This week - Checkout, Currencycloud, Ebury, Flywire, N26, Ria, Revolut, Starling Bank, SWIFT, Wirecard, WorldRemit, XE 
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New data, new insights on cross-border payments. Every week.
Covid-19 is more important than anything we write about here. Stay healthy and our thoughts go out to all those affected, especially those who have already suffered loss.

Fresh off the back of Ebury closing their deal with Santander yesterday and releasing their 2018/19 financials, we were given a first look at the company's 2019/20 numbers (we like our readers to stay ahead of the game). We dig into Ebury's investment curve as they hit £100m+ in revenue.

Last week, we spoke to Airwallex's co-Founder to learn more about their $160m fundraise. This week, we look more closely at fundraising across the sector and at who looks to be better prepared for the year ahead. Plus Euronet, owner of Ria & XE, reported their Q1 numbers and offered Q2 forecasts - we review those too as early predictors of what lies ahead.

Do you need $400m in funding?

Despite the global Covid-19 crisis dragging the cross-border payments market down, the first months of 2020 have seen the completion of some successful funding rounds, after a break from the major raises seen in early 2019. 

What do these funding boosts mean for the cross-border players and the sector as a whole?
Our main takeaways are:
  1. Revolut reached a record valuation
    With the $500m raised in February, Revolut reached a valuation of $5.5bn, becoming one of the most valuable fintechs in Europe. Having started with a card product and expanded from there, Revolut has now launched not-inexpensive pushes into both the US and the corporate market. 
  2. Growing through new products and capabilities
    We can see a consistency in the use of the proceeds: financing geographic expansion (often into the US market) and enlarging and improving the current product offering (e.g. Remitly's Passbook or Airwallex's payment infrastructure).
  3. More funds to weather the current crisis
    Many of the neobanks rely on revenue from interchange fees, which is mostly driven by travel. This revenue has dropped off a cliff. Players like Revolut are in a much better place than rivals such as Monzo to weather this storm, the latter having had to close offices and furlough staff.
While fundraising overall will continue to decline in the coming months, the leading companies with traction should still be able to close rounds. And in the consumer-focused end of the market, are we seeing a new baseline of funds needed to compete on a global scale, with c$400m allowing companies to get a seat at the table?
Help me navigate the Covid-19 crisis with better pricing

Ebury's investment takes it to the next stage

The closing of the 2019/20 financial year this April marks the achievement of several important goals for Ebury, one of the leading cross-border companies serving the SME space.

In addition to closing their Santander deal, the most recent annual results show how three years of investment to open international offices and add headcount has paid off. Ebury provides us with a case study on how to grow an SME focused payments business. 

Ebury's business is focused on hedging SME clients. In a "normal year", typically 70% of revenue would come from forwards (usually window forwards), the balance from spot FX. 

In November 2015, Ebury raised $83m ($110m in total to that point) and really began to invest in growth. By the 2017/18 financial year, this had ramped up, shown most clearly by the relative growth in overhead costs (up 82%) versus revenue (up 37%). Ebury was building the platform for scale but, as would be expected, revenue was lagging behind investment. Overheads averaged 73% of total costs throughout the period.

What was investment being directed towards? From April 2016 to today, headcount rose from 250 to over 1,000 and the number of international offices increased from four countries to more than 20 countries. Even with Ebury headquartered in the UK, the company consistently derived a large portion of revenue from outside the country helping it weather the UK focused macro storms better than others.

The results of the investment in the platform were not apparent until this latest financial year - 2019/20 - of which we have been given the first look. While £115m of revenue derived from SMEs is impressive, let's focus on the relative growth of revenue versus overhead costs: 57% against 28% respectively. This growth differential has helped the business achieve break-even EBITDA in 2019/20.

That's scalability for you (see TransferWise as another example for the sector). With Santander now backing Ebury, one of the leading horses in the race is going to be even harder to catch.

Improve your SME customer proposition

Ria - Q1 revenue up but Q2 likely down 20%

Ria's parent company Euronet reported its Q1 2020 numbers yesterday. Outside of China, March 2020 was when the global lockdown took force. It will be therefore be the Q2 numbers, rather than the Q1 numbers where we'll really see how the sector has been impacted.

Here are the headlines:

  • Q1 revenue slightly up
    We have to give credit to Euronet for continuing its impressive trend of consistent revenue growth in the money transfer segment. This has been driven by a switch to digital for Ria, US outbound holding up and XE benefiting from the currency volatility seen in March (which has heavily receded in April).
  • Q1 margins squeezed
    Driven by anticipated cash-agent receivables defaults and an overhang of 2019 investments.
  • Q2 - expect big declines ahead
    In Q1, Ria has seen bricks and mortar revenue declining 25%. According to Euronet's CFO Rick Weller, we can expect in Q2

    "Money Transfer [revenue] to be in the 80% range of prior year"  

    as the Covid-19 impact will be much greater than in Q1.

We'll be following the rest of the reporting season closely to see what big players expect for Q2 as well as what happened in a very mixed Q1.

Manage your cross-border card and DCC pricing
On our radar this week:
Curated by FXC Intelligence's Team
Currencycloud offer SWIFT gpi tracking
Tracking of payments is a major pain point across the sector. Currencycloud hopes to reduce this for its clients.
Stripe adds card issuing
Fresh off its giant fundraise, Stripe continues its product expansion including more localised offerings.
Wirecard under more pressure
KPMG finds no fraud but claims it can't verify some historical affiliate revenues which draws activist shareholders in.
Financial Times
Checkout joins Libra
The highly funded fintech becomes the first payment company to join Facebook's repurposed Libra currency.

Missed the last few weeks?

Will remittances crash in 2020 (here)
What TransferWise and Travelex teach us (here)
COVID-19 Resource Hub for the industry (here)
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Stay healthy and stay safe,

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