December 12, 2014
Payments companies in Europe are raising massive funds from venture capitalists in light of digital technologies and transition in consumer behaviour. Payments and transaction processing companies in Europe raised $418 Mn through 26 in nine months to September this year, according to data provider Dow Jones VentureSource. This is seven times of what was raised during the same period last year and is the highest amount raised yet since VentureSource started recording data in 2000.
As reported by Wall Street Journal (WSJ), payments companies raised $217 Mn through 12 deals in the first quarter itself this year. The growth in investments can be attributed to the fact that commerce is moving online and on to mobile phones. This is creating a rising demand for development of effective payments solutions for the digital world. Niklas Adalberth, co-founder and deputy chief executive of Swedish online payments company Klarna, said to WSJ: The payments sector is a secular growth market. People are changing their behavioural patterns and commerce is moving from the street to the mobile. Investors want to be there when that truly happens.
Back in March, Klarna itself raised $124 Mn from venture capital firms like Atomico, General Atlantic and Sequoia Capital. This is the largest European payments venture-backed deal this year, according to VentureSource. Powa Technologies, the UK based ecommerce firm, raised $80 Mn from Wellington Management. iZettle, the Swedish mobile payments startup, raised $62 Mn from investors like Index Ventures and Greylock Partners.
The rise in investments can also be attributed to changes in payments ecosystem itself. The changes can be attributed to factors like adoption of virtual currencies, adoption of financial services outside of traditional financial institutions, etc. Another major factor can be attributed to the fact that commerce is increasingly moving towards online and mobile platforms. This is further opening up the need and opportunity for more payment solutions in the digital world.
Europe has been witnessing the emergence of many different and creative payments solutions. Even traditional financial institutions are taking more interests in payments companies. They are themselves acting as VCs and investing in payments companies so as to not miss out on future payments innovations.