What's going on?
Move over, Deutsche Bank – there’s a new kid in town. Say “hallo” to German payment-processor-cum-fintech-wizard, Wirecard, whose stock rose by 9% on Thursday, stoked by a better-than-expected second-quarter report. Supergeil!
What does this mean?
Wirecard keeps the online economy moving, processing digital payments (from your credit card, for example) between customers and companies. It takes a small fee each time – normally 1-2% of the transaction. This soon adds up: the company facilitates over $100 billion of transactions globally. Now, it’s set its sights on growing in Asia through acquisitions (it recently snagged Citigroup’s services in Asia) and partnerships with AliPay and WeChat.
In the last quarter, Wirecard grew its revenue by 40% and profit by the same amount. Because of these über-strong results, the management bumped its revenue expectations to $3.4 billion by 2020 – an increase of $230 million on the old target.
Why should I care?
For markets: The list of digital economy winners continues to grow.
Wirecard already has $1.7 billion of annual revenue. It’s a mere 5% of Deutsche Bank’s, but Wirecard’s a more valuable company (tweet this), perhaps since it’s growing so quickly – and the sky’s the limit. Why? It has a European banking license so could become a fully-fledged bank if it fancies it. The consequences of a new online economy are far reaching: it’s not just traditional retailers that get hurt by the likes of Amazon, but also media (e.g. digital-only news outlets), hoteliers (e.g. Airbnb) and, increasingly, traditional finance.
The bigger picture: Disruption in payments is even hurting the new guys.
Square had a big boost to its stock price on Tuesday as downloads of its Cash App overtook PayPal’s Venmo. Square’s Cash App is similar to Wirecard in that it enables digital payments, but specializes in person-to-person transactions. While PayPal isn’t exactly an old dog (baby’s only 20), it’s certainly being taught new tricks by challenger businesses – it recently lost its long-standing customer, eBay, to one.