the past two years include online credit platform Creditas, a secured loan fintech based in Brazil; and a $130 million M&A deal for Citrus Pay, an Indian digital payments company that has built platforms for contextual payments, P2P, one-click checkout, taxi payments and mobile app payments for clients such as Amazon, Airtel and other merchants.
These investments are also designed to bolster broader financial services, such as lending—another necessity given the expansion of merchant credit products in the fintech industry. “Adding services can increase merchant conversion while providing consumers more choices for payment, credit and financial services,” Shiliashki said.
Open development tools, such as APIs, are part of Kreditech and Wibmo’s IT strategy to connect with multiple banks and merchants to enable international transactions, lending and other functions through scalable upgrades.
“APIs are providing the necessary systems integration and ease of use in payment transactions and other functions,” said Ray Pucci, director of merchant services at Mercator Advisory Group. “It’s especially important in cross-border e-commerce transactions, since you’re dealing with different currencies and local banks involved in these transactions.”