Paysafe to Acquire Payments Companies SafetyPay and Viafintech

Analysis of Paysafe's Latin American and German acquisitions, cryptocurrency as a driver of growth and its UK rivals in payment processing.

Payment processor Paysafe plans to acquire Latin American e-commerce platform SafetyPay to the tune of $411 million (£300.6 million) and German fintech company viafintech.

The SafetyPay transaction is expected to close in the fourth quarter of 2021. This is the second step the Isle of Man-based company has taken into the Latin American market after its  purchase of Peruvian specialised payments platform PagoEfectivo earlier this month.

Meanwhile, the viafintech deal is an all-cash transaction for an undisclosed sum. Viafintech, known under the brands of Barzahlen/viacash and viacash, offers a bank independent, payments infrastructure in the DACH region.

Viafintech was founded in 2011 and integrates with digital banking apps to offer a “mobile ATM” concept which enables consumers to make deposits or withdraw cash from their digital bank accounts at a nearby retail store using a barcode. It is headquartered in Germany, plus has a presence in an additional five European countries with plans to expand further. It operates via a network of 20,000 points of sale with over 20 retail partners.

Paysafe also released its second-quarter results with the company gaining a 13% revenue increase compared to the second quarter of 2020 and earning a net income attributable of $6.6 million (£4.8 million) compared to a net loss of $15.9 million (£11.6 million) last year.

In the SafetyPay announcement, Paysafe CEO Phillip McHugh also expressed a desire to utilise SafetyPay’s banking ties to break into the world of open banking, defined by Investopedia as “a banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs)”.

Usually, bank customers must provide consent to the bank and the service to link the two. This can allow users to aggregate their disparate financial data and payment account information into a centralised source, a personal finance hub. Open banking is not without its risks, however. It can make users more vulnerable to exploitation by hackers, particularly through phishing scams. By centralising sensitive data like this, all a phisher would need is the credentials for that centralised account to have access to most if not all a user’s financial information.

Additionally, Paysafe talked about cryptocurrency as a major driver of its growth in the second quarter, with the report attributing some of its success to crypto’s increase in trading activity, as well as the company adding 22 new cryptocurrencies to its Skrill digital wallet service.

While there are legitimate merits to crypto, the flaws, from environmental damage caused by crypto mining to its major role in global GPU shortages, are cause for concern. Especially when its most commonly-stated talking point, that it is decentralised and thus ‘owned by everyone’ as some in the industry proclaim, is simply not true.

Cryptocurrency, by design, made computational processing its source of profit. Since computational processing resources are for sale and thus able to be purchased en masse, the resource distribution for that processing power would logically reflect the already-present wealth distribution in our current centralised currency system.

This is why 65% of all Bitcoin (the largest and currently most valuable cryptocurrency) is mined in China, according to the Cambridge Centre For Alternative Finance, and why so much of the hardware needed to mine Bitcoin is also manufactured in China. This has resulted in Bitcoin especially being largely monopolised by entities with the resources to mine it, such as trust funds, the Chinese government or noted meme factory and exploding car enthusiast Elon Musk’s company Tesla.

Paysafe’s Competitors and Drop in Shares

While the aforementioned acquisitions were in the Latin American and German markets, Paysafe is also not the only payment processor in the UK space.

Fellow UK-based company GoCardless announced a partnership with financial manager Fiskl to take its services global for Fiskl customers. Square recently acquired Buy Now Pay Later service Afterpay which allows customers to buy a product now and pay the price later. Amazon and its Amazon Pay service is available in the US, UK and most of Europe. These services and more can be useful for UK citizens looking for alternatives to Paysafe.

While it’s always nice to see a UK company making strides into other potentially-lucrative markets, the skies might not be quite so clear for Paysafe. The day the SafetyPay acquisition was announced, Paysafe’s shares dropped more than 15% according to Nasdaq. The precipitous fall was attributed to a combination of the expensive PagoEfectivo acquisition and Paysafe’s stated expectations of $360-$375 million (£263-£274 million) in third-quarter revenue compared to analyst expectations of $389 million (£284.3 million). Whether this drop marks a downturn for Paysafe or is just a bump in the road remains to be seen.

Zephin Livingston
Zephin Livingston
Zephin Livingston is a content writer for eWeek, eWeek UK, IT Business Edge, and SoftwarePundit with years of experience in multiple fields including cybersecurity, tech, cultural criticism, and media literacy. They're currently based out of Seattle.
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