Payments is the boulevard of broken dreams but cross border e-commerce is sweet

Any time you see a market as big as Payments, entrepreneurs rush in and Payments is undeniably a huge market. According to Boston Consulting Group:

“In 2013, payments businesses generated $425 billion in transaction revenues, $336 billion in account-related revenues, and $248 billion in net interest income and penalty fees related to credit cards. The total represented roughly one-quarter of all banking revenues globally. Banks handled $410 trillion in noncash transactions in 2013, more than five times the amount of global GDP.”

Yet dreams of disrupting the current payment rails do seem to get dashed against the rocks of reality. Ventures that simply make it easier for merchants to accept Credit Card payments online such as Stripe and Braintree were all the rage for a while, but there are stories of merchants simply getting Basis Point reductions by playing off one against the other. That sounds like a commodity race to the bottom, not a recipe for Unicorn status.

Yet, we can see Klarna and Adyen clearly doing very well. I see two factors in their success:

  1. Enabling cross border e-commerce. This is why European companies are doing so well. In Europe, you think about cross border transactions “from the get go”. American companies used to have the luxury of “crossing that bridge when they get to it”. The high velocity startups like Facebook and AirBnB are different. Their markets are global and that is a big factor in their growth. It is significant that they turned to a European company such as Adyen to handle these cross border e-commerce payments. This seems like one market where Europe is positioned as a global leader.


  1. Fundamental innovation in combatting fraud. If there is one single reason why Credit Card fees is so high it is the cost of combating fraud. The Klarna model (pay after delivery) means that combatting fraud is key. This where Klarna’s acquisition of the Israeli venture Analyzd (from founders who had previously worked at PayPal is significant. It sounds like the Fintech City Tour needs to take a trip to Israel.

Payments remains a massive market opportunity, the Fintech equivalent of climbing Everest (which nobody said would be easy).


    • Good point. I think GoCardless are onto a winner on that score.

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