‘Tech is global but local payments determine who’s a winner or loser’: PPRO’s Simon Black

Local payments

A lot of e-commerce was driven out of the US and Western Europe, particularly the UK, on one hand, but then also, in China and parts of Southeast Asia. For the business driven out of the West, in the US, the dominant payment methods have been Visa and MasterCard, and to some extent, PayPal and Amex. It's a fairly homogenous way to pay for things.

As e-commerce has grown around the world, what's interesting is, while technology is a global trend, local factors, including local regulatory environment and local cultural preferences, have determined who the winners and losers are in the way people pay. Even in a developed market, like Germany today, the majority of adults still don't have a credit card. Why is that? Because there's a cultural aversion to credit. So how do people tend to pay online? Actually, one of the most common ways to pay is direct from your bank account, what in the US you would refer to as ACH.

In China, a whole generation -- the first generation of middle class -- skipped plastic altogether. The dominant way to pay online in China is through mobile wallets like Alipay and WeChat Pay.

So you have these different trends in different markets, which have created great complexity. The local way to pay is super important, because ultimately, it can mean more or less revenue for a seller. Consumers avoid friction. We like to do things which are easy and convenient. So if you can't pay with your preferred payment method, you would go shop somewhere else.

Merchant needs

Merchants big and small are internationalizing, and particularly for e-commerce, because the barriers to entry are very low. If you're a small business selling online in the US, you have a hell of a market to go for before you want to go overseas. If you're a small merchant selling online in Belgium, you've got a pretty limited market. Right? There's a growing trend of internationalization, where even small and medium sized US companies see bigger opportunities for selling overseas. We help them navigate those those local market differences.

We focus on enabling the payments industry. We partner with a lot of companies that your listeners will be familiar with, like Worldpay, now part of FIS, or MasterCard, which has a payment gateway division, through to tech players, like Mollie and Stripe. We partner with a whole host of payments companies around the world: Ant Group or Alipay is one of our partners. And we enable them to serve their merchants or any organization that needs to collect payment.

An example would be within Belgium. If you want to sell to a Belgian, debit cards are provided by the national debit card scheme (in a number of European countries, the national debit card scheme still survives). So we're not talking about some exotic payment method here or an outlet, we're just talking about your debit card. So you're living in Brussels, you want to pay online with your debit card. Now this becomes a challenge for an international payments business -- it's another local payment method they need to deal with. And yet their customer, the retailer, really wants to offer it, because if you're selling into Belgium, you need to offer it. If you're selling into the Netherlands, you need to offer iDEAL, which is a pay by bank payment method paying direct from your bank account.

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Consumers driving trends

The push comes up from the consumer to the retailer and from the retailer up to the payments company. For the payments company, this is a challenge because there are many hundreds of important payment methods around the world. If they integrate all of them, it's huge overhead. PPRO offers a layer that simplifies that and aggregates it and in doing so, increases their speed to market.

Trends in the business

We had a very good year and particularly in the fourth quarter, we more than doubled our payment volume, year on year. We're in a really fortunate position -- despite the tragic, wider consequences of the pandemic -- we've seen an acceleration of the trends which are already there for people to buy more goods and services online. And we think a lot of those new behaviors will stick after the pandemic. In the past 12 months, there was a rush by merchants to get online. We've also seen the number of merchants active on our platform double and as we've already mentioned, a lot of payment schemes themselves are gaining traction. PayPal recently announced their results for the year, and they just demolished one record after another. So yeah, we're in a good position.

I think the big difference from my perspective is the criticality now of enabling local payments. If you're a retailer that wants to cross borders, or you're a payments company with customers like that, or a payments company that wants to get into new markets, then you have to offer choices of local payment methods. We're seeing evidence of that.

Competition

PPRO's an unusual company in that we're really forging new ground. We're building something that hasn't been done before, and no one is doing so with the same focus. We're building a platform that enables plug and play for local payments. There's a lot of complexity to address. It's not just a technical solution; we also move the funds. That means we have to collect funds, and we have to settle to our customers and their customers. In some cases, we have to reconcile.

We're also navigating different compliance rules. Regulatory requirements can vary by country to country, and there can be FX and tax complexity. What makes us unique is we are building specifically for the payments industry. So we go to market through our partners, which are payments companies, big and small. That partnership model, building a platform that enables local payments for the payments industry, differentiates us, as opposed to going directly to merchants.

New investment

I'm really pleased to get through this fundraising milestone. The growth in volume and raising investment is all a reflection of what our team has been able to achieve at PPRO. We're now around 330 people. And we expect to add another 100 people this year. And we've got experts, payment professionals, as we call them, around the world. It's a great credit to them.

We brought in several new investors in this round, which saw a total investment of $180 million. New investors include Eurazeo, Wellington, and Sprints Capital, a growth equity investor out of Europe and the U.S. What the funding means is we can accelerate our investment. And we'll use that to build the team, but also look for potential acquisitions. We made our first acquisition in 2019, which has proven very successful by giving us a great base for Latin American expansion. We've shown we can can merge and integrate well with other businesses, and we'll look for more opportunities to do that.

PPRO's future

At this moment in payments, everyone's an acquisition target, even the largest payment companies, including ones with $200 billion market caps. Large market caps wouldn't rule out M&A because there are trillion dollar tech companies out there who are interested in payments. So who knows what the future holds, but our focus is just to keep growing and delivering value for customers.

I get asked a lot about an IPO for PPRO -- that's definitely something we're starting to look at and consider. We don't have a firm view on an IPO and when that could be. But that's definitely something we will develop a view on over the course of this year.

Looking ahead

In 2021, we'll see an acceleration of new product development. We have a lot of exciting things coming up for customers, in terms of giving them more market coverage, new payment methods, and also enhancements of existing payment methods. When a payment scheme introduces changes of their API, we tend to adopt that very rapidly and make that available to our customers.We are doing some innovative things to support our partners and enabling them to go to market. We have an online product marketing and partner support tool called Pro Discover. So that's another exciting initiative for this year.

Personal opportunities

[My focus is on] communication. I think having the privilege to lead a fast growing business means you have to constantly reassess. And that means at least once a year, thinking about how I can have impact. While we continue to operate under constrictions relating from COVID, there's a cumulative impact when you're working remotely. You know, you get a bit jaded -- everyone's talking about Groundhog Day.

For me going into this year, it definitely is a commitment to think about how I can better support the team. And a lot of that is through communication and engagement, and what priorities to raise with them and what to listen to, as well as what questions to ask.