The year may be winding toward a close and slowing down, but this week the world of payments showed signs of neither as big players seemed to be racing down to the wire to get their big news out before the clock strikes 12 on the 31st and the calendar resets to 2020.
The world of B2B payments saw its latest significant acquisition play this week with Boston-based private equity firm Great Hill announcing its intention to acquire VersaPay, a company that provides cloud-based invoice-to-cash solutions. In other big payments industry pair-up news, though, the bigger attention-getter was joint the announcement out of Citibank and PayPal that going forward, institutional clients of Citi will be able to push payments into their customers’ PayPal digital wallets.
But the most head-turning news of the week when it came to pair-ups is the team of rivals that is coming together to collaborate to create an interoperable set of non-proprietary, open-source standard for smart homes and smart technology. Apple, Google and Amazon (among others) may be locked in a tight tooth-and-nail competition over … well, everything most of the time. But it seems when it comes to creating the interoperable base from which all smart homes can run, they’ve all decided getting onto a single page is preferable than each trying to write its own smart home bible.
So why is everyone getting by with a little help from their friends, or enemies in some cases, this week? To sort through it all and provide a roadmap for what’s next, Karen Webster sat down with Flywire CEO Mike Massaro this week to dive deep into the headlines and what it all means.
The B2B Receivables Revolution
Great Hill will be buying VersaPay — and paying a fair premium. In the deal announced this week, the Boston-based venture fund confirmed it would acquire “all of the issued and outstanding common shares of (VersaPay)” through a statutory plan of arrangement. According to reports, that agreement will see each VersaPay shareholder paid out at C$2.70 for each share. A present VersaPay’s full equity is valued at about $126 million fully diluted.
“The Consideration represents a 47.5 percent premium to the closing price of the VersaPay Shares on the TSX Venture Exchange on December 12, 2019 and a 64.5 percent premium to the volume-weighted average price of the VersaPay Shares over the last 30 trading days,” the release said.
So why is Great Hill paying said premium?
Simply, said Massaro, because Versa has built a very sleek and modern tech stack premised on digitizing invoices for the receivables side of B2B payments such that it modernizes and speeds up the flow.
“Everyone wants to take the friction out of the receivable side of payments,” Massaro noted. And though he is not quite sure what Great Hill is planning to do with VersaPay exactly, he said, he is fairly sure Great Hill is likely planning to roll something out with VersaPay built into it to take on that race.
They won’t be alone, he noted, because there are many businesses trying to solve this exact problem.
“What will be interesting to watch is how exactly they [Great Hill] do it. Right now there are a lot of moves on this out there: virtual cards, banking rales — there are a lot of different options for taking on the friction on the receivables side of payments, but no one has figured out the exact secret sauce when it comes to traditional, offline business that are working with paper invoices and checks.”
There are also, he noted, a lot of players in the space targeting particular markets — enterprise, SMB and micro-businesses working in tandem, but apart.
At this point, he noted, there is no way to pick a likely winner or set of winners. What there is, he said, is a lot to watch in 2020 when it comes to tracking the specific development of this market.
And speaking of developing and redeveloping markets ...
PayPal and Citibank’s Big Disbursement Deal
PayPal and Citi's new pair-up to make institutional payments to PayPal wallet possible, issues, according to the two firms, from a shared desire: To help facilitate a global network where payments are fast and easy and where choice is not in short supply. This is why, the firms noted, the plan for 2020 is to combine Citi’s cross-border remittance capabilities with the “truly digital and seamless client experience delivered by PayPal” to enable institutional clients to pay from anywhere to anywhere instantly.
“Mobile and digital wallets are becoming increasingly important alternative payment methods for our clients as they respond to changing consumer payment preferences. The growing digitization of our personal, professional and business experiences calls for ubiquitous and frictionless means of payment,” said Citi Treasury and Trade Solutions Global Head of Payments and Receivables Manish Kohli. “Combining Citi’s cross-border capabilities with the truly digital and seamless client experience delivered by PayPal will enable our clients to pay from anywhere to anywhere instantly, meeting their evolving needs.”
The core of the move, Massaro told Webster, is about banks realizing that they have to wed all of their disbursement capability to choice about where those disbursements are flowing.
“Payments isn’t about forcing people, because on both sides of a transaction people and businesses want choice. When people pay, they expect to be able to use their choice of cards or mobile wallets — and they are expecting the exact same type of freedom when they get paid.”
Providing that choice, however, is complicated and is forcing banks to open up their systems in some ways instead of trying to be the controlling, be-all-and-end-all hub for transactions. The modern needs of the payment ecosystem, he noted, simply no longer line up with that type of model.
“I think building the kinds of choice [for] the market requires organizations to have partnerships and do things that historically they might not have. You can’t build an ecosystem you own and control in the current global payments landscape.”
And the world of financial services, he noted, isn’t the only place learning that lesson this week. The burgeoning world of smart homes and technology is heading for a similarly collaborative moment.
Google, Amazon And Apple — The Connected Home Team Of Rivals
Sometimes collaboration is the best policy, and it seems that the world of smart homes is one of those areas. This week, Amazon, Google, Apple and the Zigbee Alliance (made up companies like IKEA, Samsung SmartThings and Silicon Labs) said they would be working in tandem to develop new royalty-free connectivity standard to make smart home products more compatible with security as a design tenet.
The goal is a new, open-source unified protocol that will grow compatibility for consumers and make development simpler for manufacturers. It is created around the idea that smart home devices should be seamless, reliable and secure.
The announcement noted, “by building upon Internet Protocol (IP), the project aims to enable communication across smart home devices, mobile apps and cloud services and to define a specific set of IP-based networking technologies for device certification.”
This, Massaro noted, was the most exciting news of the week from a “tech geek” perspective, because ultimately what it signals is the beginning of a new era of advances and innovations for smart home technology. It will, however, be a challenging project.
“Interoperability is a bit tricky, though I think it has to be done. I think this sets a standard that helps more innovation, more experimentation with the devices and a ... forum to answer the questions about data privacy and how to manage it.”
He compared it to the evolution of the internet — which did not (as popular legend has it) spring up without the burden of regulations or standardization — but, was made possible by the inclusion of various standards that made connecting the whole wide world over a single digital web possible.
Once that interoperable set of standards was in place, the countless innovations that were built over top of it came to define the first two decades of the 21st century. Will interoperable do the same thing for voice?
That is, from this vantage point, probably not knowable. What is evident, however, is that a generation of Americans is talking regularly to artificial intelligence (AI) every day, which, Massaro noted, is “very cool, and very Jetsons.”
It’s not quite a flying car or Rosie the Robot making breakfast, Webster and Massaro agreed.
But it is a very good sign, along with all the rest of the week’s news, that there will be no shortage of things to track in the world of payments and commerce when the ball drops in a little under two weeks.