It’s no secret that digital payments have gotten a major boost in the wake of the pandemic, leading to stiff competition in the global industry as disruptive startups challenge incumbents with cutting-edge technology and innovative solutions.
In the Netherlands, for example, payments firm Mollie has seen its business explode since the onset of the pandemic, disrupting a market once dominated by the popular, decade-plus old eCommerce payment system, iDEAL, that was created by local banks to allow customers to pay for online purchases via direct online transfers from their bank account.
In an interview with PYMNTS, the firm’s CEO Shane Happach acknowledged that the iDEAL network is one of a few in developed markets in Western Europe where bank-to-bank payments have successfully challenged card dominance and helped to keep payment costs down for consumers.
But despite operating a highly sophisticated and effective low-cost payment system, banks never went the extra mile to cater to business-to-business (B2B) customer acquisition for online payments.
“They [banks] provided the rails and the infrastructure, but a company like Mollie made those integrations far easier to consume and allowed businesses that wanted to take payment to have a full checkout — not just the last mile, but everything that was required to get a customer through the shopping experience, and then all the way through to reconciliation and aftercare,” Happach told PYMNTS in an interview.
Today, the company offers companies a way to seamlessly integrate payments into sites, documents and other products through the use of an application programming interface (API). Last June, Mollie raised $800 million that valued the B2B startup at $6.5 billion, making it one of the most valuable startups in Europe.
“There’s a lot of tailwinds in the industry and there’s a lot of tailwinds in the company, [and] we’re obviously very proud to have new investors on the cap table to help us grow the business over the next five to 10 years,” he said.
Outside their home base, the Dutch unicorn firm currently serves small- to medium-sized business (SMB) clients in Germany, France and Belgium, and launched operations in the U.K. last year.
Enough Space for Everyone
Despite the firm’s success, Happach said he is not oblivious to the fierce competition in the payments space, as established foreign firms like Visa and Mastercard — and rising giants like Square and Stripe — battle local players like Mollie and Adyen for a bigger share of the pie.
He argued, however, that competition drives innovation and forces companies to up their game to provide a better experience for their customers, making it a win-win for merchants and consumers alike.
Moreover, all the major competitors combined still make up under 10% market share, and because payments remain a highly fragmented sector, there’s still a lot of room for each firm to grow in the specific niche they’ve chosen.
“We would call Adyen a very well-resourced tier one enterprise player focused on big multinationals,” he explained. “We would view Square as a largely physical point of sale champion in the US market [that is] expanding into eCommerce and we would see us [Mollie] as a SMB online-led company potentially expanding into one of the other areas over time.”
Sometimes customers move between payment providers, and other times they use multiple payment providers, which means that multiple payment providers can serve the same end customer.
“[It’s] another thing that keeps the industry really rich in terms of competitive innovation,” he added.
Financial Services Suite for SMBs
Moving forward, Happach said growing Mollie’s presence in the U.K. is one of the firm’s top priorities this year, while acknowledging the heavy lifting that will be required as license regimes are no longer passportable between the two zones since Brexit.
“It’s a common extra cost for us, to be honest, with no real discernible customer benefit,” he explained. “But it’s part of doing business in multiple geographies [and] most businesses have figured a way around this. If you want to be in the U.K. and Europe, you need to engage with dual regimes, but we’re prepared to do that in order to help our business grow.”
The firm is also planning to “dramatically” improve its marketplace product to cater to the underserved small business market across Europe. This move will not only help to widen their total addressable market, but it will also accelerate their goal of moving beyond payments.
“We know that our customers buy many services from other ecosystem players. There are pain points and advantages there, and we will launch our financial services suite starting this year and then grow it over the next couple of years,” Happach added.
There is also an opportunity to be in the merchant working capital space, he pointed out, due to the strong visibility the Dutch payments firm has in forward sales projections, which remains “an area of pain” for their SMB clients.
Another area with strong growth potential is the corporate card market — particularly expense management corporate card issuing in markets that they operate in, such as Benelux and Germany.
“There’s still quite some improvement to be had there and we see an opportunity to build a very elegant product off the back of our merchant dashboard and with the accounting integrations and other things that we have that would help our customers grow,” he noted.
Finally, he said that business banking will likely be the end goal for the company, given that new customers prioritize opening a bank account and developing their banking relationship when they begin operations. It is also why onboarding new businesses much earlier in their decision processes is key.
“We would love to capture a customer as early as we possibly can and to provide the most integrated value to them, [and] not just be in the decision flow after they’ve chosen their bank provider, their corporate card provider, their software [provider], accounting provider and then lastly the payment provider,” Happach said.
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