Fintechs rush to go public

April 21, 2021 11:00 AM

Coinbase's public listing came quickly on the heels of the ride-sharing app Grab announcing plans to go public through a deal that could value it at nearly $40 billion. They're just two examples of companies taking advantage of the past year's rush to digital payments to raise billions in the stock market.

Both companies are also diversifying their business lines by adding payment products and financial services, drawn by the cross-selling opportunities and recurring usage that comes with digital commerce. The pandemic accelerated an existing shift to digital, creating demand for companies that can support automation.

Most of these listings aren't traditional IPOs. In many cases, the public listings are being expedited through alternatives, such as special purpose acquisition companies or direct listings, which provide a faster route to go public but can also attract less experienced investors.

There is a building need for payments technology, along with the funding to fuel innovation. Writing for PaymentsSource, Mike Cassidy, a researcher for Signifyd, said: "COVID-19 and the resulting lockdowns and wariness accelerated changes in shopping behavior that would have taken years to advance to their current state. A whole new cohort of online shoppers with distinctive characteristics emerged with their own needs for retailers to fill."

Coinbase

Bloomberg

The cryptocurrency exchange had a market cap of $65 billion on Friday, following its public listing, a key moment in the growth of bitcoin and other alternative currencies, which have operated largely outside of the mainstream for years but have gained favor in recent months through the support of high-profile companies and investors.

Coinbase is also active outside of its core business model and is playing a role in moving crypto closer to retail payments. It's partnership with Visa gives Coindesk a way to directly issue cards and process payments in bitcoin and other crypto at Visa retailers. Coinbase recently entered an additional partnership with Skrill and Paysafe to make it easier for merchants to accept crypto while avoiding conversions to traditional currency.

Grab

Bloomberg

Grab is slated to go public this year through a merger with Altimeter Growth Corp., a SPAC sponsored by Altimeter Capital, a Silicon Valley investor. SPACs aren't new, but have expanded quickly during the tech-driven stock market boom that followed the pandemic crash in March 2020. Companies use SPACs, often referred to as blank check companies, to go public without the scrutiny and time a traditional IPO requires.

Grab is best known as a ride-hailing app, but in recent years it has built a considerable financial services business based on its ability to enroll millions of users quickly. In March, Grab drew a $300 million investment to fund its financial diversification, which includes a dedicated fintech unit.

Grab in late 2020 secured a banking license in Singapore, allowing the company to offer savings accounts, payment apps, lending and other financial services directly to consumers without working through a third party.

Affirm

Bloomberg

Affirm's January IPO raised about $1.2 billion and valued the company at about $10 billion. It also demonstrated the growing popularity of point-of-sale financing.

Operating in a buy now/pay later market with competitors such as Klarna, Afterpay and Splitit, Affirm uses a virtual card to allow installment payments; and an app to help consumers gauge their ability to afford a purchase before reaching the point of sale.

Buy now/pay later firms have attracted regulatory scrutiny due to concerns of consumers taking on debt, but investors are still pouring funds into the category, betting on a shift away from revolving debt that will outlast the pandemic.

Billtrust

Flint Lane, founder and CEO of Billtrust

Billtrust listed on Nasdaq in January following a SPAC merger with South Mountain Merger Corp. and has a current market cap of about $2.7 billion.

Like a lot of payment companies, unforeseen business adjustments during the pandemic created a need for its technology. Billtrust in late 2020 upgraded its software to adapt invoicing and payments to a supplier's ERP system without having to be explicitly programmed.

That's designed to tailor the payment experience based on how accounts receivable teams manage data and process invoices. In most cases, these teams are scattered and less centralized than in the past. By improving the "match" rates between bills and supplies, the product is designed to free up cash faster.

Payoneer

Like Grab, Payoneer is also using a SPAC, FTAC Olympus Acquisition Corp., to go public during the first half of 2021. Payoneer will use the approximate $500 million it will gain from the deal to acquire other companies that further Payoneer's mission to expand business payments.

The businesses that make up Payoneer's target market are automating B2B payments after years of trailing other categories that digitized payments faster. These businesses have had to support digital payments to improve liquidity and accommodate a remote workforce.

Payoneer has an additional collaboration with Mastercard to support a digital card that allows businesses to quickly use payment revenue to invest in advertising or to make their own payments in Mastercard's network.

Paysafe

London fintech Paysafe plans to go public this year through a SPAC tied to technology investor Bill Foley, who hopes to expand Paysafe into payment processing for online gaming.

Paysafe additionally plans to add cryptocurrency payments to its Skill Digital Wallet in the U.S. through the Coinbase tie-in.

Paysafe's other recent additions include a partnership with Incomm Payments to allow consumers to use cash for online payments, a product designed to reach underbanked or unbanked consumers.

One of the concerns that has come out of the pandemic's move to digital is the danger that cash-reliant consumers will not be able to access the economy without smartphones or cards, creating a need for Paysafe's product.

In an interview on CNBC, Foley called Paysafe "ubiquitous" and able to be inserted "just about everywhere," including digital wallets and e-cash solutions that are used in gaming.

MoneyLion

New York fintech MoneyLion, which primarily offers mobile banking, lending and investment services, plans to go public through a SPAC deal with Fusion Acquisition Corp., which could value MoneyLion at more than $2 billion.

MoneyLion also offers early access to paychecks and free withdrawals from a network of more than 55,000 ATMs.

In March, MoneyLion announced plans to support digital currencies through a service that will launch later in 2021. The fintech is additionally making a strategic investment in Zero Hash, a digital settlement provider, allowing MoneyLion to access one of the world's largest cryptocurrency settlement sources.

MoneyLion's pipeline includes an incentive marketing program that offers a cryptocurrency version of a "cash back" offer.

Paya

In late 2020, Atlanta processor Paya made a deal to go public via SPAC FinTech Acquisition III, valuing the firm at about $1.3 billion. Paya in late March announced the pricing of its stock, and that it intends to use the proceeds to make acquisitions.

Paya last week announced new digital invoicing technology, as well as a cloud-based EMV compliant payment gateway.

Like many companies that offer B2B payments, Paya is attempting to streamline connections between invoicing and enterprise resource planning to improve how companies measure their economic condition and shorten the window for outstanding payments along the supply chain.

Bakkt

Cryptocurrency platform Bakkt, which was founded by former Georgia Sen. Kelly Loeffler, earlier this year agreed to an acquisition deal with Impact Acquisition Holdings to take the firm public on the New York Stock Exchange, which could value Bakkt at more than $2 billion.

Bakkt's existing investors include Microsoft and Boston Consulting Group, and in recent weeks it's added several payment services.

It launched an app to store points from incentive marketing, gift cards and bitcoin, which can later be redeemed at merchants such as Starbucks. Bakkt added gift card company Blackhawk to the app in early April.