In a deal announced July 20th, French hardware and software payment company Ingenico buys Swedish payment company Bambora for 1.5 billion Euro. So why would they do that?
First of all, Bambora is in competition with many of the largest payment companies in the world like Android Pay, Apple Pay, Alipay and not to mention PayPal. In correlation to these, they are a small fish but in a big pond. However, they have a lower transactional fee and some cutting-edge solutions benefiting both the seller and the buyer. Secondly, and probably most importantly; they were for sale!
Ingenico makes POS (Point of Sales) payment terminals used in over 100 countries worldwide. They also make a lot of software related to this, holding on to a lot of the payment chain. However, they do not have control over the actual payments, just the systems to handle them. With purchase of Bambora they will get control over transactions worth at least 55 billion Euros (2016) and quite a good customer base in the 10 countries Bambora are present in. Ingenico can now with their own presence and impact throughout the world, easily sell a full solution to their customer, regardless of channel. This means that they can control the whole payment infrastructure and transaction for their customers and probably to a lower cut and TCO than their competitors.
A lot has happened in the payment business over the last years. We have seen quite a large transformation from traditional cash payments to credit or debet cards as consumers shop online more than ever before. But though more and more Internet usage is originating from the phone and not PC’s, the conversion rate for shopping baskets made from phones are much lower than from PC’s. Nearly 40% lower. So why is that? Surveys show that shoppers give up on entering all information from their credit card onto the retailers payment page. Some retailers have tried to “circumvent” this by adding services like Android Pay, Alipay, Apple Pay and of course PayPal, but that may be giving away more percentage to these companies with often higher cost than directly to the credit card company or cooperating banks. Bambora has developed a small app that uses the phones camera and AI to read your card info and enter it into the check-out page of the retailer regardless of design.
Bambora was started by the Swedish based risk capital company Nordic Capital in 2013. They started it after convincing SEB to sell their international card handling platform to them for 2 billion SEK. Since then they have bought several companies for the same amount and started Bambora as we see today in 2014. Even from the start the company had 400 employees and several customers, so they did not start from scratch. However, investing approx. 420 million Euros and getting 1.5 billion Euros three years later, cannot be seen on other than a good investment. But of course, a risky one.
So why are we blogging about this? Well, it only shows that we are in the start pit of consolidation of companies like this, and thus also development of more equal looking, yet innovative, companies going further. Looking at the pricing in this transaction, we predict that many companies will try to achieve the same. But all this is “old school”. All transactions are with fiat money – good old cash but in different formats from card vendors like Visa, Mastercard and AmEx. Nothing digital – nothing new. Same shit, new wrapping. Why change a winning formula? Time will show that things will change – and change fast.
We note that the evaluation of a three-year-old company Bambora with a quite small transaction volume, is valued at 1.5 billion Euros. We only imagine what a company with transaction volumes of over 1 billion Euros a day would be worth. Take your seats and fasten your seat belts. This will go fast!