payments Insight. Opinion.

vol 11

CONTENT A report from Las Vegas – review of Money 20/20 1  A report from Las Vegas – review of Money 20/20 Andreas Habersetzer reviews this year's Money

20/20 conference. Andreas Habersetzer note, demonstrating the progress made with Cur- Partner rentC during the initial trial period in Salt Lake City. 3 Extended payment factories – CurrentC supports multiple payment technologies, the potential convergence of digital Attendees ranging from QR codes to BLE and NFC, depending payments and transaction banking Alongside 10,000 other people I made the way to Las on the use case of the merchant (in-store, at the The article considers some of the key transaction banking Vegas at the end of October to this year’s Money pump or drive-through etc.) and achieved a seam- infrastructures and the implications and opportunities of 20/20 conference. The current size of this annual less integration of the multiple loyalty programmes the growing relevance of digital payments from a corporate event underlines the current level of interest by the of MCX’s merchant members which represent treasury perspective. general public, the media, investors and industry annual revenue of over USD 1 trillion. The combina- insiders in fintech, payments and general innovation tion of payments and loyalty in one transaction, with 5 MERCHANT ACCEPTANCE: THE DIS- in financial services. By now, every major bank has set loyalty programes that already matter to the user COUNTER EFFECT FOR CREDIT CARDS up internal teams with the goal to manage the trans- today, could be a real differentiator for CurrentC. AND MOBILE PAYMENTS formation to the digital age – either through in-house Google (Android Pay) and Samsung didn’t want INNOVALUE investigates to what extent the recent moves developments, partnerships or acquisitions and be to be left out and also presented their solutions. from large discounter merchants might impact the pay- able to meet the needs of the much quoted millennial. Samsung Pay is based on the technology of Loop, a ment habits of German consumers. And members of these teams were represented plen- company Samsung recently acquired. Loop’s pat- tifully in addition to investors, start-ups and represen- ented Magnetic Secure Transmission technology 7 Pu blic market valuations and tatives from the large payment incumbents. “turns in-store payment terminals where you nor- the market environment mally swipe a credit card into contactless readers” Markets have seen considerable movements over the past Announcements allowing “universal merchant acceptance”. From my three months with significant share price corrections in Corporate announcements form a big part of Money understanding, Samsung Pay is also working with August. Markus Massem takes a look at valuation drivers 20/20’s agenda and a summary of selected key notes NFC, which would be helpful as the world is migrat- and benchmarks the different groups within the payments is provided in the following chapter: ing towards the EMV standard and away from mag- universe. The most notable announcement was probably the netic stripes. launch of ChasePay. With 94 million preloaded cards, With key notes from Poynt, Ingenico, Verifone and 9 M&A Activity Chase hopes to have a critical mass of consumers to First Data with its Clover product suite, POS system What are the key drivers of M&A and IPO activity? Which compete with the likes of Apple Pay, Android Pay, providers were well represented. After a year of transactions made headlines in the 3nd Quarter of 2015? Samsung Pay and all of the other digital wallets. development, Poynt is now ready to ship its cloud What are recent takeover rationales? Robert Kayser ChasePay will run on ChaseNet, Chase’s “closed-loop based POS and already has commitments for about answers these questions. network”, which is effectively Visa’s network as this 500k terminals. The firm came with a massive was agreed as part of a 10-year deal in 2013. The booth, USD 28 million in fresh funding and huge 11 Venture Capital agreement allows Chase to offer ChasePay at a fixed ambitions to Las Vegas. The terminals are beauti- Once again, the Innovalue team reviews the latest pay- price: “there will be zero network fees for merchants, fully designed and come with a sophisticated termi- ment startup funding activity (Q3 2015). What are current there will be zero merchant processing fees for the nal management system, app store and SDK. product or service innovations for investors, and what are merchants and there will be zero merchant fraud lia- Compared with that, Verifone’s next generation POS the global investment trends within the payment bility”. In addition, Chase is cooperating with MCX’s “Engage” looked quite traditional, but Verifone ecosystem? CurrentC to grant relevant merchants acceptance already has the scale that Poynt hopes to reach one from day one. The partnership combines consumer day. Like Poynt, Verifone and Ingenico presented 13 Deal Activity M&A (Chase) and merchant reach (MCX) and could be a their own versions of cloud-based marketplaces for Transaction overview game changer for CurrentC that has been written off business applications. First Data might currently be already by many in the industry. at the forefront, with 128 apps available (in the US) 15 VC Activity MCX’s CEO Brian Mooney also held a separate key and more than 350 in development. Transaction overview payments Insight. Opinion. 2

Through its announced partnership with Affirm, “The current size of First Data will also bring consumer financing solu- tions to the POS. this annual event The most notable element of PayPal CEO Dan underlines the current Schulman’s key note was his continued emphasis on level of interest by the general PayPal’s commitment to provide SMEs with working public, the media, investors and capital financing. So far, PayPal has provided over USD 1 billion to SME’s in the US, UK and Australia. industry insiders in fintech, payments and general innovation in financial services”

Blockchain Cloud-based POS / app marketplaces SMB Solutions

Faster payments

Alternative IoT P2P commerce lending B2B

Tokenisation Frictionless Mobile payments Artificial payments Intelligence

Social commerce

On the rise At the peak Sliding into Climbing the slope Plateau of productivity the through Figure 1: The payment market continues to be highly innovative, featuring solutions both for merchants and consumers

Key topics – the Money 20/20 Hype Cycle Start-ups to watch number of start-ups trying to revolutionize the real Trends change quickly in the current fintech envi- Innovation and start-ups played a big role at Money estate sector, from origination to financing. David ronment, where one exciting idea is quickly followed 20/20 this year, with events like Launchpad 360, a Weiden, Partner at Khosla Ventures, described real by the next. At Money 20/20, topics are excitedly pitch competition and plenty of high profile VC’s estate as one of the “most under-hyped” sectors in discussed in one year, followed by disillusion and present. FinTech. Another area where investors would like to reduced interest the year after. One of the mostly Monk (www.getmonkapp.com), “a mobile platform see more new initiatives includes insurance. debated topics this year was probably the block- aiming to provide financial security by enabling Finally a word about unicorns, (FinTech) start-ups chain and its potential to provide existing services social circles to save, borrow and lend together”, with a valuation of USD 1 billion or more, which are more securely and efficiently as well as to build new won the jury prize of the start-up pitch. Fluent increasingly entering difficult terrain or “no-man’s applications for business and consumers on top of (www.fluentfunds.com) was most convincing to the land”, as one investor put it, as they are facing diffi- it. While the launch of Apple Pay absolutely domi- audience. “Built on the blockchain, Fluent’s platform culties in raising money at previous valuations or to nated conversations last year, the lack of traction led enables businesses to reduce friction, improve meet their inflated expectations regarding to less enthusiastic assessment this year. The per- transparency, and boost efficiency in financial and valuations. ceived hype around certain topics followed by a commercial flows along the global supply chain”. drought inspired the development of a “Money Groundfloor (www.groundfloor.us), a “real estate 20/20 Hype Cycle” (figure 1), based on Gartner’s crowdfunding” website is among the increasing Hype Cycle for Emerging Technologie.

Page 1 payments Insight. Opinion. 3

Extended payment factories – the potential convergence of digital payments and transaction banking

Francesco Burelli Partner

Sungard indicates that “40% of companies are oper- unit manages all outgo- Given the centrality of both models would ating with 11 or more payment initiation systems1 ing payments through offer the most benefits to and 25% have over 21 payment initiation systems”. the centralisation of of payments for corporate treasuries, While this number can vary based on the type of account management, cash and liquidity albeit in a more complex company, it is a fact that companies, including SMEs, payment expertise and management and the growing treasury structure. This operate complex payment operations with multiple through the standardi- would combine efficient bank relationships, multiple accounts, and multiple sation of processes that complexity of treasury funding management, points of payments initiation, authorisation and con- ultimately offer better management … there is the liquidity optimisation trol. This challenge is addressed through the cen- transparency, lower potential to extend the reach with payment tralisation of bank account management and transaction cost and management. payment processing, that are otherwise managed at aggregated liquidity of a corporate treasury’s The statement from Sun- business unit or subsidiary level, with the aim to positions. The IHB payment factory operations gard at the beginning of address cost duplication, lack of scale and the need model is focused on the beyond payments to digital the article would be eas- of visibility that is otherwise required for effective management of funding ily translated into a simi- cash and liquidity management. and liquidity simplifying payments. lar statistics for digital The “payment factory”2 concept has now been cash utilisation, payment acceptance. implemented in a variety of business models of improved visibility and liquidity by acting as a corpo- While payment factories provide a consolidated which the shared service organisation (SSO) and the rate’s “in-house” bank for the various business units. approach to outgoing payments, account receiv- in-house bank (IHB) are the two most widely While both models have their advantages, it can be ables are very much polarised between a bank adopted. In the SSO model a centralised argued that a hybrid model leveraging the synergies model – that is aimed to invoice related

1 http://www.sungard.com/Regions/Africa/solutions/corporate-liquidity/payments-factory I 2 “A payment factory is an accounts payable function that has been centralized for an entire organization. This is an improvement on a distributed payables system, which incurs more administrative costs to ensure that multiple payables systems are properly managed.” Source: AccountingTools

Page 1 payments Insight. Opinion. 4

payments management – and a Payment Service This would encompass incoming payments with an of IHB platforms, driving further convergence and Provider (PSP) model – related to online receivable optimised mix of FX handling, payment flow consoli- blurring of business lines between digital payments payments where the role of a payment factory, in dation that would ultimately result into an optimised and transaction banking models. terms of FX management and payment flow consoli- liquidity management. Payment factories were a pre-eminent corporate dation across multiple payment instruments and As banks are often delegating and surrendering their treasury topic two, three years ago that has faded channel, is often fulfilled by a PSP on the back of an acquiring and digital payments business to monoline from mainstream debates likely on the basis of adop- online merchant acquiring proposition. acquirers and PSPs on a referral basis, and with the tion and business models that have reached a relative Given the centrality of outgoing and incoming pay- ongoing blurring of the boundaries between steps of stage of maturity, leaving the centre of public debate ments for cash, and liquidity management and the the payment value chain, there is a potential for PSPs to other arguments. It is highly likely that the topic will growing complexity of treasury management, on the branching out into transaction banking, to drive the regain pre-eminence rapidly as digital payment fin- base of the increased flows of international trade and emergence of a consolidated payment factories tech organisations realise the potential offered by the e-commerce, there is the potential to extend the model. When this will happen, the PSPs opportunity ability to support corporate treasury solutions beyond reach of a corporate treasury’s payment factory would include not only the provision of digital pay- converging online and in-store payments. operations beyond payments to digital payments. ment interfaces but the extension into the provision

SBU Payment factory Bank

SBU Bank Shared service organization

Internal External SBU Bank netting netting

In-house bank Digital SBU payment interface

Trading ... partners

Cashflow forecasting FX management Cash and liquidity optimisation Capital allocation

Figure 1: Payment factory

Page 1 payments Insight. Opinion. 5 MERCHANT ACCEPTANCE:

THE DISCOUNTER EFFECT FOR CREDIT CARDS AND MOBILE PAYMENTS

Kalle Dunkel March 2015 December 9th 2015 Interchange regulation passed Interchange regulation in effect Senior Associate

Lena Meyer § € Associate

Thomas Grohnert Principal May June July

Figure 1: Credit card regulation and new acceptance by merchants Large retailers accepting credit cards In a series of announcements over the last few (Aldi, Lidl, Netto) joined their two peers (Rewe, We have already seen such a discounter effect back months the largest German discounters have finally Edeka) in credit card acceptance. This adds over EUR in the mid-2000’s when discounters started to introduced the acceptance of credit card payments 57 billion in potential credit card volume. With food accept EC debit cards. The annual growth rate in in all their stores in Germany. These announcements retail accounting for about one third of the German consumer cards spending at retailers jumped for included among them some of the largest food retail market this definitely could lead to a so-called about three years from 12% to 34% before settling retailers Aldi (Nord & Süd), Lidl and Netto as well as discounter effect for the credit card market. (figure 2) again at a base rate of about 10%. (figure 3) Kaufland. Within the top five in the food retail sector only the more upmarket players such as Rewe and Edeka had previously accepted credit cards. Further- New more both MediaMarkt and Saturn, the large scale 460 Food CC Acceptance electronics retailers of the Metro Group, have intro- (Top 5) 97 57 duced credit card acceptance in May of this year. (21%) (59%) The most likely driver for this development is the Food 68 (others) new regulation for interchange fees for card-based (15%) payment transactions passed by the European Parliament in March of 2015. This regulation will Other 295 come into effect by December 9th 2015 and retail (64%) 40 Previous includes the capping of interchange fees for credit (41%) CC Aceptance card payments at 0.30% of the transaction value. Currently the interchange fee depends on multiple factors such as vertical and transaction technol- ogy and could be up to 1.85%. Supermarkets in Germany always had a preferred status. For exam- Figure 2: Volume implications of discounters (2014) ple for Visa transactions the interchange varies between 0.68% - 1.00%. Cutting the payment costs by such a degree clearly makes credit cards Growth p.a. [%] attractive for these low margin high volume EC retail businesses. transaction volume Market implication Germany [EUR billion] We think that the move by German food discounters to credit card acceptance will lead to a significant increase of the market share of credit card payments 10% in Germany. In the recent past the share of credit cards in Germany was relatively low at 5.3% of the retail transaction volume. Within the food sector this was even lower at about 2.7%. The contribution from food discounters was practically zero. Within the top five food retailers three merchants Figure 3: Discounter effect on EC cash retail volume

Page 1 payments Insight. Opinion. 6

Impact on NFC and mobile payments So far, there were about 60,000 active NFC termi- Among the swell of announcements regarding Over the last years the development in mobile pay- nals in Germany which accounted for about 8% of credit card acceptance multiple merchants com- ments has steadily been going towards NFC points of acceptance. This is relatively low compared municated that they would install NFC-activated scheme based solutions. All major device/operat- to other countries such as the UK with 260,000 terminals. These included MediaMarkt, Saturn and ing system manufactur- active NFC terminals even Aldi Nord. Furthermore both Visa and Mas- ers (Apple, Samsung & in the market. The terCard have been pushing to get their new termi- Google) as well as most Actions by large number of contactless nals sold to be NFC-activated. It stands to reason MNOs have based their retail merchants will transactions in the UK that the other newly credit card enabled players are mobile payments solu- was 81 million in June at least hardware-ready for NFC. Given this we tion on NFC. However, in significantly influence 2015. Looking at the might see yet another discounter effect – for NFC Germany neither NFC payment habits … Germany NFC acceptance at transactions. nor its prerequisite to leave the “Dark Age of large German retailers credit card acceptance in general there were Conclusion had been widely Payment” only two among the Overall, we at INNOVALUE believe that these available. 30 surveyed players actions by the large retail merchants will signifi- (Top 5 merchants, 6 verticals) which accepted NFC cantly influence the payment habits of German payments in the beginning of this year. consumers. Their new payment strategy might just pave the way for Germans to leave the “Dark Ages of Payment”.

Sources: GfK, Statista, Visa, Company Websites, INNOVALUE

Page 1 payments Insight. Opinion. 7

Public market valuations and the market environment

Markus Massem Senior Associate

The last 3 months up to October 13th have been a uncertain timing of an interest rate rise in the U.S. losses over the course of September. Verifone volatile time for international equity markets. A have made investors cautious. The risk of a slow- announced a USD 200 million share repurchase worldwide sell-off in mid-August led to a strong down in Chinese growth is possibly the single authorisation on September 28th, the first in Veri- decline in share prices and most important issue fone’s history, representing about 6.5% of the resulted in August being the The majority of driving investment company’s outstanding shares. Global Payments worst month for the Dow public companies decisions at the continues to be the strongest performer with YTD Jones in 5 years and the worst moment, keeping mar- gains in excess of 60%. The shares jumped 11% month for the S&P500 since in our payments kets somewhat alert. on October 8th on the back of strong earnings May 2012. In Europe, the universe have ended up The majority of public and an increase in the outlook for the year 2016. FTSE 100 fell below the 6,000 higher at the end of the three companies in our pay- The month of August saw two strongly antici- mark for the first time since month period even though ments universe (see pated IPOs as both WorldPay and First Data 2013 and also the German end of article for com- made their stock market debut. WorldPay was DAX dropped below the psy- the slowdown in August has position) have ended able to pull off the largest UK IPO of the year and chologically important mark been clearly reflected in the up higher at the end of was priced at 240p, in line with the most recent of 10,000 points. The drivers share price movements. the three month period price range of 235-250p. Advent International for the recent stock market (with 10 out of 18 and Bain Capital, who bought the company from movements are numerous and include a weaker stocks posting gains) even though the slowdown RBS five years ago received gross proceeds of than expected recovery in advanced economies as in August has been clearly reflected in the share GBP 1.2 billion and will retain a 49% share in the well as a further slowdown in emerging econo- price movements. A partial rebound from the company post the IPO. The listing values World- mies, especially in Latin America. In addition, the steep declines was followed by more consistent Pay at more than 16 times underlying 2014 impact of a slowing economy in China and the gains in early October, in line with the wider mar- EBITDA of GBP 375 million. ket. Since the beginning of the year, 13 out of the First Data ended up issuing its shares at a dis- The payments universe (alphabetical order): 18 stocks are still in positive territory. The overall count to the published price range of USD 18 to Acceptance: Global Payments, Ingenico, payment index is up by 4% over the past three USD 20, floating the company at only USD 16 per PayPoint, Vantiv, Verifone months and 16% since the beginning of the year. share. The company sold 160 million shares to Processing: Cielo, Euronet Worldwide, FIS, Fiserv, The acceptance bucket gained about 6% over the raise close to USD 2.6 billion. KKR, the company’s Heartland Payment Systems, Total System Services last three months, with both Vantiv and Global private-equity owner, was not selling any stock in PSP/Online payments: Wirecard Payments outperforming their comparable peers the offering, and the proceeds will be used solely Issuing/Prepaid solutions: FleetCor, Green Dot, WEX with gains of 21% and 22% respectively. PayPoint to pay down some of the company’s USD 21 bil- Schemes: American Express, MasterCard, Visa and Ingenico closed at the same level at the end lion in total debt, as was stated in the IPO filing. Sources: Innovalue research and company filings; of the period while Verifone’s stock declined by KKR had acquired First Data in April 2007 for Google Finance for share price data 11% over the past three months, given gradual about USD 29 billion.

135 Last 3 months 130 125 120 115 110 105 100 95 90 85 Jan-15 Feb-15 Mar-15 April-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Jul-15

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

Figure 1: Indexed stock price performance year-to-date October 13th 2015

Page 1 payments Insight. Opinion. 8

The comparables within the processing bucket 70% gained about 11% over the last three months. 60% 61% 61% Cielo was the only underperformer over the 50% period, with the share price declining consistently 47% throughout July until early October, losing about 40% 45% 13%. Heartland Payment Systems and Euronet 30% 31% Worldwide performed strongly, gaining more 29% 29% 26% 25% than 20% over the period following stable 20% 24% 24% increases post the August decline. 10% 14% 12% Within the PSP and online payments category, 10% 8% Wirecard AG gained 12% over the last three 0% Revenue growth CY 13-14 Ebitda margin CY 13 Ebitda margin CY 14 months and is up by 17% since the beginning of the year. Figure 2: Payments universe operational metrics as of October 13th 2015 The comparables of the issuing / prepaid solu- tions bucket lost about 6% over the last three 35.0x months, with all of WEX, Fleetcor and Green Dot 35.2 posting share price losses. WEX lead the losses 30.0x with 18% while Fleetcor and Green Dot lost 7% 25.0x each over the three months period. 25.6 Lastly, the trading comparables within the 20.0x 21.3 21.6 schemes bucket gained a total of 2% over the last 19.3 3 months. American Express shed another 2% of 15.0x 17.3 16.8 15.3 market value over the period while MasterCard 13.5 10.0x 12.8 12.3 finished unchanged and Visa gained about 8%. 11.3 9.2 American Express is still down by about 18% year 5.0x 6.3 7.4 5.0 5.6 to date. The company reported better than 4.9 3.6 4.3 0.0x expected second-quarter profit as it was able to EV/Rev CY 13 EV/Rev CY 14 EV/EBITDA CY 13 EV/EBITDA CY 14 benefit from cost-savings due to job cuts. Compe- tition for "co-brand" deals in which card issuers Figure 3: Payments universe trading multiples as of October 13th 2015 team up with prominent corporate partners to sell cards remains strong, and American Express lost Acceptance Processing PSP/Online payments Issuing/Prepaid Schemes a number of lucrative co-brand contracts this year due to the higher prices it charges compared to rivals.

Page 1 payments Insight. Opinion. 9

M&A Activity

Robert Kayser Senior Associate

In the third quarter of 2015, deal activity in the million, equates to a multiple of 6.1x EBITDA and M&A Market development international fintech industry has surged signifi- 0.8x revenue. The acquisition of Sungard by FIS 47 Numbers of transactions 15 46 50 cantly compared to the first two quarters. A total equates to a multiple of 13.1x EBITDA or 3.5x rev- 39 36 38 of 46 transactions have been reported with a enue. PayPal’s acquisition of Xoom for USD 982.4 14.1 40 10 total disclosed volume of USD 14.1 billion. Fur- million equates to a multiple of 48.9x EBITDA or 30 8.1 20 ther consolidations among mobile payment pro- 6.2x revenue. Envestnet paid 104.3 Yodlee’s 5 viders as well as (crypto-) currency markets EBITDA or 6.4x revenue in an acquisition valued 3.6 10 2.4 1.6 have been among the drivers. In addition, World- at USD 573.9 million. The enterprise/revenue USD billion Value 0 0 2014 2014 2015 2015 2015 pay went public while First Data launched its ini- multiple for CVC Capital Partner’s acquisition of Q3 Q4 Q1 Q2 Q3 tial public offering. Linxens is 6.6x. The acquisition of AppRedeem by Transaction volume Value USD billion Perk.com for USD 2.5 million equates to a multiple M&A activity and deal characteristics of 3.6x invested capital. Figure 1: Value and volume comparsion A total of 46 M&A transactions were announced in the third quarter of 2015. One less compared to Geographically, 61 per cent of the targets were the same period of 2014. However, it has been by based in North America (Q3/2014: 49%), fol- far the strongest quarter in 2015 in terms of deals lowed by 22 per cent in Europe (Q3/2014: 34%) Median enterprise value multiples and volume. Despite the sell-off in global markets and 11 per cent in Asia/Pacific. After a strong H1 in 16x 14.5 14.7 due to concerns about China’s economy, M&A Europe deal activity has been more quiet in the 14x 13.1 activity has not really been affected. While the last three months. As a result the pendulum has 12x 9.5 summer months tend to be generally slower for swung again in favour of the Anglo-Saxon inves- 10x 8x M&A activity, particularly August and September tors (+24% YoY) and targets (+12% YoY). There 6x 3.7 3.8 have been busy months. The financial terms of 14 has been only one Non-European investor to the 4x 2.8 transactions, with a total volume of USD 14.1 bil- 10 European targets in this quarter, a situation 2x lion, were disclosed. This quarter’s highlight in observed for the first time. Nevertheless my 2012 2013 2014 2015 Q3 terms of deal size is FIS’s acquisition of Sunguard hypothesis is that with the euro lower in value and Revenue Multiple Ebitda multiple for USD 9.1 billion including the assumption of growth slowly picking up, Europe could become USD 4.6 billion in long term debt. In June the com- again a vital target area for Asian and U.S. inves- Figure 2: median value, revenue, Ebitda pany filed to go public. But as speculated in our tors and boost cross-border activities. Looking last issue the group of private-equity firms that forward, M&A is still seen as the quickest way to owned Sungard, including Bain Capital, Black- expand in what remains a low or slow-growth stone and KKR & Co., preferred a clean exit before environment. Furthermore, cash will likely remain Target and buyers by region the full IPO process would have started. SunGard readily available and debt, while likely to get more 7% 2% 9% makes software for financial institutions from expensive, remains reasonably priced. Thus, in 15% 11% 9% 2% 4% which FIS expects to expand its enterprise bank- terms of deals, 2015 has still the potential to be a 28% ing and capital markets solutions portfolio. The record-breaking year. 34% 22% 22% combined company will have more than USD 9.2 billion in annual revenue, 55,000 employees and 60% operate in more than 100 countries. 49% 61% 67%

The median EBITDA-multiple decreased from Q3/14 Q3/15 Q3/14 Q3/15 14.7x to 13.1x between 2014 and 2015. The median Targets Buyers revenue multiple increased by 36 per cent, from RoW Asia/Pacific Europe North America 2.8x to 3.8x between 2014 and 2015. TIO’s acqui- sition of Softgate System, valued at USD 30.3 Figure 3: 2014-2015 funding comparsion

Page 1 payments Insight. Opinion. 10

Key drivers of and rationale for M&A activity Deal activity in Q3 has been coined by transac- tions in the mobile payments sphere which made up 26% of all transactions. Especially PayPal stands out with its two acquisitions of Xoom and Modest in the U.S. Through the acquisition of Xoom PayPal expands its international money transfer business portfolio whereas the purchase of Modest strengthens the commerce experi- ences. After the acquisition of Paydiant in March this year PayPal puts major efforts in mobile. This is in dire need as for example ApplePay not only launched successfully in the U.S. but also in the UK and SamsungPay started with a sweeping launch in South Korea. Alibaba continued its astonishing growth by grabbing a 40% stake in India’s Paytm for USD 680 million. The two com- panies intend to build a mobile payment ecosys- tem in the country. In addition, mobile payments can also be of interest for established industries. Volkswagen Financial Services, the financial sub- sidiary of German car producer Volkswagen, bought German sunhill technologies. The deal gives Volkswagen access to a mobile payment system and 2 million customers across Europe. Consolidation among pure mobile payment apps such as PayPal or Yapital might reach its turning debt of GBP 1.2 billion) or more than 16 times last Altogether 2015 might become a year of private point this year. However, in countries such as Ger- year’s underlying EBITDA. Private equity firms equity. Nearly 10% of all buyers in the third quar- many there are already more in-app payment Advent International and Bain Capital which ter have been strategic investors. Most recently solutions (e.g. myTaxi or Handyticket), then pure bought Worldpay for GBP 2 billion from Royal Iconiq, a secretive investment company that acts payment apps. Therefore, I expect mobile pay- Bank of Scotland five years ago as part of bail out for many of the most influential executives in Sili- ments also in the near future to be a major deal terms ordered by the European Union Bain, hit its con Valley, such as Facebooks’ Mark Zuckerberg driver. targeted valuation of GBP 6 billion. With the IPO or Twitter’s Jack Dorsey, has made an investment After initial transactions last quarter, consolida- Worldpay declined a GBP 6.6 billion takeover bid in Dutch payment processor Adyen. Less than a tion among (crypto-) currency marketplaces has of French Ingenico which has been in official year after raising USD 250 million at a USD 1.5 gained further speed. negotiations. In billion valuation from institutional investors Dutch Coinfy which pro- In terms of deals, addition, German including private equity group General Atlantic vides a mobile application Wirecard reportedly and Singapore’s Temasek, Adyen has raised funds that enables buying, sell- 2015 has still the has been among bid- now at a USD 2.3 billion valuation. This makes the ing, and accepting bitcoin potential to be ders but has not company one of the most highly valued technol- payment in stores, bought a record-breaking year revealed this in pub- ogy start-ups in Europe. In addition CVC Capital Coinzone to further lic. Worldpay pro- and Astorg Partners acquired French smart card expand its European mar- cesses around USD producer Linxens for USD 1.67 billion. The key ket share. Canadian Winston Resources acquired 564 billion in payments each year, from about reason for the investments is, in particular, the UK-based Crypto Next for USD 6.8 million. Finally, 400,000 merchants. It also handles about 40 search for returns to optimize the monetisation of Currencies Direct, a provider of foreign exchange percent of European Web transactions. Further- portfolios which can be apparently achieved by and international payment solutions, was pur- more, First Data launched its IPO after filing pub- the high scalability of some fintech businesses. chased by alternative investment managers Pal- licly in July. Former owning private-equity firm amon Capital and Corsair Capital. KKR & Co. planned to seek at least USD 2.5 billion Regarding initial public offerings (IPO) the general – on a valuation of USD 20 to 25 billion. This will market atmosphere has become increasingly likely be exceeded as the intended purchase of more benign. Payment processor Worldpay went 160 million shares would bring more than USD public which has been the largest floatation in the 3.5 billion in one of the largest IPOs in U.S. mar- UK in 2015 and is set to be the biggest IPO of a kets this year. The proceeds raised from the issu- private equity company in the UK ever. The listing ance would be used to redeem roughly USD 2.5 Sources: Bloomberg, Financial Times, Mergerstat, values Worldpay at GBP 4.8 billion (excluding net billion of senior unsecured notes. Mergermarket, Nilson, Reuters, company publications

Page 1 payments Insight. Opinion. 11

Venture Capital

Stefan Thomalla parties, with the aim to provide equity and debt largest venture round of USD 60 million from Ama- Associate capital. In recent years, the traditional institutional zon, Fidelity Growth Partners India, Mousse Part- lenders have been joined by new and agile market ners, Sequoia Capital and Walden International. Philipp Steinbrück players. Such players connect market participants Other Financial Services deals focused on compa- Associate in a peer-to-peer (P2P), business-to-customer nies offering integrated financial management plat- (B2C), customer-to-business (C2B) and business- forms (e.g. payable), cloud based services and Funding Activity to-business (B2B) relationship. During the third solutions that enable customers to manage both VC funding activity kept its momentum in the third quarter, KrediTech closed one of the largest rounds expenses and savings (e.g. Cloudability). It remains quarter of 2015. While the nominal number of of the segment. The German company uses big- to be seen if the shift in funding activities will con- funding rounds decreased to 117, compared to 153 data in combination tinue in the next in Q2 (and 113 in Q1), the overall funding volume with algorithms to quarter(s) for the increased. The total (disclosed) volume amounted evaluate credit risks A segment attracting Financial Services to USD 3.5 billion in equity and USD 335.9 million in and offer competi- interest of venture segment. debt financing in the third quarter. It is striking that tive loans. Kredi- capitalists as well as A segment attracting the average value per funding round increased by Tech succeeded in interest of venture cap- about 44% to USD 32.8 million compared to the two funding rounds large investment banks are italists as well as large previous quarter. this quarter – first in Virtual / Crypto Currencies investment banks are July, where it raised and the underlying blockchain Virtual / Crypto Cur- USD 110 million and rencies and the under- Funding Activity by Region in late September, technology. lying blockchain North America 61 where another USD technology. While the Europe 27 92 million were raised. Another success of this blockchain is the backbone of crypto currencies like Asia 20 quarter was Avant, the American consumer lend- Bitcoin, its potential applications range from smart Oceania 1 ing company, which raised USD 325 million in Sep- contracts to P2P data storage. The use of a distrib- tember. With this, it continues to become one of uted ledger, a protocol adding a new “block” with Africa 1 the largest online providers of B2C loans in the US. each transaction, makes the blockchain identifiable Australia 4 Investors included JP Morgen as well as the private and verifiable to the entire network. In the third South America 3 equity firm General Atlantic. With this investment quarter, a total of 11 fundings with a total volume of Total 117 JP Morgan extends its interest in Avant, following USD 72.8 million occurred. Of these transactions, the USD 200 million “warehouse” credit facility the several were targeting ventures researching the firm and Credit Suisse provided in August. blockchain technology in applications aside from Although North America continues to lead the field Based on the number of deals (15), Financial Ser- crypto currencies. Targets included among others and accounts for more than half of the disclosed vices was the 3rd largest funding segment of the PeerNova, a Californian based company, offering a funding rounds, FinTechs based in Asia were able to quarter. However, as 27 deals were closed in Q2, blockchain based data storing solution. The com- gain ground. Out of the 117 funding activities 20 this represents a significant decrease of 44 percent pany raised USD 6 million from an undisclosed were in Asia, making it (by the number of funding in the segment. Even more remarkable is the reduc- investor. The segment’s largest venture capital was rounds) the biggest winner of this quarter. Europe tion in terms of funding volume. In Q2 a volume of raised by Chain (USD 30 million) from well-known continues to secure the second place with a total of around USD 591 million was raised (USD 345 mil- companies including Visa, NASDAQ, Citi, Capital- 27 funding rounds. Australia is ranked fourth with a lion Q1), in Q3 funding’s with a total volume of only One, Fiserv and Orange. total of 4 funding rounds and is closely followed by USD 219 million (minus 63 percent) were closed. South America, with 3 funding activities. Not seen This trend was caused in particular by low North on the list of the last quarter, however now present American funding activity, with only 6 Financial Funding Activity by Segment again is Africa, where one funding activity took Services venture rounds during this quarter (17 in place. Q2). Contrary to this is the Asian market, where Financial Marketplace 26 twice as many deals were conducted in Q3 (4) Financial Services 15 Investment Trends compared with 2 in Q2. This pattern is in line with Online Payments 8 Similar to the trend seen throughout the year, finan- the overall market trend for Asia. Therefore it is not Mobile Payments / mCommerce 16 cial marketplaces was the biggest winner of ven- surprising that the largest deal in the segment was Virtual / Crypto Currency 11 ture capital funding (26 funding activities). also raised in Asia. India based BankBazaar, which Others 41 Financial marketplaces concerns the process of provides instant customized rate quotes on loans Total 117 enabling the transfer of cash flows between two and insurance products, received the segment’s

Page 1 payments Insight. Opinion. 12

Chain develops network solutions based on the number of funding rounds showed a decrease com- or be unsuccessful in raising funds from venture blockchain technology, aiming to change the acces- pared to the previous quarter, the overall average capitalists. We expect this to continue and poten- sibility of information and the transfer of assets. capital raised increased substantially. We believe tially intensify further. Though the third quarter showed a decrease in that this trend will continue in the upcoming quar- In our view, ventures related to the blockchain tech- funding activity within this segment, we believe ters as ventures seem to grow and are aiming for nology are going to be of increasing interest during that the increasing interest by institutional inves- higher capital fundings. the upcoming quarters. We believe that funding will tors and initiatives by large banks will fuel invest- It will be interesting to see whether a shift in the further shift from Bitcoin to the underlying block- ments in blockchain related ventures in the funding concentration by segment will take place. chain technology. upcoming quarters. The Financial Marketplaces segment, typically the segment with the highest number of funding Conclusion rounds in 2015, showed a big dive compared to the This quarter is another indicator of the growing previous quarter. Competition within this segment interest in FinTech ventures. While the nominal seems to accelerate, potentially causing smaller players to be pushed out of the market

Page 1 payments Insight. Opinion. 13

DEAL Activity M&A Q3 2015

Date Target Company Country TC Industry Buyer(s) (Country) Country Transaction Announced value (USDm) 1 01/07/15 Linxens France Manufactures smart card connectors CVC Capital Partners UK 1,665

2 02/07/15 Xoom USA Provides online money transfer services internationally PayPal USA 982.4

3 02/07/15 iSend USA Provides international electronic payment Ding Ireland N/D

4 06/07/15 Columbus Data Services USA Processes automated teller machines Cardtronics USA 80

5 06/07/15 XE.com Canada Provides Internet foreign exchange tools and services for Euronet USA 40 corporate clients

6 14/07/15 Talio Labs USA Develops mobile messaging application Remitly USA N/D

7 14/07/15 Softgate Systems USA Provides independent neighborhood-based payment center TIO USA 30.3 operation services

8 15/07/15 TransGlobal Payment Solutions UK Provides collaborative payment and collection solutions Equiniti UK N/D

9 15/07/15 Transaction Wireless USA Provides wireless payment solutions First Data USA N/D

10 21/07/15 NettCash Zimbabwe Provides financial investments services Mozido USA N/D

11 23/07/15 American Credit Card Processing USA Provides electronic payment processing services Priority Payment Systems USA N/D

12 27/07/15 Premier Payments USA Provides credit and debit card payment processing services Newtek Business Services USA 16.5

13 05/08/15 YTS Solutions India Provides mobile payment solutions to individuals, operators Bharti Airtel India N/D and financial institutions

14 06/08/15 Financial Tech USA Provides API banking services Silicon Valley Bank USA N/D

15 11/08/15 Yodlee USA Provides digital banking, financial data and account Envestnet USA 573.8 aggregation services

16 11/08/15 Currencies Direct UK Provides foreign exchange and international payment Palamon Capital + Corsair Capital UK 310.9 solutions to private and corporate clients.

17 11/08/15 CoinRepublic Singapore Operates an digital currency brokerage platform meXBT Mexico N/D

18 12/08/15 SunGuard USA Provides software and technology services Fidelity National Information USA 9,749 Services

19 12/08/15 CT-Payment Canada Provides comprehensive point-of-sale services to financial Smart Card Marketing Systems USA N/D institutions and merchants for debit and credit card authorization and settlements 20 13/08/15 Coinzone Nether- Provides online payment services Coinify Netherlands N/D lands

21 14/08/15 Mobileview Italia Italy Provides mobile payment solutions BOKU USA N/D

22 19/08/15 Modest USA Operates as mobile commerce platform PayPal USA N/D

23 21/08/15 Tastebud Technologies USA Develops mobile loyalty applications Raise Marketplace USA N/D

24 27/08/15 FutureAdvisor USA Provides investment advice BlackRock USA N/D

25 01/09/15 Banco Nacional De Mexico SA (Merchant Mexico Engages in merchant acquiring business EVO Payments International USA N/D Acquiring Business)

26 01/09/15 FX Mart India Provides electronic payments services Flipkart India 6.8

27 02/09/15 Boku (Pay By Call Business) USA Provides call payment services DaoPay Austria N/D

Page 1 payments Insight. Opinion. 14

Date Target Company Country TC Industry Buyer(s) (Country) Country Transaction Announced value (USDm) 28 03/09/15 Wipit USA Provides financial services solutions for the unbanked and Urban FT USA N/D under banked consumer

29 04/09/15 Cash Bases Group UK Designs and manufactures cash management equipment APG Cash Drawer USA N/D

30 04/09/15 iPay88 Malaysia Provides online payment gateway services and solutions NTT DATA Japan N/D

31 07/09/15 Qustomer Belgium Provides digital loyalty solutions ING Netherlands­ N/D

32 09/09/15 Aurora Financial Systems USA Operates as payment processor and program manager Finicity USA N/D

33 11/09/15 Crypto Next UK Offers white label crypto currency exchange services Winston Resources Canada 6.8

34 14/09/15 Terrapin Financial Services USA Provides merchant processing services BluePay USA N/D

35 15/09/15 Toyota (Co-brand US Credit Card USA Provides payment services Alliance Data Systems Corporation USA N/D Portfolio)

36 15/09/15 Catalyst Business Development USA Provides payment gateway services, sales and software Spindle USA N/D solutions

37 16/09/15 sunhill technologies Germany Provides mobile payment systems Volkswagen Financial Services Germany N/D

38 16/09/15 Beanstream Internet Commerce Canada Provides payment, risk management and authentication Bambora Sweden N/D services

39 18/09/15 Spree Commerce USA Provides an open-source ecommerce platform for stores First Data USA N/D

40 21/09/15 Ambur POS USA Provides iPad and iPhone point of sale system for more than ShopKeep.com USA N/D 1,500 restaurants

41 21/09/15 AppRedeem USA Provides an advertising platform for mobile application Perk.com USA 2.5 discovery, branding, and monetization

42 22/09/15 Cover USA Provides mobile dining application for payment of bills Velocity USA N/D

43 23/09/15 GRG International (Australian ATM Australia Operates automated teller machines DC Payments Australasia Canada 1.5 Business)

44 23/09/15 B+S Card Service Germany Provides electronic payment solutions Deutscher Sparkassen Verlag Germany N/D

45 24/09/15 Sightline Payments (ATM and Cash USA Provides payment solutions for gaming companies NRT Technologies USA N/D Business)

46 29/09/15 Paytm (20% stake) Asia Provides mobile payment solutions Alibaba China 680

Page 1 payments Insight. Opinion. 15

Venture Capital Activity & Company Profiles Q3 2015

Target (Country) Round Volume Investor(s) Funding Description (USDm) (USDm) 1 GFG Group (NZ) Venture 167.00 N/D 180.00 GFG Group provides consumer electronic payment software solutions to banks, mobile network operators, and third party processors. 2 LoanSolutions (PH) Seed N/D John Dang, Kickstart Ventures, KK Fund N/D Loan Solutions is the largest platform in the Philippines that connects borrowers and lending partners online. 3 BankBazaar (IN) C 60.00 Amazon, Fidelity Growth Partners India, Mousse Partners, 79.00 Chennai based BankBazaar is a neutral online marketplace that gives instant Sequoia Capital, Walden International customized rate quotes on loans and insurance products comparing products of India's leading financial institutions. 4 Pret d’Union (FR) D 34.00 Eurazeo, Pierre Kosciusko-Morizet 52.40 Pret d’Union provides an online platform to facilitate financial transactions between individual lenders and borrowers. 5 Payever (DE) Seed 0.55 High-Tech Gruenderfonds 0.81 Combnies different payment and shop application in one register card on a mobile device. 6 Ant Financial (CN) A N/D National Social Security Fund (NSSF) N/D Ant Financial is an online payment services provider that enables individuals and businesses to execute payments online in a secure manner. 7 InvoiNet (AR) N/D 4.00 IFC N/D InvoiNet makes electronic invoices available for financing within an online marketplace. 8 FAMOCO (FR) Venture 4.40 Aurinvest, Bpifrance, Hi Inov 5.40 FAMOCO is creating android-based NFC reading devices.

9 LSQ Funding Group (US) Private 40.00 Ares Capital Corporation 140.00 LSQ Funding provides specialized accounts receivable financing to growing Equity companies. 10 SlimPay (FR) B 16.60 Prime Ventures (Lead) 16.60 Payment gateway for SEPA Direct Debit and more.

11 Nearex (SG) B N/D Beenos Partners, Tata Capital, Xinvesco N/D Nearex offers a proximity transactions system (devices for merchants and contactless cards for customers). 12 IndiaLends (IN) Venture N/D DSG Consumer Partners (Lead), Siddharth Parekh N/D IndiaLends is a digital lending and borrowing marketplace.

13 Lendingkart (IN) A 10.00 Ashvin Chadha, Mayfield Fund, Saama Capital, 10.00 Lendingkart is an online financing company dedicated to help entrepreneurs Shailesh Mehta and small businesses with Working Capital Loans. 14 Karmic Labs (US) A 5.00 Greycroft Partners (Lead), Marketplace Fund I, LP 7.70 Karmic Labs offers a budget and cash flow planning tool for managers that allows their employees to request specific amounts of cash for specific events. 15 Toast (SG) Seed 0.75 Startupbootcamp N/D Toast is an online and iOS money transfer app that allows users to send money instantly without using the current legacy banking network SWIFT. 16 Fundible (UK) N/D 0.11 Wales Technology Seed Fund N/D Fundible offers a platform on which customers can club together to collectively buy a product or service. 17 BitFury Group (US) C 20.00 DRW Trading Group, Georgian Co-Investment Fund, 60.00 BitFury is the leading, fully integrated Bitcoin Blockchain security and iTech Capital infrastructure provider. 18 KrediTech (DE) C 110.00 Peter Thiel, N/D 158.00 Kreditech loans money to customers with little or no credit rating.

19 Self Lender (US) Seed 1.50 Silverton Partners 2.00 Self Lender offers a consumer finance service to help underserved people to build up credit history. 20 Airbitz (US) Seed 0.45 Damian Cutillo, Paul Puey, Rick Henri Chan, Tim 0.45 Airbitz offers a Mobile Bitcoin wallet. Horton, William Swanson 21 ClassWallet (US) Seed 1.90 Accelerated Growth Partners, Kaplan Ventures, 3.10 ClassWallet is a virtual wallet for schools that replaces cash, checks and MaverixLab, NewSchools Venture Fund, William interoffice envelopes. Through ClassWallet, administration, parents and Guttman vendors connect with teachers for peer-to-peer funding. 22 Fenergo (UK) Private 75.00 Insight Venture Partners 75.00 Fenergo offer Client LifeCycle management software to private banks, Equity spanning the front and back office functions. Covers KYC, CDD, AML, UDSI, MiFID II, FATCA, Dodd-Frank. 23 Fastacash (SG) B 15.00 Rsing Dragon Singapore, Life.SREDA, UVM 2 Venture 23.50 Fastacash allows users to send "value" in the form of money, airtime etc Investments as well as digital content such as pictures and videos through social networks and messaging platforms. 24 GiftStarter (US) Seed 0.13 500 Startups 0.16 GiftStarter is an application offering Gift partial payments.

25 Fastacash (SG) B 15.00 Rising Dragon Singapore, Life.SREDA, UVM 2 Venture 23.50 Fastacash allows users to send "value" in the form of money, airtime etc as Investment well as digital content such as pictures and videos through social networks and messaging platforms. 26 Credit Benchmark (UK) B 20.00 Balderton Capital, Index Ventures 27.00 Operate a unique model for credit risk data, aggregating anonymized credit risk estimates from leading banks and financial institutions. 27 Malauzai Software (US) Venture 11.00 N/D 24.10 Created mobile banking SmartApps to serve community banks and credit unions.

Page 1 payments Insight. Opinion. 16

Target (Country) Round Volume Investor(s) Funding Description (USDm) (USDm) 28 Estimize (US) B 3.60 WorldQuant, Bob Greene, Briam Finn, Euromoney 6.20 Financial platform which facilitates the estimation of fundamentals for Institutional Investor, Frank V. Sica, Jarrod Yuster, Peter independent analysts. Nesvold, Ross Garon 29 Ethoca (CA) Private 45.00 Spectrum Equity 45.00 Ethoca offers a solution to Fraud by providing a platform to bring together Equity Card Issuers and Merchants. If Card Issuer notices committed fraud then the Merchant is made aware through the Fenergo platform. 30 Upstart (US) C 35.00 Third Party Ventures, Collaborative Fund, First Round, 53.20 Upstart is a lending platform, lending money to people based on their Khosla Ventures Education and Experience as opposed to their credit score. Upstart offers 3 year fixed rate loans. 31 FlyPay (UK) A 10.70 Time Out 12.40 Allows restaurant customers to check, split and pay the bill on their mobile devices. 32 Linqpays Limited (MT) Seed N/D N/D N/D Linqpays offers ist clients Finance management support.

33 ShoCard (US) Seed 1.50 AME Cloud Ventures, Digitsl Currency Group, Enspire 1.50 Digital identity enabled by the blockchain. Capital, Morado Venture Partners 34 Privitar (UK) Seed 1.20 David Cleevely, David Gammon, Gerard Buggy, Sir 1.20 Enables organisations to extract value from sensitive data sets while Peter, Tom Glocer complying with regulation and protecting client privacy. 35 Revolut (UK) Seed 1.50 Balderton Capital, Seedcamp 2.00 Revolut is a card and App which allows customers to pay for items all around the world with zero fees. It transfers the currency automatically into the local currency of the country the customer is in. The card is part of the MasterCard scheme. 36 Innovati (IN) Venture 5.00 Catamaran Ventures 6.60 Solutions for improving operational efficiency and enhancing customer experience in every payment transaction. 37 CircleBack Lending (US) A 17.50 N/D 22.20 Internet-based consumer lending platform with two aims: provide prime and super- prime consumers in the Unite States a fast and efficient way to borrow money at attractive rates and institutional investors a robust platform to invest in these loans. 38 Bitx (NG) A 4.00 "Digital Currency Group 4.80 Allows acceptance of Bitcoin by merchants and provides Fis with institutional PayU" storage and liquidity tool and access to advance crypto-fiat transfer protocols and customised solutions. 39 Mint Payments (AU) N/D 2.94 Vix Investments N/D Omni-channel payments processing solution provider. Focus areas are: Customer Present (CP) payments via mobile devices such as smartphone or tablets, leveraging innovative Bluetooth NFC card readers. Customer Not Present (CNP) payments via the internet such as e-commerce, MOTO, recurring or bill payments. 40 Factom (US) A 1.00 N/D 1.10 Factom has developed the Blockchain software to simplify records management, record business processes and address security and compliance issues. 41 Money Mover (UK) N/D 1.00 N/D 2.00 International payment enabler and currency exchange platform for SMEs.

42 Mswipe Technologies (IN) C 25.00 Axis Bank, DSG Comnsumer Partners, Falcon Edge 25.00 mPos solution that links to an bank account and runs on any mobile device. Capital, Matrix Partners India, Meru Capital, Olacabs 43 DealStruck (US) Debt 10.00 Community Investment Management (CIM) 9.50 Lending marketplace connecting profitable, small- and medium-sized businesses with individual and institutional accredited investors. 44 Bankers Toolbox (US) N/D N/D Accel-KKR N/D Banker's Toolbox helps community banks with software based solutions to prevent money laundering as well as fraud and kite prevention. 45 China Rapid Finance (CN) C 35.00 Broadline Capital 56.00 Consumer credit access to Chinese consumers. Omni-channel borrower acquisition system and proprietary Big Data Analytics. 46 Buyatab (CA) Seed N/D N/D N/D eGift Card Solutions offered to merchants with mobile integration. Customers can purchase, send and redeem eGift Cards from their mobile device through text, email or social media. 47 Cognia (UK) Venture N/D Oxford Capital Partners, Swisscom, Vodaphone 4.60 Cognia has a cloud-based PCI compliance payment processing solutions and reduce PCI compliance requirements by 90%. 48 Shopkeep (US) D 60.00 Activant Capital 97.20 Cloud-based Point of Sale for restaurants and retail stores which also allows for reporting, analytics and customer marketing. Also allows inventory management. 49 OneVest (US) A 2.00 N/D 5.30 OneVest aims to connect early stage tech companies with accredited investors. OneVest has over 80,000 entrepreneurs and 15,000 investors registered. 50 Stripe (US) D N/D American Express, Visa, Sequoia Capital, Kleiner 190.00 Stripe offers online merchants the ability to accept and manage payments. Perkins Caufield & Byers 51 iwoca (UK) B 20.00 Acton Capital Investors, CommerzVentures Global, 31.50 Lending facility for SME's to access funding similar to larger companies helping Redline Capital Management them to place large stock orders and bridging cash flow gaps. 52 Seedrs (UK) Equity 2.50 N/D 22.80 Seedrs offers investors to invest as little as USD 10 per transaction into startups Crowd­ looking to raise capital. The company completes the most deals in Europe. funding 53 Crowdcube (UK) C 6.00 Balderton Capital, Draper Esprit, Numis, Tim Draper 15.90 Crowdcube enables investors to invest or loan to small companies in return for equity or an annual return. Platform for startups and investors to meet on the platform. 54 Cryptocurrency Research Grant 3.00 National Science Foundation 3.00 The firm is a cross-discipline research firm which focuses on studying Group (US) cryptocurrencies and other decentralised consensus tech. 55 BankFacil (BR) A 3.00 Accion Frontier, Redpoint eventures 4.40 BankFacil uses Financial Education as a tool to understand what type of loans are required by consumers and uses Real Estate and Autos as collateral.

Page 1 payments Insight. Opinion. 17

Target (Country) Round Volume Investor(s) Funding Description (USDm) (USDm) 56 Beat the Q (AU) A 5.00 Reinventure 5.00 Beat the Q allows customers to order on route to the merchant, thereby skipping the Queue as your order will be ready. Merchants take payments online. 57 GREX (IN) A 0.63 Chandru Badrinarayan, Kunal Bajaj 0.63 Grex offers a platform on which high-growth start ups with good upside opportunities are posted for other investment professionals to potentially invest in. 58 SavingsGlobal (DE) B 21.80 Index Ventures, Ribbit Capital, Tom Stafford, Yuri 32.00 SavingsGlobal and its German brand WeltSparen provide on online Milner infrastructure for savers to find best Deposit rates from International Banks. 59 CashStar (US) D 15.00 FTV Capital, Intel Capital, Mosaik Partners, North Hill 43.00 CashStar offers personalised gift cards which can be sent instantly, with Ventures, Passport Capital omni-channel capabilities. Allows merchants to combine gift cards with marketing and reward programmes. 60 Ezetap (IN) C 23.50 Bergruen Holdings, Capricorn Investment Group, 35.00 Ezetap make a device which can be connected to your smart phone to Helion Venture Partners, Horizons Ventures, The enable card payments. Business is developed in India. Social+Capital Partnership 61 Payable (US) Seed 2.10 Freestyle Capital, Haystack, Lerer Hippeau Ventures, 2.10 Payable offers contractors the ability to manage and analyse payments as Moment Ventures, Redpoint Ventures, Rick Marini, well as having Onboarding, Work-Tracking analytics. Rothenberg Ventures, Y Combinator 62 Mogl (US) Venture 7.90 Aequitas Capital, Avalon Ventures, Correlation 45.20 Reward App which gives user 10% cash back if they pay by Credit Card Ventures, Monroe Capital, Moore Venture Partners, or Debit Card. The user will receive a link which offers them the chance to Sigma Partners donatethat cashback to the homeless. 63 Prodigy Finance (UK) Venture 12.50 Balderton Capital, Ed Wray 12.50 Loans offered to students who wish to join Business School. Company has a 99% repayment rate after having loaned out USD 75 million to students. 64 Cloudability (US) B 6.00 N/D 15.80 Financial Management tool which enables businesses to track all cloud based expenses and analyse them to gain data to mentor spending. 65 bitFlyer (JP) Venture 4.00 Mitsubishi UFJ Capital 6.90 bitFlyer is a trading platform for the virtual currency Bitcoin with either a Mitsui Sumitomo Insurance Company private or corporate account. Venture Labo 66 ToneTag (IN) N/D 1.00 Reliance Capital N/D ToneTag develops a Software, that enables the interaction between a merchant's and customer's device via sound waves and NFC technology without the need of a specific hardware. 67 Vendorin (US) N/D 0.89 N/D 4.90 Vendorin runs a platform for business owners, through which B2B transactions can be made electronically instead of being handled via checks. 68 Digital Retail Apps (US) Seed 0.76 Texas Ventures 0.76 Digital Retailer Apps offers an mobile application, which allows the client to scan and pay for items without the assistance of a sales person. Simultaneously, staff can accept payments via the mobile applications when serving a client but not using a traditional POS device. 69 Xfers (SG) N/D 0.12 N/D N/D Xfers offers merchants a platform to connect their online bank account with that of their clients and collect and track payments. 70 GuiaBolso (BR) B 7.00 Ribbit Capital (Lead); e.Bricks Ventures; Ed Baker; 7.00 GuiaBolso offers its clients a platform to better manage their money by Kaszek Ventures; Mark Goines; Omidyar Network; helping in financial-decision making and automates the process of improving Peter Kellner; QED Investors; Valor Capital Group and categorizing transactions from users' bank accounts and credit cards. 71 nVoicePay (US) Debt 1.80 N/D 10.30 nVoircePay manages the invoices for the client and coordinates the best payment method, time of money transfer and thereby reduces the transaction costs while increasing efficiency. 72 Tesorio (US) N/D 0.12 Y Combinator 0.12 Tesorio operates a platform through which it is matching vendors and buyers and uses an algorithm to calculate the financial rates, that appeal to both. Hereby it is optimizing the working capital demand of its clients. 73 iZettle (SE) D 67.00 Intel Capital (Lead); Zouk Capital LLP (Lead); 83North; 175.80 iZettle provides POS solutions such as card readers for iPhones or tablet. Creandum; Dawn Capital; Index Ventures Northzone; Santander Innoventures 74 PaidEasy (US) Seed 2.00 Ivor Ichikowitz 2.00 PaidEasy is a mobile application through which its users connects with a merchants and can add purchases to her shopping cart which than can be clear through the application. 75 Payoneer (US) E 50.00 Carmel Ventures, Greylock Partners, Nyca Partners, 90.00 Payment Solutions which allows firms to receive, withdraw and send payments Ping An, Susquehanna Growth Equity, Wellington globally. Customers include Google and Airbnb. Management 76 Tyfone (US) C 6.60 CIA, David Petraeus, In-Q-Tel 11.90 Patented, neutral and comprehensive memory card-based payments solution for mobile contactless payments. Services include Mobile Banking, Mobile Identity Management, Mobile Remote Payments, Mobile Retail Services and Mobile Contactless Payments. 77 Avalon Solutions (US) N/D 2.00 Privat Investor 5.00 Avalon Solutions is engaged in the development of Software as a Service (SAAS) applications, to provide its clients (small-to-medium businesses) with payment process solutions such as mPOS. 78 MarketInvoice (UK) Venture 10.00 Paul Forster, VC Northzone 20.40 MarketInvoice pre-finances invoices for family businesses, high net worth individuals and corporates. 79 CaptialMatch (SG) A 0.70 CE Tech Invest 0.70 CapitalMatch offers short term loans to SMEs and investment opportunities Crystal Horse Investments to private people. Innosight Ventures" 80 Drip Capiral (US) N/D 0.12 Y Combinator 0.12 Drip Capital is offering SMEs short term credits.

81 SericaPay (US) N/D 0.12 Y Combinator 0.12 An platform through which merchants can accept and customers make payments. 82 Revel Systems (US) C 13.50 ROTH Capital Partners 128.50 Revel Systems provides an iPad point of sale solution that is mobile, cloud-based, and secure. This state of the art system offers an open API with third party integration, detailed and extensive real-time reporting, and is the only POS solution to offer True Offline Mode. Revel Systems exceeds standards set for PCI compliance, and offers the security of the cloud to allow an owner to conduct his or her business from anywhere.

Page 1 payments Insight. Opinion. 18

Target (Country) Round Volume Investor(s) Funding Description (USDm) (USDm) 83 Grouplend (CA) A 10.20 Lance Tracey (Lead) 10.20 Grouplend offers its clients loans that can be set up via their website. Markus Frind" A credit rating and payment schedule is setup via the website and offers consumers a convenient way to get a loan. 84 SoFi (US) N/D 1,000.00 N/D 1,750.00 SoFi is a P2P lending platform for private loans (focusing on educational loans) that combines reduced rate student loans and career advice. 85 Avant (US) Debt 325.00 Jefferies & Company 1,730.00 AvantCredit operates a web based consumer-lending business JP Morgan // KKR & Victoria Parc Capital for short term loans of up to USD 20k. 86 Dianrong (CH) C 207.00 China Fintech Fund 219.00 Shanghai based Dianrong offers a P2P lending platform. Standard Chartered Bank 87 XENDIT (US) N/D 0.12 Y Combinator 0.12 XENDIT is a mobile wallet through which customers can transfer money to merchants and friends. 88 Moneytis (FR) Seed N/D N/D N/D The firm enables its clients to transfer money to an receiver in an other currency. 89 Able Lending (US) B 6.00 Blumberg Capital (Lead); RPM Ventures (Lead) 12.50 Able is a lender for SMEs, offering loans for a period over the term Expansion Venture Capital; Peterson Partners; of 1-5 years and additionally supports the new ventures with advice SierraMaya360 on marketing and growth strategy. A normal Able loan consists out of 25% raised through F&F and 75% added through Able. 90 Nok Nok Labs (US) C 16.30 DaouKiwoom Group; DOCOMO Capital; Thundersoft; 47.80 Nok Nok Labs offers a user verification solution that allows for an DCM Ventures; Lenovo Group; ONSET Ventures; Raven identification to any application by using the existing security capacities Ventures of their respective device. 91 Magiccube (US) Seed 2.20 Azure Capital Partners; EPIC Ventures; Bialla Venture 2.20 The firm has developed a software-only technology that aims to Partners; Visa stops digital-transaction fraud at the endpoint of a transaction. 92 XENDIT (US) N/D 0.29 Y Combinator 0.41 XENDIT is a mobile wallet through which customers can transfer money to merchants and friends. 93 Remitly (US) C 12.00 N/D 34.50 Remitly offers expatriates a money transfer services from a mobile phone in the US to a mobile phone in a country abroad. 94 InVenture (US) A 10.00 Collaborative Fund (Lead); Google Ventures 11.20 Allows clients to get a loan via its mobile phone instead of going to Lowercase Capital; Mesa Ventures a broker or bank. 95 Electronic Payments (US) 1 Round 5.00 Super G Funding 5.00 The company has a Station-, Mini- (tablet) and Mobile- device, through which payments can be accepted. In addition, the product supports the merchant with additional business information such as inventory levels etc. 96 Paymium (FRA) N/D 1.10 Galitt; Kima Ventures; Newfund 1.10 Paymium is a marketplace for Bitcoin which is tries to secure compliance standards by working with an approved payment institution. 97 Prospa (AU) B 60.00 AirTree Ventures; Carlyle Group; Entree Capital; 60.00 Prospa offers short term loans to Australia located SMEs for the Ironbridge Capital period of 3 to 12 month. 98 CommonBond (US) B 35.00 August Capital (Lead), Existing Investors, Nyca 195.70 CommonBond offers a higher education loan to students at a lower rate, Partners, The Social+Capital Partnership, Tom Glocer, however allowing investors to receive a sustainable return. Tom Kalaris, Tribeca Venture Partners, Victory Park Capital, Vikram Pandit 99 ShapeShift (CH) Seed 1.60 Digital Currency Group (Lead); Bruce Fenton; Michael 2.40 ShapeShift provides a bitcoin and other virtual currencies exchange. Terpin; Roger Ver; Trevor Koverko 100 Shift (US) N/D 50.00 N/D 50.00 Shift is an Mobile application similar to a mobile wallet (regardless of currency) that is connected with a Visa card, allowing the client to control money and to make mobile and card transactions. 101 Kash (US) Seed N/D Structure Capital, Draper Associates, Green Visor 2.00 Kash is a provider of a direct bank mobile payment app that is also Capital rewarding consumers purchases with deals or free gifts. 102 Chain (US) B 30.00 Capital One; Citi Ventures; Fiserv; Nasdaq; Orange; Visa 43.70 Chain provides an easy access API to the Bitcoin blockchain that allows developers to simply integrate Bitcoin protocol. 103 Abra (US) A 12.00 Arbor Ventures; Carthona Capital; First Round; RRE 14.00 Abra is an mobile application through which customers can upload Ventures money, transfer it to friends and merchants and withdraw money at Abra tellers (shops) globally. 104 Case Wallet (US) N/D 1.00 Future Perfect Ventures 3.15 Case Wallet is a potable device (size of a credit card) which allows the customer to pay with bitcoin by scanning a barcode and verifying ones identity via a fingerprint. 105 LightSpeed (CA) C 61.00 Caisse de Depot et Placement du Quebec (Lead); 126.00 POS software developer LightSpeed develops a mobile payments service. Investissement Quebec (Lead); Accel; iNovia Capital; 106 Fundera (US) B 11.50 Susquehanna Growth Equity (Lead); Aaron Levie; 14.90 Fundera is an online market place that helps SMEs to facilitate funding BoxGroup; David Rosenblatt; First Round; Khosla through alternative lending. Ventures; QED Investors; Scott Belsky 107 Satispay (IT) A 3.50 N/D 11.20 Satispay is a payment network that can be used for micro payments, P2P money transfer, in-store and online purchases. 108 PaySur (MEX) Seed 0.25 N/D 0.28 Allows clients to register at the platform and transfer money to other users or businesses via registered credit- or debit cards. 109 PeerNova (US) N/D 6.00 N/D 19.00 The firm offers a platform through which data's validity is secured based on the blockchain principle. 110 KrediTech (DE) C 92.00 J.C. Flowers & Co., Amadeus Capital Partners, Värde 355.00 German based Kreditech applies Big Data technologies on credit Partners, HPE Growth Capital, Blumberg Capital, Peter decisions to give out short term microloans globally. Thiel

Page 1 payments Insight. Opinion. 19

Target (Country) Round Volume Investor(s) Funding Description (USDm) (USDm) 111 Paytm (IN) N/D 675.00 ANT Financial, Alibaba Capital Partners 875.00 India based Paytm is a provider of a mobile commerce platform, including a mobile wallet. 112 Pushpay (NZ) N/D 18.70 Pie Funds Management 22.60 New Zealand based Pushpay provides a mobile payment app, which can be used at any registered merchant throughout the United States, Australia or New Zealand. 113 Ellevest (US) A 10.00 Morningstar, Mohamed El-Erian, Contour Venture 10.00 US based Ellevest offers an investment platform for women. Partners, Andrea Jung, Ajay Banga 114 Credible (US) A 10.00 Soul Htite, Carthona Capital, Ron Suber, Scott 12.70 Credible offers an online lending platform, which is dedicated to Langmack students to get access to loans as well helping them to refinance their loans afterwards by calculating an individual saving plan. 115 Qualpay (US) A 8.00 N/D 8.00 US based Qualpay is a provider of a multichannel acquiring and payment processing platform. 116 Safe Cash Payment Seed 1.12 Bialla Ventures, Naveen Jain, Vuk Bulajic, Vinh Vo, N/D Safe Cash offers a crypto currency payment system allowing cash Technologies (US) Chris Kitze. to be used as a digital asset, with member banks storing U.S. dollars and providing tokens which are redeemable for cash. 117 Adyen (NL) Venture N/D Iconiq Capital N/D Adyen is a payment service provider specialised in multi channel web-based payment processing for merchants - via web shops, at the POS as well as mobile applications.

Page 1 payments Insight. Opinion. 20 disclaimer

Introduction Publisher and author of this document is INNOVALUE Management Advisors GmbH, Heimhuder Str. 69, 20148 Hamburg („INNOVALUE“). The use of the document is free of charge. In return, the addressee and reader agrees through reading this document – without any restriction or amendment – with the following terms, which shall be governed by and construed in accordance with the laws of the Federal Republic of Germany without any reference to International private law:

No advice This document is designed as academic document which solely reflects INNOVALUE’s opinion and which was drafted for information purposes. In no case, the document must be seen as advice. By publishing this document, no contractual relationship to INNOVALUE will be created and INNOVALUE will not be obliged in any way. This document contains selected information and does not purport to be complete. Partially, this document is based on documents and data from third parties. INNOVALUE has assumed that these data and documents are correct and complete.

Exclusion of warranties INNOVALUE uses best endeavours to provide each respective reader with reliable information in a timely manner. However, INNOVALUE has made no representation or warranty and accepts no liability for the quality, correctness, actuality and completeness of the information and data contained in the document. In no case, the document and the information contained therein shall form the basis on an investment decision or another economic decision or must be seen as decision recommendation of INNOVALUE.

Certain statements and information in the document, including but not limited to the assumptions, estimations and projections of future trends constitute "forward looking statements”. Regarding such forward looking statements, INNOVALUE has expressed no opinion on, and accepts no responsibility for the suitability and/ or accuracy of such forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from such forward looking statements. Therefore, INNOVALUE accepts no liability for forward looking statements. The same applies for decisions of any third party which has been taken on the basis of the document.

Liability Although this document has been drawn up with care, the possibility that it may be incomplete or contains errors cannot be excluded. INNOVALUE, its subsidiaries, shareholders, executives and employees accept no liability for the correctness and completeness of the document. In particular, they shall not be liable for the statements, projections, stated market or competition situations, described regulatory environment, etc. or other information contained in the document. No liability for direct or indirect damage shall arise as a result of any incorrectness or incompleteness of the document.

Rights related to content and layout This document is and remains the sole property of INNOVALUE. The content and the layout is protected by applicable copy right and intellectual property laws as well as in similar manner. Unless the prior written approval of INNOVALUE, the partial or complete reproduction, transfer, modification, combination and use of the document for public, commercial or other purposes is strictly forbidden. Brands and logos used in the document are also legally protected. Unless the prior written approval of INNOVALUE, these brands and logos must not be used.

Page 1 21

About Innovalue

INNOVALUE is a leading strategic management advisory firm dedicated to the financial services industry. INNOVALUE’s clients are global or national market leaders, regional specialists, innovators and entrepreneurs that have trusted INNOVALUE for over a decade as their preferred advisors. In the three practices – Payments, Banking and Insurance – INNOVALUE has a distinctive industry know-how based on years of experience, deep and tested insights and established methodologies. The industry practices are complemented by two cross-functional service lines: Corporate Finance and INNOVALUE Solutions.

In the payments practice our clients range from high-growth mobile payment startups to established financial institutions or telecom companies and from cut- ting-edge strategic players to high-profile private equity and venture capital investors. We develop and implement tailored solutions on topics of strategic impor- tance – including Growth, Efficiency and M&A – on engagements across Europe and beyond. Our clients uniquely benefit from the passion of our consultants in the payments industry, through extensive international project experience, methodologies and the use of very current and pertinent data and benchmarks.

Kai-Christian Claus Managing Partner

PHONE +49 40 41 30 36 13 MOBILE +49 163 413 13 63 [email protected]

Hamburg office

Francesco Burelli Partner

PHONE +44 203 283 43 25 MOBILE +44 788 781 30 03 [email protected]

London office

Andreas Habersetzer Partner

PHONE +44 203 283 43 25 MOBILE +44 795 735 86 98 [email protected]

London office Images: Shutterstock Images:

hamburg Frankfurt London Heimhuder Straße 69 Siesmayerstraße 21 3 More London Riverside 20148 Hamburg 60323 Frankfurt am Main London, SE1 2RE Germany Germany United Kingdom www.innovalue.com

Page 1