According to Apple CEO Tim Cook, 2015 should have

been the year of ApplePay. But how did the much

hyped payment initiative of the tech giant really fare

and how can the status quo of other “Pay”-Initiatives

be evaluated? Secondly, this article tries to define a

way forward for the main initiatives.

The number of mobile payment wallets launched by

banks is limited. The most noteworthy example is

probably ChasePay that aims to leverage the more

than 90 million issuing customers of the bank. Fur-

thermore, Chase is able utilize its Visa partnership to

minimize transaction costs for the merchant. Few

other banks have scale comparable to Chase. It is for

that reason that banks focus on partnering with the

likes of Apple and other wallet providers to give their

customers access to a mobile wallet solution.

Furthermore, a bank’s focus is typically primarily on

its mobile banking application, where mobile pay-

ments can be integrated to facilitate a comprehensive

personal financial management on a mobile device.

So far, four players that control the operating sys-

tem (OS) and in some instances the hardware of a

mobile device have launched their wallet initiatives:

ApplePay, AndroidPay, SamsungPay and Hua-

weiPay. Further players including LG, Xiaomi, ZTE,

and Lenovo are reported to be working on the initia-

tion of their mobile wallet services. Of the already

launched initiatives, Apple has currently the broad-

est geographic coverage and has been able to con-

vince the largest majority of card issuers in its

launch countries to support its wallet initiative.

However, despite considerable support for issuers

and merchants right from the start, ApplePay’s

usage is currently very limited. Figure 2 shows the

current state of ApplePay with regard to its existing

and expected geographic coverage and user base.

All other initiatives run on (different versions of)

Android, which controls approximately 80% of

global smartphones. Theoretically, AndroidPay –

Google’s second attempt to succeed in the mobile

wallet space - should have the largest consumer

reach of all initiatives, but uptake by both

The currenT sTaTe of mobile walleTs

andreas haberseTzer

Partner

paymentsInsight. Opinion.

vol 13

COntent

1 The currenT sTaTe of mobile

walleTs

Andreas Habersetzer discusses the current state of mobile

wallets and compares the different players and products

present in the market.

3 Public markeT valuaTions and The

markeT environmenT

Markets have shown a recovery since reaching a low point

in mid-February. Markus Massem takes a look at valuation

drivers and benchmarks the different groups within the

payments universe.

5 m&a acTiviTy

What are the key drivers of M&A and IPO activity? Which

transactions made headlines in the 1st Quarter of 2016?

What are recent takeover rationales? Robert Kayser,

Apostolos Psaras and Philipp Steinbrück answer these

questions.

7 venTure caPiTal

Once again Stefan Thomalla and Eduardo Cenci review

the latest payment startup funding activity. The article

considers the payment segments in which investors

were most interested in, headline startups and the larg-

est deals of the last quarter of 2016.

9 deal acTiviTy m&a

Transaction overview

12 vc acTiviTy

Transaction overview

bank wallets mno walletsos wallets

merchant wallets scheme wallets Tech and digital wallets

Launched by banks that want to participate in the growth of wallets to not get side-lined

Opportunity to use the device for payments as a way to increase stickiness and drive hardware sales

Used by MNO’s to increase product breath beyond voice and data

Wallets operated directly by the merchant to increase customer stickiness and loyalty

Mobile wallets launched by the major card schemes

Wallets operated by technology players with a pure focus on payments

figure 1: Overview of the payment wallet landscape

payments Insight. Opinion.

canadaLaunch

total iphones

usaLaunch

total iphones

enabled for payments

Used for payments

merchant acceptance (# locations)

Bank participation(# card issuers)

ukLaunch

total iphones

enabled for payment

merchant acceptance (# locations)

Bank participation(# card issuers)

chinaLaunch

total iphones

Bank participation(# card issuers)

Retailer acceptance (# chain)

Jun 14

17m

˜4m

250k+

15

Feb 16

˜230m

19

16

nov 14

˜85m

˜23m

˜3.5m

1m+

400+

nov 15

8m

ausTraliaLaunch

total iphones

nov 15

7m

expected 2016 launch countries are shown in dark grey

consumers and merchants is currently limited. One

big advantage of SamsungPay is its independence of

NFC. Thanks to the “magnetic secure transmission”

technology Samsung acquired when it bought Loop,

SamsungPay works on every terminal. Samsung

recently reported that over 5 million users regis-

tered and that it processed more than USD 500

million in the first six months since its launch.

MNOs (mobile network operators) were probably

among the first that identified mobile payments as

area for growth that could help to compensate for

declining revenues in their core business. All major

operators started initiatives, either stand-alone or in

joint-ventures with other operators, to benefit from

the expected growth in

mobile commerce. MNOs

seemed to have all the right

assets in place to become

major mobile payment

players – large customer

bases which include both

consumers and merchants,

and control over the secure

element of the SIM-card.

However, propositions with

limited added value that

typically included a stored-

value account together with a (digital) pre-paid card

and the introduction of HCE eliminated the inherent

MNO-advantage. Today, only Vodafone and Orange

seem to further pursue their initiatives.

Until today, very few merchants got engaged in the

mobile wallet game, but with Starbucks, a merchant

probably operates one of the most successful initia-

tives. Another very prominent initiative called MCX,

jointly initiated by major US retailers, doesn’t seem

to get out of the block and now MCX’s founding

members Walmart and Target announced their own

“Pay” solutions. This is one more example that illus-

trates how difficult joint ventures are to operate on a

day-to-day basis, although a joint initiative of indus-

try leaders makes a lot of sense theoretically. In

Europe, no major wallet initiative has been launched

until today.

Scheme wallets like Visa Checkout (formerly V.me),

Masterpass and American Express Checkout aren’t

really wallets in a narrow sense, but rather the

attempt to stay relevant in an e-commerce environ-

ment through a facilitated secure checkout that lim-

its the credentials required for user authentication.

Visa and MasterCard are

expanding the geo-

graphic reach of their

checkout-products con-

tinuously and are report-

ing increasing user

numbers and merchant

acceptance.

Tech or digital wallets

are the pioneers of

mobile payment wallets

and therefore have

reached the highest

degree of maturity with regard to their value proposi-

tion, geographic coverage and customer base. Today,

PayPal has 179 million active users in 203 countries

and is continuously investing in its value proposition.

Following the acquisitions of Braintree / Venmo and

Xoom, the company is now offering “One Touch”

and P2P-payments, and is working on its omni-chan-

nel strategy through partnerships with Discover,

First Data and others. The most sophisticated

propositions are currently offered by Chinese wallet

solutions that control entire payment and commerce

ecosystems and have become an integral part of

every aspect of the daily life of its users. WeChat, at

the core a mobile messaging system, has estab-

lished WeChatPay, that is used to conduct any type

of business transaction between users and autho-

rized merchants that have established applications

within WeChat’s mobile platform. Today, more than

200 million of its approximately 650 million users

have signed up for WeChatPay.

In particular the comparison with tech wallets illus-

trates what is currently missing at ApplePay and

other newer initiatives: a compelling value proposi-

tion and true value-add compared to existing means

of payments. Today, users often conceive a card-

based contactless payment as more convenient

than a payment by phone. Furthermore, a direct

connection with existing merchant loyalty programs

is often lacking. Therefore, we currently see three

steps in the mobile wallet evolution: step 1 is a pure

payment proposition, in most instances covering

multiple channels, from POS over remote and in-app

payments. The step 2 includes the seamless integra-

tion of payments and loyalty / reward programs.

Looking at Apple Pay, it seems logical that the firm

would combine the Pay-initiatives with its wallet

(formerly Passbook) that is already preinstalled on

every phone. Additional payment functions, like P2P-

payments, are often popular initiatives for user

generation at this stage. Lastly, in step 3, additional

services beyond payments and commerce are

integrated into the wallet, ranging from financial

services to health related propositions that cover a

wide range of everyday life (the respective apps are

already pre-installed on the iPhone – facilitated by an

invisible “payment process”).

Of the already launched initiatives, apple has currently

the broadest geographic coverage and has been able to convince the largest majority of card issuers in its launch countries to support its wallet initiative

2

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payments Insight. Opinion.

Following a rough start into the year, overall markets

have been able to bounce back and recover some or

all of their 2016 losses. The S&P 500 gained 13%

from the low point it reached

on February 11th and has been

able to erase all losses for the

year to date period. The Euro-

pean STOXX 600 on the other

hand has gained 10% since the

February low point, but is still

about 9% below heights at the

beginning of the year. As earn-

ings seasons for the first quar-

ter has kicked off in the US,

worries persist that the first

quarter could be the worst

quarter since 2009 as corporate profits are expected

to drop. Especially banking stocks are feared to take

a meaningful hit following the release of quarterly

results, with potential impact and knock-on effects

on the wider markets.

Public markeT valuaTions and The markeT environmenT

markus massem

Manager

Following meaningful declines till

mid-February, the great majority of public companies in our payments universe have shown positive returns over the past three month period.

On other market news, exports data showed that

Chinese exports expanded in March for the first

time in 9 months, calming fears that the country’s

economy is slowing down rapidly. However, US

retail sales in March were weaker than expected,

raising concerns that consumers continue to be

cautious. Low US inflation expectations on the

other hand will help

the Federal Reserve to

maintain a cautious

stance on interest

rates, while the ECB

cut the Eurozone inter-

est rate to zero and

ramps up quantitative

easing in an attempt

to fend off deflation

and jump-start the

economy.

Following meaningful

declines till mid-February, the great majority of

public companies in our payments universe (see

end of article for composition) have shown posi-

tive returns over the past three month period up

to April 12th (with 14 out of 21 stocks posting

share price increases). This enabled companies to

gain some ground and recover the losses that

were felt across the overall markets. Since the

beginning of the year, 13 out of the 21 stocks are

still in positive territory. The overall payment

index is up by 7% over the past three months and

2% since the beginning of the year.

The acceptance bucket gained 3% over the three

months period (-4% year to date). Global Pay-

ments, following meaningful losses at the

The payments universe (alphabetical order):

Acceptance: First Data Corp, Global Payments,

Ingenico, PayPoint, Vantiv, Verifone, WorldPay

Processing: Cielo, Euronet Worldwide, FIS, Fiserv,

Total System Services

PSP/Online payments: PayPal, Paysafe, Wirecard

Issuing/Prepaid solutions: FleetCor, Green Dot, WEX

Schemes: American Express, MasterCard, Visa

Sources: INNOVALUE research and company filings;

Google Finance for share price data

beginning of the year, jumped almost 10% upon

the release of its latest quarterly results, beating

analyst guidance on both revenue and earnings.

Also fiscal guidance for the year was raised and

the acquisition of Heartland Payments is expected

to close in the next quarter, boosting revenue. Fol-

lowing the 12% tumble post the 2015 earnings

release, Ingenico has gained some ground and

presented a 2020 strategic plan, envisioning EUR

4 billion in revenue, a 22-23% EBITDA margin and

45% free cash flow (FCF) conversion by 2020.

Overall, Ingenico is still down 14% since the

beginning of the year.

Advent International and Bain Capital announced

plans to sell 14% of WorldPay shares and placed

275 million shares on April 6th, raising about GBP

740 million. Following the transaction, Advent

and Bain hold 565 million shares in WorldPay,

leaving them with a combined stake of 28%.

The comparables within the processing bucket

gained about 8% over the last three months

(+9% year to date). The strongest performer in

the group was Cielo, which has gained almost

20% since the beginning of the year and has

gained more than 35% since reaching a low point

in early February. Also Euronet, which plunged

upon the release of Q4 earnings, missing analyst

estimates, has since been able to regain 30% of

its market value.

The comparables within the PSP and online pay-

ments category lost about 3% over the last three

months (-2% year to date). Wirecard announced

plans to expand to the US in the next year as the

company is trying to gain momentum following a

beating from short sellers.

figure 1: Indexed stock price performance year to date until april 12th 2016

Acceptance Processing PSP/Online payments Issuing/Prepaid Schemes S&P 500

115

120

110

105

100

95

90

85

8018 Jan 15 Feb04 Jan 01 Feb 29 Feb 14 Mar 28 Mar 11 Apr

3

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payments Insight. Opinion.

The stock still hasn’t made up for the losses that

followed the accusation of little known Zatarra

Research, accusing the German company of mis-

leading accounting and fraud. Paysafe continues

to gain and was added to the FTSE 250 at the end

of March. PayPal shares lost value after Amazon

announced the launch of Amazon Payment Global

Partner Program. The retailer will help e-com-

merce platform providers and other developers

integrate with Amazon Payments, so their own

merchants can offer the option to “Pay with Ama-

zon” at checkout.

The comparables of the issuing / prepaid solu-

tions bucket gained about 25% over the last three

months, driven by all companies in the category

(+12% year to date). Green Dot is the best per-

forming stock across our payments universe for

the year so far, gradually increasing more than

30% since the beginning of the year. On April 11th,

Green Dot announced a further USD 50 million

stock repurchase, meaning it has now repur-

chased USD 100 million since September 2015.

Also WEX’s shares have gained significantly since

reaching a low in early February, recovering 45%

of their losses.

Given the losses of the comparables in the

schemes bucket at the beginning of the year, not

all losses could be erased despite a meaningful

recovery. American Express, which had shown

significant losses and announced plans to cut

USD 1 billion in costs, bounced back about 20%

from the low point reached in early February. Also

VISA and MasterCard have made up for the share

price declines and are almost even for the year.

figure 3: payments universe trading multiples as of april 12th 2016

0.0x

4.4 5.0 4.3 4.6

24.0

10.810.0x

20.0x

25.0x

30.0x

5.5 5.0 4.8

19.2

16.815.3

10.6

4.8

11.4

14.613.0

17.8

20.7

EV/REV CY 14 EV/REV CY 15 EV/EBITDA CY 14 EV/EBITDA CY 15

Acceptance Processing PSP/Online payments Issuing/Prepaid Schemes

Acceptance Processing PSP/Online payments Issuing/Prepaid Schemes

70%

60%

50%

40%

30%

20%

10%

0%

8% 7%

22%

15%

39%

30%

24%

46%

39%

29%25%

37%

69%

figure 2: payments universe operational metrics as of april 12th 2016

Revenue growth CY 14-15 EBITDA margin CY 14 EBITDA margin CY 15

15.0x

5.0x

2%

61%

10.8

4

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payments Insight. Opinion.

16x

14x

2x

12x

10x

8x

6x

4x

The first quarter of 2016 showed a new peek in

terms of the number of M&A activities within the

payment industry. A total of 62 transactions

have been reported with a total disclosed volume

of USD 4.7 billion. Among those deals there are

two which stand out: Firstly, Total System Ser-

vices’ (TSYS) acquisition of TransFirst for USD

2.4 billion, aiming to strengthen competitive

positioning by increasing scale and improving

product proposition and secondly the acquisition

of Serviços e Tecnologia de Pagamentos (STP) by

FleetCor Technologies for USD 1.1 billion, aiming

to drive international expansion.

M&A activity and deal characteristics

A total of 62 M&A transactions were announced

in first quarter of 2016. This represents a 27%

increase over the 49 transaction in the last quar-

ter of 2015. The financial terms of 19 transactions,

with a total volume of USD 4.7 billion, were dis-

closed, a decline compared to the previous quar-

ter. The increase in deal activity highlights the

maturity of the payments landscape.

The value of Q1 2016 was heavily driven by the

acquisition of TransFirst by TSYS for USD 2.4 bil-

lion (50% of disclosed volume). The underlying

enterprise value-multiple was 15.6x EBITDA. The

transaction allows TSYS to establish a leadership

position in merchant acquiring by becoming the

6th largest US acquirer based on net-revenue and

expand its acceptance network to 645,000 mer-

chants by adding 235,000 outlets in the profit-

able and fast-growing SME segment serviced by

TransFirst. In addition the acquisition allows TSYS

to improve its technology and payments platform

and provide integrated payment services gaining

access to TransFirst’s more than 1,300 technology

and referral partners. The private equity owners of

TransFirst, among them Vista Equity Partners,

exited their investment in TransFirst in a little

more than two years, having acquired the com-

pany in November 2014.

roberT kayser

Senior Associate

aPosTolos Psaras

Associate

PhiliPP sTeinbrück

Associate

m&a acTiviTy

North America Europe Asia

Middle East, Africa (MEA) Australia South America

figure 3: targets by region (funding)

figure 1: m&a market development

Disclosed value [USD billion]Number of transactions

The median EBITDA-multiple from 2015 to the

first quarter of 2016 decreased, from 13.1x to

10.3x. The median revenue multiple from 2015 to

the first quarter of 2016 increased 7%, from 3.5x

to 3.7x. FinTech Acquisition’s takeover of Card-

Connect, valued at USD 350 million, equates to a

multiple of 29.4x revenue or 8.9x EBITDA. The

acquisition of NWP Services by RealPage equates

to a multiple of 11.3x EBITDA or 1.2x revenue.

FleetCor Technologies’ acquisition of Brazilian

STP for USD 1.1 billion equates to a multiple of

5.6x revenue or 11.3x EBITDA. Wirecard’s acquisi-

tion of Moip Pagamentos for USD 23.5 million and

Provus for USD 32 million equate to a multiple of

9.4x EBITDA and 7.1x EBITDA, respectively. As

seen in the previous quarters, deals become on

average larger and being based on slightly lower

multiples as investors “adjust” expectations about

how disruptive target companies will change the

payment landscape, but there is a broad range of

valuation multiples observed in the market.

Geographically, 52% of the targets were based in

North America (2015: 49%), followed by 26% in

Europe (2015: 33%) and 11% in Asia/Pacific

(2015: 8%). Despite the overall “slow down” of

Europe compared to North America, German

companies were highly active in engaging in inor-

ganic growth during Q1 2016 (six transactions).

Kraken, the dominant bitcoin exchange in Europe

and the global leader in terms of Euro volume and

liquidity, solidified its position and expanded in

North America in a two-piece acquisition of NYC-

based Coinsetter and Canadian Cavirtex. German

based payments solution provider Wirecard con-

tinued its international expansion strategy through

acquisitions with two processing targets, Moip

Pagamentos in Brazil and Provus in Romania.

Key drivers of and rationale for M&A activity

Generally Q1 has shown again more transactions in

established payment segments such as issuing and

processing. Main drivers to engage in mergers and

acquisitions were to achieve synergies, improve

internal capabilities and expand the company’s

international reach.

An established segment of the industry, process-

ing, experienced a significant amount of deal activ-

ity in Q1 2016. Growth in new markets was one of

the primary drivers for transactions in this segment

as shown by the acquisition of Canadian processor

of tuition fee payments Scholar FX by US-based

Flywire and the two acquisitions made by

Revenue Multiple EBITDA multiple

figure 2: median enterprise value multiples

9.5

14.5 14.713.1

10.3

3.72.8 3.5

2012 2013 2016Q1

2015

3.7

2% 5%5%

11%

26%

52%

2015

2016Q1

Dis

clos

ed v

alue

[U

SD b

illio

n]

Num

ber of transactions4

6

8

0

10

20

30

40

60

70

50

02015

Q12015Q2

2015Q3

2015Q4

2016Q1

42 4210

12

32

2

3.6

14.1

31.9

4.7

1.6

4649

62

2014

5

Page 1

payments Insight. Opinion.

Wirecard. The sale of Emerging Market Payments,

a provider of electronic payment services to banks,

retailers, governments and finance institution by

Actis, a financial investment company, to Network

International, a provider of payment solutions in

the Middle East, for an undisclosed amount allows

the latter to improve its product offering and foot-

print in the region. Achieving synergies and driving

consolidation in the resident billing and energy

management for rental housing industry was the

key driver behind the domestic acquisition of

US-based NWP Services Corporation by Real Page

for USD 68 million.

We are confident that the upward deal trend in the

processing segment is set to continue and acceler-

ate in view of developments in Q1. Advent Interna-

tional, Bain Capital and the Danish pension fund

ATP, the private equity owners of Nets Holding

(a Nordics payment processor) are examining dif-

ferent exit opportunities including both an IPO or a

sale within 2016 at a potential equity valuation that

might exceed USD 3.5 billion according to Bloom-

berg sources. In the UK, the Payment Systems

Regulator (PSR) proposed that the banking institu-

tions sell their stake in VocaLink, the infrastructure

provider that they use for the processing of

payments. VocaLink processed over 11 billion trans-

action valued at GBP 6

trillion in 2015 including

more than 90% of salary,

more than 70% of house-

hold bill and almost all

state benefit payments in

the UK, as it provides the

backbone for the Bacs,

Faster Payments and

LINK payment systems.

According to the PSR, the

ownership of VocaLink by 18 UK banks stifles inno-

vation and competition in the industry for infra-

structure provision. Given the potential

attractiveness of VocaLink as an asset for numer-

ous payment companies, reports that MasterCard

has approached VocaLink’s owners for a potential

GBP 1 billion (~USD 1.4 billion) acquisition just a

week after the PSR released its recommendation,

come as no surprise.

Another large deal in Q1, the acquisition of STP by

FleetCor Technologies for USD 1.1 billion, was

driven by the need to increase scale and drive inter-

national expansion. The rationale behind the deal is

FleetCor’s goal to drive scale in Brazil to support its

overall growth in workforce payments and acquire

an innovative cardless fuel payments solution with

one of FleetCor’s global partners, Shell.

Adoption of electronic

payment services and the

ownership of electronic

payment platforms are

becoming increasingly

important for retailers,

especially those whose

core business lies in

ecommerce, as consum-

ers are shifting to new and

emerging payment chan-

nels. We expect that this

can be a significant con-

tributor to deal activity in

the payments sector in

the future. In February

2016, Amazon, the lead-

ing global ecommerce

marketplace, acquired

Indian-based start-up

Emvantage Payments, a

provider of an online payments gateway providing

acceptance of card, debit and mobile payments to

online merchants. The deal is very interesting

despite the fact that the amount has not been dis-

closed. This acquisition enables Amazon to

develop convenient and secure payment solutions

for India, one of the

key focus markets for

the company, where

Amazon is set to

invest USD 2 billion.

Another Indian com-

pany that grew its

payment capabilities

through acquisition is

Ola. Ola acquired

Qarth a mobile pay-

ments start-up that has integrations with 26 Indian

banks enabling users to make “one-touch” pay-

ments and money transfers. Initially a rival to Uber

with USD 1.2 billion in venture capital backing from

players like Sequoia Capital, Ola developed an

in-app mobile wallet service to allow users to pay

for rides, given the limited penetration of card

payments in the country. The Ola Money wallet

service was made available as a separate app in

November 2015, allowing the company to expand

in a new vertical.

The global trend away from cash payments and the

emergence of innovative alternative payment

methods can lead to a wave of mergers and acqui-

sitions as companies try to enhance their product

portfolio and gain competencies in new technolo-

gies. Apple for example acquired Artificial

Intelligence facial recognition start-up Emotient in

January for an undisclosed amount in a move

showcasing the growing interest in and applica-

tions of biometric authentication by technology

and payment companies. Another company that

acquired capabilities in the field of machine learning

was Square with the purchase of Framed Data,

enhancing its data science and risk analytics team.

The alternative payment methods and digital

currencies space continued to demonstrate

momentum. As discussed in the previous issue,

investors and banks such as Goldman Sachs or

BBVA increasingly engage in the blockchain tech-

nology. The consolidation in the bitcoin exchange

industry fuelled by the two Kraken acquisitions of

Coinsetter and Cavirtex shows that as the digital

currency / blockchain space matures we can

expect more deal activity. Another example,

nanoPay a Canadian start-up providing loyalty and

payment solutions for retail and ecommerce

merchants acquired Mintchip, the digital currency

platform developed by the Royal Canadian Mint, to

drive its partnership strategy with retailers, banks

and telecom companies.

For the first half of 2016 we are optimistic that the

payment industry will remain an important driver

for M&A-activity. It will be highly interesting to see

how adoption of electronic and alternative

payment methods, such as mobile payments and

digital currencies, influences the business models

of traditional financial institutions and what will be

the impact of such developments on retailers and

established payment companies.

Despite the overall “slow down” of europe compared

to north america, German companies were highly active in engaging in inorganic growth during Q1 2016

6

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payments Insight. Opinion.

sTefan Thomalla

Associate

In the first quarter of 2016, 50 companies raised

USD 382 million, of which USD 332 million in

equity and USD 49 million in debt financing. Com-

pared to Q4 2015, the number of companies that

received funding slightly increased (+4% deals)

and the total disclosed value increased by 7%, indi-

cating a turnaround compared to the last two quar-

ters of 2015. Overall, 2016 had a positive start.

Year-on-year the number of deals has increased

from 43 to 50. However, the invested amount has

decreased by 31% from USD 550 million to USD

382 million.

Analysing the funding activity from a regional per-

spective, the North

and Central American

region has been once

again been the region

with the highest num-

ber of deals. In total 26

deals (Q1 2015: 25)

with a disclosed value

of USD 220 million

(USD 216 million in

equity and USD 4 mil-

lion in debt financing)

have been reported.

With 15 deals (Q1 2015: 8), accounting for USD 101

million, Europe has been the second largest region

for number of deals. In Europe financing activities

have been well balanced in terms of invested vol-

ume between equity (55%) and debt (45%). Over-

all, 18% of the funding activities were conducted in

Asia (6 deals, USD 49 million), MEA (2 deals, USD

7 million) and Australia (1 deal, USD 5 million).

Investment Trends

In the first quarter of 2016 investors mainly

financed “alternative payment system” companies

(17 deals). Alternative payment systems are

defined as “acceptance brands” integrated with

the checkout of the merchant (e.g. PayPal) and

mobile money payment apps. Compared to 2015,

investors showed a higher interest in “security”

companies, however maintained a strong interest

in “alternative payment systems” and “payment

acceptance devices and software”.

Regarding the financing rounds, seed investments

are still predominant, accounting for more than

1/3 of the total financing rounds. This implies that

investors are seeking new and alternative invest-

ment opportunities while still facing low returns

from capital markets. A persistent downward

trend regarding more mature funding is not

identifiable.

This quarter’s largest funding was the USD 75

million deal sealed between Pindrop and Google

Capital in January 2016. Pindrop is a provider of

authentication and fraud detection solutions. Pin-

drop’s solutions are highly valuable for the indus-

try because of their ability to prevent account

takeover, reduce payment fraud conducted over

the phone, block cross channel attacks and pro-

tect brand reputation. The company disclosed its

plans to use the new funding to expand interna-

tionally and increase

its investments in

research and new

product development.

Another interesting

investment has been

the Series B funding of

Momo. The company

received USD 28 mil-

lion from Standard

Chartered Private

Equity (lead investor)

and Goldman Sachs

that already invested almost USD 6 million in the

company in January 2013. Momo is a Vietnamese

company that provides mobile solutions for pay-

ments and banking in the country. The company

is trying to replicate in Vietnam the success of

Alipay in China and MPesa in Kenya, leveraging a

fast growing smartphone market. Moreover, Stan-

dard Chartered teamed up with Momo to offer a

payment wallet (“Straight2Bank”) for the bank’s

corporate clients in Vietnam. With the new fund-

ing round, Momo intends to accelerate its growth

by investing in the launch of new products and ser-

vices, expand bank and merchant connectivity and

extend the network of point-of-sale terminals.

In Europe, instead, the German mobile payments

start-up Payleven stands out with a USD 10 mil-

lion series D funding. The new funding round

brings the total raised capital by the company to

USD 51 million. The company is a provider of

mobile POS solutions expanding in all Europe and

venTure caPiTal

edoardo cenci

Associate

Dis

clos

ed v

alue

[U

SD b

illio

n]

Num

ber of transactions200

300

400

0

10

20

40

50

30

0

500

600

800

100

figure 1: market development – Including both equity and debt funding deals

Disclosed value [USD billion]Number of transactions

700

48

2015Q2

2015Q3

2015Q4

2016Q1

48

710

345382

458

3949

50

North America Europe Asia

Middle East, Africa (MEA) Australia South America

figure 2: Investment by region

4%

12%

30%

52%

2%2015

2016Q1

Other D

C B

A Venture

Seed

2015Q2

2015Q3

2015Q4

2016Q1

21%32% 33%

6%

21%

15%

6%

17%2%

100%

2%

34%

12%

16%

10%6%

20%

6%

19%3%

19%

10%10%

12%

26%

10%

24%2%

5%

figure 3: Financing rounds

It is predicted that the number of digital wallets that can be

used in stores will double within the next 12 to 18 months and the number of mobile Web or in-app payment services will triple over the same period

7

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payments Insight. Opinion.

the funding will support Payleven to expand its

offering even more and accelerate customer

acquisition. Additionally, Payleven’s spokesper-

son hints there may be another round being

announced soon.

Of particular interest is also the first debt financ-

ing of WorldRemit after seven equity funding

rounds. In February 2016 the company received

USD 45 million debt financing from Silicon Valley

Bank (lead investor) and TriplePoint Venture

Growth BDC. WorldRemit is a UK based online

and mobile money transfer company that, since

inception in 2010, received a total of USD 192.7

million. The company was valued at USD 500

million in a USD 100 million funding round last

year, led by Silicon Val-

ley venture capital firm

Technology Crossover

Ventures (TCV), which

has also backed the

likes of Facebook, Spo-

tify, and Netflix.

According to a study by

Deloitte, WorldRemit

has been the UK’s fast-

est-growing technology

company in 2015. The

money transfer service generated USD 39 million

in revenue in 2015 - making it one of Europe’s big-

gest FinTech firms - and currently enables around

400,000 transfers every month. The latest

financing will help WorldRemit expand its net-

work of partners across the world and increase

availability of instant money transfers to

customers.

Among the top ten investments in Q1 2016 there

is also Blockstream. Blockstream, in February,

raised USD 55 million in Series A funding, reach-

ing a total funding of USD 76 million. With the

fresh investment, Blockstream would like to con-

tinue expanding the bitcoin code base for com-

mercial use Blockstream’s round was led by

venture capital firms

AXA Strategic Ven-

tures, the venture

capital arm of French

multinational insur-

ance firm AXA

Group; Digital

Garage, the Tokyo-

based online pay-

ments firm co-

founded by Joi Ito;

and Hong Kong

venture capital firm Horizons Ventures. Even

though payment services are not its core busi-

ness, Blockstream is developing a technology that

allows interoperability of blockchains and could

therefore foster the adoption of blockchain tech-

nology in the payments industry.

In terms of VC deals, 2016 had a good start.

Investors showed a particular interest in “secu-

rity” companies as displayed by the 7 sealed deals

that rose more than USD 107 million. The growth

of attention in “security” start-ups is, however, a

consequence of the unstoppable growth of alter-

native payment systems. It is predicted that the

number of digital wallets that can be used in

stores will double within the next 12 to 18 months

and the number of mobile Web or in-app pay-

ment services will triple over the same period.

This is a very fragmented and highly competitive

space. It will be important to keep an eye on the

start-ups that receive the highest funding to

determine the potential market leaders.

Compared to 2015, investors showed a higher interest in

“security” companies, however maintained a strong interest in “alternative payment systems” and “payment acceptance devices and software”

8

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payments Insight. Opinion.

Date Announced

Target Company Country TC Industry Buyer(s) (Country) Country Transaction value (USDm)

1 04/01/16 Shifu India Develops a personal assistant app for smartphones Paytm India 8

2 04/01/16 SmartLink USA Provides secure payment gateway and network services businesses

Echosat USA N/D

3 05/01/16 TibiDono Austria Provides marketing and gift card distribution InComm USA N/D

4 06/01/16 Giftcards.com USA Sells digital and physical prepaid gift card solutions to consumers and customized prepaid incentive and reward solutions for business clients

Blackhawk Network USA N/D

5 07/01/16 Chase Commerce Solutions (ISO Portfolio)

USA Merchant acquiring and payments processing unit of JP Morgan Chase & Co

First American Payment Systems USA N/D

6 07/01/16 Emotient USA Tech start-up with the expertise to analyse facial expressions to read people’s emotions

Apple USA N/D

7 08/01/16 Paypoint.net and Metacharge United Kingdom

Provides online payments solution Capita United Kingdom

20

8 12/01/16 Embratec Brazil Develops fuel card and maintenance solutions Edenred France N/D

9 12/01/16 Mintchip Canada Provides a digital currency product nanoPay Canada N/D

10 13/01/16 Coindesk United Kingdom

Operates a Bitcoin news site Digital Currency Group USA 0.9

11 14/01/16 Fiverun USA Develops mPOS software Vista Equity Partners USA N/D

12 15/01/16 AJB Software Design Canada Provides payment gateway and switching solutions Verifone USA N/D

13 18/01/16 MiniCheckout Canada Provides nobile payment solutions omNovos Canada N/D

14 19/01/16 Coinsetter USA Operates a bitcoin exchange Kraken Germany N/D

15 19/01/16 Cavirtex Canada Operates a bitcoin exchange Kraken Germany N/D

16 20/01/16 ScholarFX Canada Processor of tuition, room and board payments for international students attending universities and other educational institutions in Canada

Flywire USA N/D

17 20/01/16 SmartPocket India Provides a mobile wallet solution for loyalty cards Goodbox India N/D

18 25/01/16 Transact24 Limited Hong Kong Provides electronic payment services Net 1 South Africa 7

19 25/01/16 VendScreen USA Develops vending industry cashless payment technology USA Technologies USA 5.6

20 26/01/16 Smart Card Software United Kingdom

Provides mobile payment platform solution Rambus USA 92.7

21 26/01/16 TransFirst USA Provides payment technology solutions Total System Services USA 2,350

22 26/01/16 SmartLine Digital Waitlist Management System

USA Provides a digital waitlist management application PaidEasy USA N/D

23 27/01/16 Union Mobile Pay China Joint-venture between China Mobile, the world's largest mobile operator, and China UnionPay, which operate a mobile transfer application

Qingdao Haili Metal China 462

24 28/01/16 Toshiba Global Commerce Solutions Japan Manufactures integrated point of sales systems and solutions for retail store

Toshiba Japan 160

25 28/01/16 UBIQ Italy Designs and implements innovative solutions for digital marketing and data mining

SIA Italy N/D

26 01/02/16 CoreCommerce USA Operates an ecommerce platform which provides payment, shipping cart, etc. for professional online businesses

N/D N/D N/D

27 01/02/16 Invotas International USA Offers Security Orchestrator, an automated response solution that connects user’s hardware, software, tools, and policies into a single cohesive solution

FireEye USA N/D

m&a deal acTiviTy Q1 2016

9

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payments Insight. Opinion.

Date Announced

Target Company Country TC Industry Buyer(s) (Country) Country Transaction value (USDm)

28 03/02/16 NimbleCommerce USA Operates a commerce platform and distribution network for digital promotions. It helps merchants sell their own pre-paid offers and gift cards through a network of publisher branded sites

Blackhawk Network USA N/D

29 08/02/16 Billhighway USA Software company specialized in integrated payment processing for associations and large not-for-profit organizations

BluePay USA N/D

30 08/02/16 Quickservice Technologies Canada QSR technology and software provider that serves markets across Canada, the U.S. and key international markets

Panasonic Canada Canada N/D

31 09/02/16 Vanso Nigeria Product design company offering payment solutions to its clients

Interswitch Nigeria 50

32 09/02/16 MercedesCard Germany Provides credit card with a range of mobility safety attributes; daughter company of automotive company Mercedes

BW-Bank Germany N/D

33 10/02/16 MDRX Medical Billing USA Offers operational services in the healthcare sector Constellation Healthcare Technologies

UK 28

34 16/02/16 Emvantage Payments India Provides "Platform as a Service" for online merchants, banks and merchant aggregators offering the best payment gateway.

Amazon USA N/D

35 16/02/16 FIN Holdings USA Conglomerat of several payment firms, incl. services in card handling and payment security

ID Global Solutions Corporation USA 9

36 17/02/16 MCC USA Provides a comprehensive Software as a Service platform that helps clients manage school, recreation and community activities online

Invoice Cloud USA N/D

37 22/02/16 Moip Pagamentos Brazil Operates a payment platform for small and medium sized retailers, offering solutions in particular, on marketplaces and companies with direct sales with its innovative end-to-end solutions

Wirecard Germany 24

38 23/02/16 NWP Services Corporation USA Provider of cloud-based resident billing, electronic payments, energy management, back office accounting and IT infrastructure solutions

RealPage USA 68

39 23/02/16 Worldline France Provides solutions for merchant services & terminals, mobility & eTransactional service and financial processing & software licensing

Komercní banka Czech Republic

N/D

40 24/02/16 CollectorSolutions USA Offers debit and credit card processing services JetPay Corporation USA N/D

41 26/02/16 OneView UK Omni-channel and mobile point of sale software provider Armour Group UK 22

42 29/02/16 Costco (credit card portfolio) USA Membership-only warehouse club that provides a wide selection of merchandise

Citi USA N/D

43 29/02/16 Provus Romania Active in the area of card transactions processing, card personalization and retail sector services

Wirecard Germany 32

44 02/03/16 Emerging Markets Payments Egypt Offers electronic payment services to banks, retailers, governments and consumer finance institutions across the Middle East and Africa

Network International United Arab Emirates

N/D

45 03/03/16 Safend Israel Global data security company with a broad range of competitive and encryption and data protection solutions

SuperCom Israel 2

46 04/03/16 Quicken  USA Provides an online software for private persons handling their billings, payments and money

HIG Capital USA N/D

47 07/03/16 CardConnect USA Offers payment acceptance products with complementary access to CardPointe, giving option to manage processed payments and view full transaction lifecycle reports in real-time.

FinTech Acquisition USA 350

48 07/03/16 Holvi Finland Offers a current account combined with business MasterCard for small business owners

BBVA Argentina N/D

49 08/03/16 Risk Factor UK Provides a fraud analytics software for commercial finance lending that complements Equiniti’s other ‘control risk’ capabilities

Equiniti United Kingdom

N/D

50 08/03/16 KYCnet Netherlands Technology and services provider which helps organisations verify and on-board their customers

Equiniti United Kingdom

N/D

51 08/03/16 1to1 Card USA Delivery of prepaid card management services for multiple payment products including incentive, loyalty and promotional cards, rebates, pay cards, and general purpose reloadable cards

Gift Card Pioneer USA N/D

52 08/03/16 Grasp UK Provides digital services for the banking industry Atom UK N/D

53 14/03/16 Global Reach Partners UK Foreign exchange specialist providing payments and hedging services to businesses and private individuals

Inflexion UK N/D

54 14/03/16 Framed Data USA Provides redictive analytics services Square USA N/D

55 14/03/16 Projective Belgium Program and project management for the financial services sector

Wincor Nixdorf Germany N/D

10

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payments Insight. Opinion.

Date Announced

Target Company Country TC Industry Buyer(s) (Country) Country Transaction value (USDm)

56 15/03/16 CEC UK Provides foreign exchange operator FEXCO Ireland N/D

57 15/03/16 STP Brazil Brazil’s leading electronic toll payments company FleetCor Technologies USA 1,050

58 16/03/16 Armor Payments USA Provides escrow as a service for B2B e-commerce Payoneer USA N/D

59 21/03/16 Parametric USA Develops vendor software tablet devices used by professional and college sports teams at stadiums

Bypass Mobile USA N/D

60 22/03/16 Qarth India X-Pay (Qarth product) facilitates mobile payment to anyone with IMPS enabled bank account across India

Ola Cabs India N/D

61 24/03/16 Shopular USA Operates a mobile product discovery application Ebates USA N/D

62 29/03/16 Currency Select Australia Dynamic Currency Conversion and Multi-Currency Processing transactions through ATMs, Point-Of-Sale (POS) payment terminals and e-Commerce channels

Global Blue Switzerland N/D

11

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payments Insight. Opinion.

Target (Country) Round Volume (USDm)

Investor(s) Funding (USDm)

Description

1 Snapcart Seed 1.68 SPH Media Fund 1.68 Snapcard provides a cashback app that incentivizes consumers to take photos of their receipts in exchange for rewards.

2 Xfers Seed 2.50 500 Startups, BWB Ventures, Convergence Ventures, Eduardo Saverin, GMO VenturePartners, Golden Gate Ventures, Lazena Investment, Partech Ventures

2.50 Xfers offers merchants a platform to connect their online bank account with that of their clients and collect and track payments.

3 Patientco N/D N/D Pamplona Capital Management 3.75 Patientco is a provider of payment acceptance solutions to the healthcare industry, incl. eBills and analytic features.

4 Ping++ B 10.00 China Broadband Capital, Linear Venture, Squoia Capital, Shengjing Technology

10.00 China based Ping++ provides an online payment solution, that integretes major third-party channels such as WeChat payment, AliPay, etc.

5 Minkasu Seed 1.00 Dan Palanisamy, Kannappan Mohan, Kuppanna G. Krishnan

1.75 Minkasu offers a mobile payment app, that works with QR coce scan or payment code and that is secured through fingerprint identification.

6 TransferFast Seed 0.16 N/D 0.16 Estonian TransferFast is a provider of bank to bank instant money transfers in the Nordics.

7 Facepay Angel 0.05 N/D 0.15 Facepay has not yet launched its product and there is not much information, except that it will make the mobile payment procedure without passinga regular checkout process.

8 Nxt-ID Venture 2.00 N/D 4.32 Nxt-ID is a provider of various biometric solutions for primarily mobile, but also online autentification.

9 PayIt A 4.50 Advantage Capital Partners, Five Elms Capital, Missouri Technology Corporation

4.50 PayIt provides online and mobile payment processing for government payments.

10 SatoshiPay Seed 0.39 Coinsilium Group, FastForward Innovations 0.63 SatoshiPay offers a browser wallet for bitcoin nanopayments, allowing users of a customers webside to unhide the premium content by paying a very little amount of money.

11 Jewel Paymentech A 1.00 Tuas Capital Partners 1.00 Jewel Paymentech provides risk management for payment acquirers that conducts merchant due diligence and uses predictive analytics to manage transaction fraud risks.

12 Pindrop C 75.00 Google Capital 122.00 Pindrop is a provider of a solution for audio-based authentication and fraud detection.

13 yoPay Seed 0.55 N/D 0.55 YoPay offers a online as well as mobile payment solution, where customers authorise payment transactions with their mobile phone number.

14 MOVO (MovoCash) Seed 0.70 Cox Orange Investment Ltd, Daniel Kjellen, Eric Solis

0.70 Californian MOVO provides payment tokens to enable P2P transfers at POS & NFC payment terminals.

15 OOO Fit (PayQR) Seed 3.90 Sergey Kozlovsky 5.40 Russian OOO Fit, developer of PayQR, is a provider of a QR-code based mobile payments solution.

16 Blockstream A 55.00 "AXA Strategic Ventures, 76.00 Blockstream provides the bitcoin technology sidechains, a peer-to-peer network that is interoperable with each other and with Bitcoin.

17 Thumzap Seed 3.00 Digital Garage, 3.00 Thumzap offers a payments platform dedicate to teens, enables them to send a request from within any participating app to their parents to approve and execute the actual purchase from any device.

18 Revolut Seed 4.80 Horizons Ventures" 7.60 Revolut offers MasterCard scheme based mobile money transfers and payments, which allow customers to pay globally without any fees by transferring currency automatically into the local currency of the country the customer is in.

19 Fit Pay Seed 3.10 Sierra Wasatch Capital, Ron Zuckerman, Yuval Tal, Eilon Tirosh

3.10 Californian Fit Pay offers a white label payment wallet, that allows customers to conduct highly secure, frictionless payment transactions.

20 Simplex A 7.00 Index Ventures, Venrex Investment Management, Point Nine Capital, Seedcamp, Balderton Capital

8.00 Simplex is a credit card acquirer, that enables crypto currency businesses to accept credit cards.

21 Shopbox Venture 2.20 Giesecke & Devrient 2.20 Shopbox is an integrated mobile POS system, that enables small businesses in the food and service industry.

22 WorldRemit Debt 45.00 DRW, Bitmain, Cumberland Mining, FundersClub 202.66 WorldRemit is a online and mobile money transfer business with the option to use card payments and innovative local payment methods

23 SwervePay B 10.00 N/D 11.60 United States based SwervePay enables patients in healthcare and clients in the automotive industry to pay bills on the go via text message.

24 payleven D 10.00 Silicon Valley Bank 25.23 Berlin based payleven provides payment acceptance devices, that enables merchants to provide their clients with debit and credit card payments via their smartphones or tablets.

25 Spreedly A 3.00 Garland Capital Group 5.50 Spreedly a cloud-based credit card vault that allows users to work with multiple payment gateways simultaneously.

26 Droplet Seed 0.64 MePay, New Enterprise Associates, ru-Net, HV Holtzbrinck Ventures

2.73 Droplet is a provider of a mobile payment app, including loyalty rewards.

27 Modo Payments Angel 2.00 Emerge 4.00 United States based Modo Payments provides a digital payments API.

venTure caPiTal acTiviTy & comPany Profiles Q1 2016

12

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payments Insight. Opinion.

Target (Country) Round Volume (USDm)

Investor(s) Funding (USDm)

Description

28 Signifyd B 20.00 Menlo Ventures 31.00 Signifyd provides a fraud protection tool for e-commerce merchants, that enables them to determine a client’s identity.

29 AppCard B 20.00 Alexander Rittweger 26.50 AppCard provides a loyalty app, where customers find coupons received via mobile or online and where merchants can do analytics and personalized offers.

30 Juspay Venture 5.82 Accel 5.82 India based Juspay is a provider of mobile and online payments with a browser-device for 1-click-experiences.

31 Ribbit.me Seed 1.50 Hayaat Group 1.50 Ribbit.me is an universal loyalty solution built on blockchain technology.

32 ChangeIt Seed 2.20 FedDev, Golden Triangle Angel Network, MaRS Angels

2.20 ChangeIT offers a charitable payments feature, that can easily be added to any debit or credit card.

33 BitPesa Venture N/D BitFury Capital 1.10 BitPesa provides a remittance platform based on bitcoin payments to send money to East Africa.

34 Onslip N/D 1.30 N/D 2.20 Onlsip is a Swedish payment solution provider that operates in the Nordics.

35 Anedot Debt 0.51 N/D 1.76 Anedot provides a platform for non-profits for the purpose of accepting donations via web, Facebook, and mobile.

36 International Payment Processing Network

Seed 0.10 N/D 0.10 International Payment Processing Network (IPPN) is an United States base payment processor.

37 SpeedETab Seed 0.65 Kris Singh 0.65 SpeedETab is a provider of a mobile ordering and payment app for restaurant clients.

38 Instarem A 5.00 Vertex Ventures 5.00 Australian Instarem is a provider of money transfer services to Indian clients, both individuals and businesses.

39 Mobetize N/D 0.50 N/D 3.20 Mobetize is a global mobile platform for MNO's, that enables non-NFC payments via mPOS, mPay and mWallet.

40 Momo B 28.00 Standard Chartered Private Equity 33.75 Vietnamese Momo is a provider of mobile payments and eWallet app, that enables clients to do payments and peer-to-peer transfers.

41 Ensygnia A 0.56 Gate Ventures Plc 7.18 Ensygnia provides a mobile payment app that allows users to make secure transactions on their mobile phones by scanning a validation code.

42 Elliptic A 5.00 Paladin Capital Group 7.00 Elliptic is a provider of blockchain intelligence software for the purpose of identifying illicit activity on the Bitcoin blockchain.

43 Stocard N/D 4.51 N/D 6.66 Mobile wallet and allows retailers to drive additional traffic to their stores through targeted mobile offers and coupons

44 Jumio Debt 3.70 Eduardo Saverin 36.71 Jumio is a provider of ID valudation software, that enables a friction-free mobile checkout process.

45 GoCardless  C 13.00 Notion Capital 24.80 GoCardless is a UK-based online direct debit provider mainly for B2B interactions.

46 Emburse N/D 0.12 N/D N/D Emburse is an expense management platform that provides debit cards for business with unique expense and accounting challenges

47 Meter Feeder Seed 0.12 Y Combinator 0.12 Meter Feeder's provides low cost payment solution for the purpose of vehicle parking to small to mid-sized governments.

48 CurrencyFair Venture 8.98 Octopus Ventures 24.43 CurrencyFair offers online money transfer and remittance services with real time foreign exchange rates.

50 Wave C 5.07 BDC Capital Corporation 44.77 Wave offers a cloud-based integrated suite of small business tools including accounting, invoices, payments & payroll. Offers also an online payment solution

51 Bluefin Payment Systems Venture 6.00 Camden Partners 6.00 Bluefin Payment Systems is the leading cloud-based provider of secure integrated payment technologies for independent software vendors (ISVs), SaaS providers and major U.S. and Canadian merchants through the PayConex payment platform.

13

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payments Insight. Opinion.

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