Cashing in: Payments firms rush to go public

Stripe's $95 billion valuation makes it one of the world's most highly valued privately held technology firms. It has enjoyed a series of investment rounds over the past several years, the most recent having taken place in March.

The San Francisco company has hired Cleary Gottlieb Steen & Hamilton for legal advice ahead of potentially hiring investment bankers for an IPO, according to the Reuters report. Stripe's investors have included the venture-capital heavyweights Andreesen Horowitz, General Catalyst, GV and Sequoia.

Stripe, founded in 2010, provides connections for businesses to accept online payments, a model that has fueled its success with private-equity investors and allowed Stripe to invest in other technology companies. Stripe in the past year has invested in Check Technologies, which builds human resources systems; Fast, a startup that supports one-click payments; and Step, a teen banking platform. Stripe has made dozens of other investments over the years to build international security technology to comply with PSD2 and provide digital merchant services beyond payments processing for its base of small-business clients.

Stripe raised $600 million in the spring of 2020 to bring online payments capabilities to traditional brick-and-mortar firms that had to go digital during the pandemic. Stripe bundled several of its products — including fast access to funding to improve liquidity for small business — such as Stripe Capital, Stripe Corporate Card and other products.

Going public would enhance Stripe's ability to fund more acquisitions and strengthen incentives jfor employees, according to Reuters, which also reported that the after an IPO Stripe could rival Chinese technology companies Ant Group and ByteDance as the world's most valuable startup.

Stripe competes with established bank technology companies like Fiserv and FIS, and relatively newer payment technology companies like PayPal and Square. All of these companies are publicly traded.

The Boston-based cryptocurrency exchange recently entered a deal with Concord Acquisition Corp. to go public on the New York Stock Exchange via a SPAC merger. The transaction gives Circle an enterprise value of $4.5 billion.

Circle is betting on the growth of stablecoins, which tie their value to government-issued currencies to avoid the volatility associated with cryptocurrency. Through the use of distributed ledgers, stablecoins can also speed processing and enable digital ID and cross-border payments.

Circle's USDC stablecoin is in the market ahead of Diem, the Facebook-affiliated stablecoin that's expected to launch this year. USDC has expanded fast, with Circle reporting its stablecoin has grown 3,400% since early 2021. More than $25 billion of USDC is in circulation, powering more than $785 billion in on-chain transactions.

That growth has fueled an expansion of financial services, such as Circle Account, application programming interfaces, Circle Yield, distributed finance APIs and SeedInvest, which helps firms raise capital directly from investors on the internet. 

The product diversification will allow Circle to compete in the race to support embedded finance, or super apps. Apple Card, which is powered through a collaboration between Apple and Goldman Sachs, is the best known example of embedded finance, though dozens of other fintechs and payment companies are pursuing the strategy.

Part of the fast-growing buy now/pay later industry, Afterpay, has reportedly begun preparing to go public.

The six-year-old Melbourne-based Afterpay in April hired Goldman Sachs to advise on a potential IPO, according to CNBC, adding a U.S. listing would enhance Afterpay's profile in the U.S. where it's expanding due to growth in online shopping. BNPL has grown quickly, with Afterpay reporting reporting North American sales have tripled in the first three months of 2021.

BNPL firms are popular with investors, though the industry is under regulatory pressure and competitive pressure, which could potentially pressure BNPL firms that have to lower their fees to merchants. That pressure could spur diversification into other financial products such as savings accounts, incentive marketing or broader mobile payments to create stickier relationships with merchants. Public listings could provide more funding for acquisitions or development to broaden BNPL lenders' product lines.

"While we intend to remain an Australian headquartered company, our shareholder base is increasingly becoming more globally focused. A U.S. listing would further accommodate this growing interest," Amanda Pires, an Afterpay spokesperson, said in an email.

Swedish BNPL rival Klarna has also expressed an interest in going public, though it has not made firm plans and earlier in 2021 told TechCrunch it is in "no hurry" for a listing. Klarna did not return requests for comment.