Deutsche Bank is making its first small acquisition as part of its return to the payment business (“Merchant Solutions”). According to exclusive information from Finanz-Szene.de, the largest financial institution in Germany has acquired the Berlin-based payment fintech company “Better Payment”. The startup, founded in 2013, is a so-called payment service provider, i.e. a provider that supports companies in the technical integration of various payment methods – be it credit card, purchase on account, or even Paypal.
Deutsche Bank did not want to comment on the purchase price over the weekend. Market experts assume that the purchase price will be in the low to mid-double-digit millions. In times, in which new Payment service Provider such as Mollie rise few years after the establishment already to billion-worth Unicorns, that would seem nearly like a bargain.
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At the end of February, Deutsche Bank announced its comeback in the “Merchant Solutions” sector
In essence, this involves solutions for the institution’s approximately 800,000 “business banking” customers – for example, craft businesses or smaller retailers with whom the Frankfurt-based financial institution wants to do more than just lending business in the future, but also support them in payment processing.
To this end, Deutsche Bank founded a joint venture with the U.S. group Fiserv, known in this country as “First Data” (or “Telecash”), back in the summer. However, the DAX-listed group tends to be in a junior position in this structure: Deutsche Bank is to plow the market, but the technical solution comes from Fiserv, and the Americans also hold the majority of the shares in the joint venture, albeit by a narrow margin (51:49).
Deutsche Bank is now much more self-confident in the “Better Payment” deal
Through the full acquisition, the Frankfurt-based bank not only gains access to the customers of the Berlin-based fintech company but also to its technical setup. Almost even more interesting, however, is another difference from the Fiserv joint venture: Better Payment’s typical customers are not small traders, but larger companies such as Creditreform (the credit agency appears on the fintech’s reference list in any case) or two medium-sized debt collection service providers. After all, such companies also need a technical infrastructure for accepting payments – the large-volume counterpart, as it were, to the classic POS terminal of the small merchant. And it is precisely for this target group that Better Payment has developed an online payment gateway that companies like Creditreform can integrate into their processes on a white-label basis.
“Better Payment gives us broader market access in payment processing,” said Kilian Thalhammer, the “Head of Merchant Solutions” within Deutsche Bank’s corporate banking division. With the help of existing merchant relationships and the Berlin-based startup’s technical solutions, the bank now wants to “accelerate growth in the German market.” Thalhammer also emphasizes the possibility of “additional synergies.” These could look, for example, like Deutsche Bank offering existing Better Payment customers traditional banking services in addition to the payment processing solution in the future. In a way, this would be the reverse logic of the Fiserv deal. In principle, the idea here is to make existing bank customers of the company’s own payment solution as well.
Market observers see another motive behind the Better Payment takeover: Even if the fintech tends to address a different target group than Fiserv, Deutsche Bank could try to reduce its own dependence on the joint venture partner Fiserv with the help of the technical know-how of the Berliners.
Better Payment GmbH is to remain an independent legal entity under the umbrella of Deutsche Bank for the time being. The management team around founder Björn Bähre will also remain on board. For Bähre, the sale of his startup to the Frankfurt heavyweight is on the one hand a very respectable exit. On the other hand, the whole thing can of course also be seen as an admission that Better Payment (founded in 2013, currently employing around 20 people) no longer believed it could achieve the kind of breakthrough achieved by the Dutch Mollie.
Accordingly, the following two insights are also part of the current funding boom around the fintech and payment industry: 1.) Not all providers are benefiting. And 2.) In some ways, some startups even suffer from the success of others. Because when investors pounce on individual fintech companies like Mollie like a herd – at some point these startups are so capital and sales strong that it becomes increasingly difficult for other providers to compete against them, even if their technical solutions may not be much worse.
And one last facet of the deal: Better Payment’s existing acquiring partners (a purely technical PSP like Better Payment needs an acquirer to be able to offer its customers the acceptance of credit card payments as well …) include the cooperative VR Payment. However, this is now likely to be replaced by Deutsche Bank itself as acquirer. A detail that shows very nicely: The new global payment giants such as Stripe and Adyen are likely to be relaxed about Deutsche Bank’s merchant solutions offensive. On the other hand, VR Payment will suddenly face serious competition from Deutsche Bank in its home market.
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First published in finanz-szene.de, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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