Waud's $100 million investment in fintech's future
The wave of technology that's turned card swipes into dips, phones into wallets, sunglasses into payment devices and micromerchants into international sellers will not only continue, but proliferate, according to Andrew Rueff, a longtime payment industry veteran who's turning his focus to finding and funding the next revolution.
Waud Capital Partners, a Chicago-based private equity firm with assets of $2.1 billion, has appointed Rueff as an operating partner to focus on payments and financial services technology. The company is putting an initial $100 million into the market.
"We are seeing unprecedented innovation," said Rueff, who joined Waud in late January.
Rueff has more than 20 years' experience in the payments industry. He was one of the original founders and architect of the recapitalization of TransFirst Holdings in 2000, and has also held a senior executive position at Nova, an Atlanta-based transaction processing company.
The payments technology investment market has changed its focus in the past few years from building scale to building platforms for innovation, Rueff said.
"The products and technology that have been developed over the last three or four years have dramatically changed the landscape and the way we think about payments and the benefits of financial transactions," Rueff said.
While Rueff will seek opportunity in all facets of financial technology, areas that interest him include ideas, developers or new companies that can extend functionality to small businesses.
One of the major benefits of the wave of technology startups that have entered the payments industry has been the extension of web services to small businesses. Most notably companies like Stripe and Square have served to democratize retail, making digital payments and EMV more accessible to micromerchants.
The next generation of technology marries these payment functions to other "large retail" tasks for small business, Rueff said. "It started with inventory management and payroll and things like that, which were once only available in a meaningful way to the larger merchant community. Now all of that is opening to the SME segment" (small to midsize enterprises).
Rueff is joining Waud at a time when some investors are starting to pull away from the market, citing projects that have not met expectations along with the scale of existing companies that are upgrading their own technology to ward off startups. Rueff has maintained his bullish outlook. "People are getting a nice return for their investment," he said, adding that, while the margins may have come down a bit, there is no bubble in the financial technology industry.
Current venture capital investments in payments fall into three camps, according to Michael Moeser, director of payments at Javelin Strategy & Research.
The companies drawing funds either help e-commerce merchants process transactions through online and mobile storefronts; or offer wallets on mobile phones or are P-to-P payments with a heavy emphasis on remittance. Most of the top companies attracting funds fall into these categories, Moeser said.
"As more business goes online, merchants will need help form companies like Stripe, Shopify, Magento, etc.," Moeser said. "As more is purchased online or mobile, we will need more mobile wallets both in the U.S. and internationally."