The short-term coronavirus response revealed most merchants will need a more robust option for digital payments — and that’s prompting fresh investment in what was expected to be a slow period.
Shortly after Stripe announced a $600 million investment round to bolster its range of products that enable businesses to sell and receive payments online, Mountain View, Calif.-based fintech Rapyd acquired Korta, an Iceland-based merchant acquirer, with the intent to use Korta’s omnichannel card acquiring system to feed Rapyd’s hosted fintech services.
With a mix of APIs and automated self-service, Rapyd hopes to attract merchants who want to quickly build a localized digital payment and shopping mix.
“The new disaster recovery plan means you have to be able to provide 50% of your business services online,” said Arik Shtilman, Rapyd’s CEO. “You can’t rely on anything physical.”
Rapyd’s core business is supply chain automation, serving use cases such as a consumer in one country using a digital wallet to buy a product from a merchant in another country in that merchant’s local currency. The merchant can then use that payment flow to pay suppliers in a third country — using local currencies in each case.
Rapyd, which has a valuation of about $1.2 billion, has worked with local payment processors to support e-commerce, B2B and sharing economy businesses in the U.S. and international markets like Brazil and Singapore. It did not disclose financial terms of the Korta deal, but the price was reported to be in the “tens of millions” of dollars, according to Calcalistech. The deal is an “acquihire” with Korta serving as Rapyd’s Iceland-based branch. Korta processes about $2.5 billion in payments per year over Visa and Mastercard networks and will remove the need for Rapyd to use a third party to process payments over Rapyd’s “fintech as a service” platform.
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Cash use will suffer because of this outbreak, and there are factors other than germs contributing to this trend. A growing work-from-home workforce will funnel more shoppers into digital channels, including ones they may have never tried before.
“Companies that are in the e-payment space are now going to be called on to do acquiring,” Shtilman said. “Korta has a technology stack that can be integrated into our offering and has existing market share in the EU.”
Rapyd’s investors include Stripe, which invested in Rapyd in 2019 as part of Stripe’s diversification effort to compete with traditional acquirers such as Fiserv, FIS, Global Payments and payment technology firms like PayPal and Square.
Even as the economy slows, there has been investment in fintech providers that allow businesses to place more of their operations online, integrated directly with transaction processing.
Earlier in April, Australian cross-border payment technology Airwallex raised $160 million from Tencent and other investors to fuel an expansion beyond payments into broader services, with the expectation that Airwallex will make acquisitions to accomplish that goal quickly. And Japanese digital payment company Kyash raised $45 million from Goodwater Capital to add mobile banking technology to digital payments.
Brick-and-mortar merchants have dramatically increased their omnichannel transformation in 2020. According to an Emarsys/GoodData tracker survey of store-based retailers, since March of this year online sales have spiked in a year-over-year comparison, with Europe seeing increases in online orders up 71%, the U.S. and Canada growing by 56%, and APAC-region online orders soaring 82%.
In a recent roundtable interview with PaymentsSource, a group of payment technology executives said that even firms that have a digital payments program or digital acceptance were often not ready to fully migrate their businesses online, a problem that would create an opportunity for merchant technology providers.
While there has been a reluctance to embrace digital payment modes such as contactless transactions or mobile, the crisis should eliminate much of that reluctance, placing more demand on merchants to upgrade.
"Since the mid-'90s, Mastercard and Visa have tried in vain to interest U.S. banks, merchants and consumers in contactless payments. COVID-19 is more persuasive," said Eric Grover, a principal at Intrepid Ventures. "Nobody wants to touch. Issuers are rushing to put contactless cards in consumers’ leather wallets."
