Payment technology development is a hot space in 2018. The month saw both Square (formerly TienTzuo’s startup) and Nuvei (formerly Kyber Network) acquired by large corporation.
The purchase of Square by PayPal means the payment company could bypass the US government and continue to be one of the major credit card processors in the country.
Square started out as a mobile payments company which started by offering app developers and independent developers an API so they could process card transactions through Square. Since then Square has grown into a full-service consumer-facing firm, which should aid the brand expansion for users of Square, making it harder for the company to face regulatory risks.
This will most likely make Square a valuable acquisition by Amazon or Apple who have the payments systems they need but could use the company’s talent and technology for their own products.
Nuvei, meanwhile, started in 2001 as a website builder and SEO service provider in California which was the first to include a crowdfunding component. In 2016 the company made a $110m acquisition of MediaMath Inc, a global digital advertising agency.
Nuvei remained independent for the majority of its life, never being acquired. According to CEO Jacob Siegel, the company was facing a financial crisis, and after failed attempts to find a buyer offered for Mergers & Acquisitions.
Siegel says that it was the product of the now-defunct stock market bubble of 2007 that contributed to the financing crisis and occurred only a few years before the financial crisis in 2008. While it didn’t bear any of the loans, they did take one impairment charge with their first acquisition. They felt confident to start looking at acquisition opportunities once the stock market began to recover.
The company is now cutting its losses and selling off its communication business which was built when it bought PBwiki and added that to Salesforce.com.
Which one is better?
Nuvei was founded in 2001, has been an independent company since 2008 and had revenues of $90m in 2017 according to its annual report which also says its core business consisted of building products with a platform as a service aspect.
This means Nuvei was already ahead of its time on lots of aspects when they first began but was in the right place at the right time. Siegel thinks that because his company has always been independent he thinks they have an advantage in terms of being able to innovate without having to adhere to the traditional acquisition rules.
He says the company has been thinking about a blockchain based system for payments and that it plans to spend the extra $50m it is bringing in the form of the latest acquisitions. However, he has yet to expand on details of the blockchain system Nuvei has in mind.
Payment processing and blockchain companies are something of a new trend – they may face legal and regulatory issues, but Nuvei appears to be preparing for it. According to Siegel’s most recent interview, the company had approached a number of potential investors interested in investing in the company, and he cites Bitcoin as an example of potential applications.
What will happen to the tech companies?
In the interview Siegel explained that the rise of the blockchain is a key part of the Nuvei story. Despite Nuvei being an independent company, Siegel believes that their technology is important for all businesses which use the blockchain, but he doesn’t believe that businesses will use their services today. He says that sooner or later people will become enthralled with the technology, and that it will affect business differently once blockchain is more widely accepted in a number of industries and starts gaining currency.
I think that Nuvei is a company with a lot of vision and without question, its unique technology could play a major role in 2018 and the coming years. I don’t think this is a year where Nuvei will find itself in an aggressive acquisition market so it seems likely that you will be able to see Nuvei’s technology grow in power, but I would not expect it to reach the headlines as readily as companies like Square.
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