Some chopping and changing is afoot in the world of payments in Europe. Today, Klarna, the startup out of Sweden that works with online merchants to enable flexible payment options, confirmed that it has acquired BillPay, a payments company based in Germany, from its previous owner Wonga, the startup that once achieved notoriety for predatory payday loans.
The companies are not disclosing the value of of the deal, but our close sources corroborate a number mentioned in a couple of reports from over the weekend that placed the price at around £60 million ($75 million). Klarna itself was last valued at $2.25 billion back in 2015.
The sale is a sign of consolidation for both: Klarna — which gives customers one-touch payment services, as well as the option to pay immediately, pay in instalments or pay at delivery — is looking to build out a stronger presence across Europe in payments. Specifically, in this case, it’s augmenting an existing business in Germany, where this is Klarna’s third acquisition (it acqui-hired the team behind peer-to-peer payments app Cookies in October 2016; and it acquired Sofort in 2013 for $150 million). In fact, it looks like the only acquisitions Klarna has made over the years have been in Germany.
On the other side, Wonga is retreating from its ambitions to pivot its business (or at least expand it) from loans to payments — which had been its original intention when it acquired BillPay in 2013. If you look on Wonga’s site today, it’s all about loans, and not much more. The loss-making company is looking to cut its costs as part of a turnaround plan.
“We are excited to be working with BillPay and their talented team in Berlin. By combining our skills and expertise, and leveraging BillPay’s deep market knowledge, product features and consumer offering, we are confident that we can offer even more innovative payment services to our customers,” said Sebastian Siemiatkowski, co-founder and CEO of Klarna, in a statement. “‘Germany is one of the largest e-commerce markets in the world, and we are delighted to have strengthened our position here with this acquisition.”
Although Wonga has not made many headlines lately for its loans — it modified practices after having to write down 330,000 bad loans in 2014, scrutiny from regulators, and subsequently divesting other assets and laying off employees as part of its restructure — it seems that its name and brand are still not one that people want to wave around. Klarna’s press release announcing the acquisition doesn’t make a single mention of the company selling BillPay to Klarna.
BillPay itself was founded back in 2009 as one of several e-commerce clones from Berlin-based incubating factory Rocket Internet, where BillPay was fashioned as the PayPal of Germany (Klarna, by the way, has also been described as the PayPal of Europe when pitching its business in the U.S.).
Although many other Rocket clones eventually branched into other parts of Europe and the world, BillPay focused on dominating in one single, big country: Germany is known as the biggest e-commerce market in Europe. It is also operational in Switzerland, Austria and the Netherlands.
“We are thrilled to join the Klarna team. Together we will have a market leading position in Germany, Austria and Switzerland, and will be able to offer our merchants and users highly attractive payment options in more international markets in an ever increasing cross-border e-commerce environment,” said BillPay CEO, Nelson Holzner, in a statement.
It’s not clear how big BillPay’s business is today but user numbers have grown in the last few years. Today it has 12 million customers in its four markets according to reports. Back when Wonga acquired it, we reported that the company had 2 million users and agreements with 3,500 sites/online storefronts, with annual transaction volume of €300 million ($409 million).
This acquisition will make Germany Klarna’s biggest market. Klarna tells me that it has 45 million customers and 65,000 merchants/stores globally, and BillPay will give it a combined 27 million customers in Germany alone (out of 80 million in that market). It also counts 25 million people using its Sofort direct payment platform, a spokesperson said.
But as the market has grown, so have rivals. In 2017, PayPal is far from the only other company working in online payments, and it’s a crowded and competitive market. Specifically for Klarna, one interesting competitor is Stripe, which also positions itself as a very simple way for third parties to incorporate payments into their sites and apps.
Klarna — founded back in 2005 by Sebastian Siemiatkowski, Victor Jacobsson and Niklas Adalberth, has to date has raised around $291 million with backers including several VC biggies: Atomico, DST, General Atlantic, IVP, QED and Sequoia.
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