Thank you for that interesting insight, Jevgenijs! My opinion is, that Worldline and nexi have focused too much on geographical expansion through M&A to create European giants as they have seen how the market and the US is turning from bank-lead to ISV-lead distribution model. This brought them huge portfolios of SMB businesses from their various acquisitions and also a huge problem, as in contrast to the Adyen and stripes of this world these companies do not have an underlying unified processing platform and are therefore weak on leveraging the power of integration, internationalization and data. They have simply underestimated the technological progress which haunts them, as they now compete against these new unified players that power the underlying payment infrastructure of various marketplaces and ISVs that make the market in Europe. Their fragmented, local solution portfolio limits their execution power and that makes them unattractive to various innovative ISVs, who are ultimately going for worldline's and nexi's existing customer base. For me this is the fundamental challenge of these players, of course next to a very volatile post-Covid fintech market.
Hello, Martin! Appreciate your comment! I understand why Worldline and Nexi would struggle competing with Adyen and Stripe for enterprise merchants -> totally agree with you that fragmented systems don’t help them.
But what about SMBs? (which are the core segment for both, Worldline and Nexi). Does a merchant in Belgium really care that in Germany Worldline has a different system? Doubt that.
I guess it comes down to losing ISVs, but not sure how to even explore this theory.
I agree with you that the SMB market in Europe is highly localized and therefore less dependent on an international set-up. That said, the SMB market is all about understanding the merchant pain points and offering them pro-actively a truly integrated, omnichannel merchant ecosystem. Therefore data and connectivity are main ingredients to a successful merchant relationship, which local banks suck at and where ISVs are winning merchants over. Payments for ISVs are the connective tissue to understand the merchant and sell more and more services to them. This raises their own TAM. Eembedded payments are therefore a core offering for them, as they also offer the possibility to sell more financial services. Approx. 70-80% ofToasts and shopify's revenue is derived from selling financial services. In the US the "attached payments" rate is 80+%, meaning that SMB merchants take up the payments offering from the ISV. These ISVs again are increasingly operating across regions, which makes them an increasingly powerful distribution channel in the US. Therefore.....while the SMB merchants might only have local interests and preferences, there new best friends, the ISVs, operate on an international scale and they like a unified offering (just as theirs) that gives them access to omnichannel data. This is why stripe and adyen are powering so many marketplaces and ISVs. Long story short, in the SMB sector the adyen and co indirectly change the landscape, while for bigger international merchants it is a direct competition. It is an interersting enviornment to look.
Why are the firms based in continental Europe sluggish? I think it simply reflects the economy of this region. I see headlines today of plant closures from VW.
The EU has really dropped the ball thanks to their poor governance from Brussels' bureaucrats and extreme over-regulation of the continent. Europe needs to wake up. Europe is the sick man of the western world.
In Europe, the payment initiation service also plays a role, and therefore, evaluating the entire market volume based on card payment turnover alone does not give a complete picture.
Initiating a payment has a different business logic (it's it must be free for everybody), and it seems to me that this is why acquiring as a business is no longer profitable in Europe.
Completely agree with you, alternative payment methods and now account-to-account payments cannot be ignored in Europe. Though I think for Nexi and Worldline, offline volumes are still the key.
Very nice research 👍
Good work, seems that payments' landscape still remains in your heart :)
Thank you for that interesting insight, Jevgenijs! My opinion is, that Worldline and nexi have focused too much on geographical expansion through M&A to create European giants as they have seen how the market and the US is turning from bank-lead to ISV-lead distribution model. This brought them huge portfolios of SMB businesses from their various acquisitions and also a huge problem, as in contrast to the Adyen and stripes of this world these companies do not have an underlying unified processing platform and are therefore weak on leveraging the power of integration, internationalization and data. They have simply underestimated the technological progress which haunts them, as they now compete against these new unified players that power the underlying payment infrastructure of various marketplaces and ISVs that make the market in Europe. Their fragmented, local solution portfolio limits their execution power and that makes them unattractive to various innovative ISVs, who are ultimately going for worldline's and nexi's existing customer base. For me this is the fundamental challenge of these players, of course next to a very volatile post-Covid fintech market.
Hello, Martin! Appreciate your comment! I understand why Worldline and Nexi would struggle competing with Adyen and Stripe for enterprise merchants -> totally agree with you that fragmented systems don’t help them.
But what about SMBs? (which are the core segment for both, Worldline and Nexi). Does a merchant in Belgium really care that in Germany Worldline has a different system? Doubt that.
I guess it comes down to losing ISVs, but not sure how to even explore this theory.
I agree with you that the SMB market in Europe is highly localized and therefore less dependent on an international set-up. That said, the SMB market is all about understanding the merchant pain points and offering them pro-actively a truly integrated, omnichannel merchant ecosystem. Therefore data and connectivity are main ingredients to a successful merchant relationship, which local banks suck at and where ISVs are winning merchants over. Payments for ISVs are the connective tissue to understand the merchant and sell more and more services to them. This raises their own TAM. Eembedded payments are therefore a core offering for them, as they also offer the possibility to sell more financial services. Approx. 70-80% ofToasts and shopify's revenue is derived from selling financial services. In the US the "attached payments" rate is 80+%, meaning that SMB merchants take up the payments offering from the ISV. These ISVs again are increasingly operating across regions, which makes them an increasingly powerful distribution channel in the US. Therefore.....while the SMB merchants might only have local interests and preferences, there new best friends, the ISVs, operate on an international scale and they like a unified offering (just as theirs) that gives them access to omnichannel data. This is why stripe and adyen are powering so many marketplaces and ISVs. Long story short, in the SMB sector the adyen and co indirectly change the landscape, while for bigger international merchants it is a direct competition. It is an interersting enviornment to look.
Why are the firms based in continental Europe sluggish? I think it simply reflects the economy of this region. I see headlines today of plant closures from VW.
The EU has really dropped the ball thanks to their poor governance from Brussels' bureaucrats and extreme over-regulation of the continent. Europe needs to wake up. Europe is the sick man of the western world.
https://www.euronews.com/business/2024/10/22/us-europe-economic-growth-divergences-to-widen-further-imf-warns
In Europe, the payment initiation service also plays a role, and therefore, evaluating the entire market volume based on card payment turnover alone does not give a complete picture.
Initiating a payment has a different business logic (it's it must be free for everybody), and it seems to me that this is why acquiring as a business is no longer profitable in Europe.
Oh, hi, Jaan! Long time no see! :)
Completely agree with you, alternative payment methods and now account-to-account payments cannot be ignored in Europe. Though I think for Nexi and Worldline, offline volumes are still the key.