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This week - BOSS Revolution, EncoreFX, Global Reach, Intermex, INTL FCStone, PayPal, Ria, Veem, Viamex, Wells Fargo, Xoom
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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.

Plenty to cover this week. We wrap up earnings season looking at PayPal and INTL FC Stone. We break down the bankruptcy proceedings of EncoreFX with Global Reach Group picking up some of the pieces.

And as digital remittances spiked, we look at how some of the lesser known players have been pricing.

PayPal's cross-border performance

PayPal released its quarterly results this past week. Revenue rose 20% in Q1 2020, driven by a 22% rise in Total Payments Value (TPV). Shelter-in-place restrictions around the world have been favouring the rise of digital purchases and money transfers, and PayPal is no exception to this trend.

But where is PayPal's cross-border business headed?
 

The main takeaways:
  • Cross-border payments rose 10% year-on-year, but declined 6% compared to Q4 2019. Since February, cross-border e-commerce has been hit by Covid-19, with lower activity in China and Europe. 
  • Cross-border's share of TPV will likely decrease in the coming quarters as Venmo continues to surge. Venmo's TPV increased 48% for the quarter, with January and March being over 50%. Despite the lockdown, the use cases for the P2P payments app changed, boosting revenue in the US domestic market.
  • Revenue shifted across sectors. The travel and events segment mirrored the 80-90% decline observed at Mastercard and Visa, accompanied by an increase in consumer goods categories. The negative effect on PayPal's volume, though, was more contained. Travel only accounts for a single digit share of their total flow, as opposed to significant share for Mastercard and Visa.
  • Xoom's new active users rose 400% during the quarter, some of the highest growth we've seen across the board in digital remittances.
In the earnings call, PayPal forecasted 15% revenue growth for Q2 2020. How will cross-border perform? The answer is still uncertain, and as PayPal's CFO pointed out, it is going to depend on 

"the extent to which behavioural changes associated with social distancing measures continue".
Access the best cross-border card data

INTL FCStone's emerging markets push  

INTL FCStone, a leader in commodities trading and payments to emerging markets, reported quarterly results last week as well. Revenue for the company went up in every segment, including Global Payments.

We talked to Carsten Hils, Global Head of Global Payments, and Gregory Vincent, Head of FX Payments. INTL's typically serves banks and NGOs with spot FX transactions. We put INTL's annual payments flow at c.$17-20bn (with no double counting of covering flows).
Here are our main takeaways from the conversation:
  • As a seasonal business, Q1 is normally the slowest for INTL. The high currency volatility in March and the lack of exposure to FX hedging helped the business counterbalance the negative effects of lower M&A activity and capital flows in January and February. 
  • INTL is benefiting from the downturn.  Banks in particular are looking for new ways to drive revenue into emerging markets by offering FX services (via INTL) as opposed to relying on just earning fees by sending the norm of dollar payments into these regions. 
  • INTL just completed the acquisition of Giroxx, a German company specialised in foreign exchange transactions and hedging for SMEs in order to enter this segment of customers and activity. The service will have a digital focus, leveraging the Giroxx digital platform. INTL's overall balance sheet should help although we expect the company to remain conservative when it comes to extending SMEs credit.
As to what else the future will bring for INTL's Global Payment's division, the answer is geographic expansion across Europe, Brazil and the US, either organically or via acquisitions.
The Top 100 Players - Who competes with INTL FC Stone

Not yet a price war

The US is typically one of the more expensive major countries from which to send money internationally - and this applies to transfers made through both banks and payment companies. 

Below is a snapshot of prices for sending 200 USD to Colombian Pesos. While one might expect a VC-backed digital player such as TransferWise to undercut the market, their pricing is higher than both bank-based services (Wells Fargo ExpressSend) and established remittance companies Boss Revolution and ViaNext (Viamericas). 
Access the best pricing data in the industry

Picking up the pieces from EncoreFX

The administrators at EY have been busy in Canada working EncoreFX through its bankruptcy proceedings. 

Some notable numbers from the bankruptcy:
  • EncoreFX had over 4,000 clients. As the crisis hit, 248 of them received margin calls totalling C$77m.
  • Encore had relied on zero margin credit to help grow the business with derivative liquidity provided by Goldman and Deutsche Bank.
  • Only one bid was received for the US division, three bids for the Canadian business and nothing as yet for the Australia and New Zealand arm.

Private Equity owned Global Reach Group announced today it will take the Canadian business out of bankruptcy. A purchase price of C$100,000, a small two-year earn-out and the re-hiring of around 70 people form the core of the deal. 

The core asset of the US business are its licenses. The only bid received is from a US public company and totals around $1.2m. Of this $1.2m, $1m is related to maintaining working capital and the licenses. 

The administrators will wish to continue to push through some swift deals to retain as much value in the EncoreFX assets as possible, however, regulatory involvement and Covid-19 will likely slow the affair. 
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On our radar this week:
Curated by FXC Intelligence's Team
Shopify adds dLocal offering 
Merchants will be able to accept local currency payments in 19 markets across LatAm, Africa, the Middle East and Asia
Mobile Payments Today
WU, Veem, PayPal offer PPP loans
More payment companies are offering small business Paycheck Protection Payment loans in the US
Businesswire, Business Insider, Barrons
Ria is catching up in mobile
The cash-focused remittance player launches its app in Europe with a plan to roll out to 13 markets by June
Globenewswire
Cross River Bank adds card product
The bank adds settlement product for push to card transactions with Remitly an early customer.
OAonline

Missed the last few weeks?

How Visa and Mastercard are performing in 2020 (here)
Western Union and MoneyGram Q1 Earning Analysis (here)
Finablr, Travelex and UAE Exchange update (here)
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Stay healthy and stay safe,

Daniel
Copyright © 2020 FXC Intelligence Ltd, All rights reserved.

London New York | Washington DC

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