A current overview of one of the hottest sector in Fintech.

Article by Maxime Mandin published by BlackFin Tech

If we had to name one fintech sector that benefited from the pandemic crisis, it would definitely be Payment. With the shift towards an economy that relies much more on online interactions, online payments have increased a lot since 2020. According to Business Insider, “the coronavirus pandemic accelerated payments industry digitization by two to three years”. To give you figures, the global digital payments industry is expected to hit $6.6trn value in 2021, a 40% increase in two years — according to data presented by Finaria.it.

A more structural reason that explains why Payment is so hot at the moment lies in the fact that payment companies are easily able to expand internationally. As payment is used everywhere, it’s not hard for a fintech like Stripe or Adyen to convince customers all over the world.

Today, payment companies are the ones with the highest valuations. It’s particularly true in Europe, with fintechs like Klarna ($45.6B), Checkout.com ($15B), Rapyd ($2.5B) or Ppro ($1B). As reported in CB Insights Q1 2021 Fintech Report, all of them raised mega-rounds in the first quarter of 2021 that put their valuation above the symbolic sum of one billion dollars.

The three graphs below show:

(1) how big has become payment industry compared to other fintech categories in terms of VC funding, both in the world and in Europe:

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(2) inside the payment sector itself, how great the beginning of 2021 has been in terms of funding compared to 2020:

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Nevertheless, payment companies are not homogeneous. Now that you get why Payment companies can’t be ignored in the coming years, let’s deep dive into the different trends of BtoB payment solutions, subgroups and what’s at stake for each segment. Who are those payment platforms offering new payment experiences for “B” customers?

A — BtoB solutions for e-merchants

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1. Payment orchestration platforms

Why we think it’s hot

These platforms are appealing to e-merchants as they are one-stop shop solutions and can be considered as (partial) outsourcing of the payment department of those merchants. By enabling the aggregation of PSP, they increase the number of connected acquirers, conversion and performance rate. Last but not least, by offering the opportunity to pre-integrate payment methods and services around payment (fraud detection, analytics), these solutions enable fast-scaling and roll-out.

Food for thoughts

What are some potential limitations? First, those one-stop shop solutions might create by definition a single point of failure for merchants in case of technical issue. Second, PSP and service providers might see those players as distribution channels but are generally rather reluctant to be integrated in those platforms which are disintermediating them.

2. Fraud detection

Why we think it’s hot

These new generation solutions are powered by machine learning, which delivers significantly better performance compared to previous business rules-based fraud detection engines. It results in reducing the number of false positive and frauds, which in turn generates proven ROI for e-merchants.

Food for thoughts

Nevertheless, these premium solutions require model training in order to detect specific and advanced fraud patterns — and are therefore a bit overengineered and expensive for small merchants.

3. Split payment

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Publié le 19 juillet 2021