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The Nigerian Central Bank threw a spanner in the works this week forcing remittance players to switch from sending Naira to USD into Nigeria, one of the world's largest inbound remittance markets. Many were caught off-guard.
As we begin to wrap up 2020, we look at who have been the best (and worst) performers on the public markets. Number one may surprise you. Plus Paysafe became the biggest payments company to plan for a return to the public markets via the now fashionable SPAC route (IPO alternative). We analyse that deal too.
Finally we've added a new section to the end of newsletter providing links to additional background research we have produced on each of the main topics covered.
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Nigerian remittances face upheaval
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Only days after we looked at the African remittance market, a Central Bank of Nigeria decision has created new barriers in the country. The pay-out of remittances in NGN cash are now banned, requiring pay-outs to be paid either in USD cash or directly to a local bank account. And it’s clear that the decision has caught the industry off-guard, compounded by confusion surrounding whether the latter option of direct-to-bank-account NGN pay-outs is actually permitted.
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As of Monday over half of providers were still continuing to show NGN FX rates for remittances sent from the UK and US. However, this percentage dropped in the following days, with many switching to show only pay-out options in USD. Likewise, many providers have at least temporarily removed the ability the pay directly into bank accounts and now offer only cash pickup. This is likely due to the uncertainty surrounding how bank account payments work under the new guidance and whether there may be additional charges or FX conversions for recipients. Meanwhile, a significant minority of providers in the UK have suspended remittances to Nigeria.
The Central Bank of Nigeria argues that the decision was needed to increase the depth and transparency of the foreign exchange market, as well as provide more liquidity. However, local commentators counter that it is forcing customers into unofficial remittance channels with high margins or into converting USD locally at exchange rates not reflective of the market.
For the remittance industry, meanwhile, there is little option but to react to ongoing changes, and do as much as possible to keep customers informed. This was one topic no one wanted to talk publicly on either!
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For more background articles and context on remittances and the major players, see the links at the end of this letter
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2020 in review: Payments share prices
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With the end of 2020 rapidly approaching, it's worth taking a look back at how key companies in cross-border payments have fared in this unprecedented year. And when it comes to share prices, some have fared better than others.
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2020 has been a turbulent year for public companies across the cross-border payments industry, with the vast majority taking a significant knock following the outbreak of the virus and its subsequent classification as a pandemic in early March.
However, the market also shows how resilient the industry has been, with most companies recovering from the steep dives early in the year relatively quickly, and having for the most part returned to pre-pandemic levels by the end of the year.
Some have even managed to climb well beyond their opening value in January, with MoneyGram standing out as the clear winner, having achieved dramatic growth across the year, driven in the past few months by its digital business. Others such as Visa and Mastercard are so ingrained in global finance that their values have increased even though some of the core revenue drivers such as travel remain significantly down (but are improving).
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For more background articles and context on stock market performance, see the links at the end of this letter
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Paysafe surprises with SPAC merger
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While the 2021 stock market performance of cross-border payments companies is ahead of us, these public competitors are likely to be re-joined by Paysafe. This week, Paysafe announced that it was going public (again) as part of a $9bn merger with a special purpose acquisition company (SPAC). SPACs are all the rage right now, offering a much faster and lower-cost route to the public markets than traditional IPOs. Intermex (a strong performer for 2020), took the SPAC route back in July 2018.
The merger sees Paysafe join with Foley Trasimene Acquisition Corp II, which is owned by Bill Foley, vice chairman of FIS and owner of the Vegas Golden Nights hockey team. Under the deal, which is expected to be completed in the first half of 2021, Paysafe will be listed on the New York Stock Exchange under the symbol PSFE.
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Some initial takeaways:
- The SPAC route is interesting
SPACs are an increasingly popular route to the stock market. However, it’s still unusual enough to be an interesting approach, and we’ll be watching with interest to see how many others follow Paysafe and Intermex.
- Paysafe’s reach is broad
Paysafe has a presence in multiple markets and products, and there are growth plans for all of them, in particular in areas such as iGaming. However, in cross border we can expect a doubling down on efforts in areas such as online remittance (via Skrill) and travel.
- Expect digital wallet-related acquisitions
Paysafe is planning numerous acquisitions in the coming year, and one area set to see particular focus is digital wallets. The company plans to consolidate its existing products and expand them with acquisitions, tying these into products across its portfolio.
While 2020 has been a quiet year for cross-border-related M&As, Paysafe has been an interesting development in the final weeks. If the SPAC route proves successful again, we would not be surprised to see more payment companies and fintechs taking this route, especially given the level of SPAC funding being raised (208 SPACs have raised more than $70 billion so far this year).
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On our radar this week:
Curated by FXC Intelligence's Team
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Revolut launches acquiring solution
The product will allow business customers to accept online payments, taking on companies such as Stripe.
TechCrunch
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Ria obtains Lithuanian licence
Euronet subsidiary Ria has obtained a Payment Institution licence in Lithuania, to expand its European digital operations.
Yahoo Finance
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TransferWise begins hiring spree
TransferWise has announced that it plans to add 750 jobs over the next six months. No longer a lean company.
Finextra
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JD.com adds digital yuan support
The ecomm giant becomes the first platform to accept China's official digital currency, the digital yuan.
Reuters
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