Q1 2024 observations reveal significant financial activities in cross-border payments, with notable fundraising and mergers and acquisitions.
In Q1 2024, the financial sector witnessed a flurry of activity, with one of the most prominent events being Capital One's acquisition of Discover, marking one of the biggest deals in the US card industry in years. This move aligns with broader trends in the cross-border payments sector, which has seen robust fintech investments and strategic M&A activity.
Trends in Cross-Border Payments
The fintech sector has been investing heavily in technologies that enhance cross-border payments, with a focus on infrastructure that addresses fragmentation in global money movement. M&A activity is often used strategically to expand payment networks and improve efficiency.
Key Trends and Technologies
Digital currencies and stablecoins have been explored by central banks for cross-border payments, although regulatory challenges remain. Real-time payment systems linked across borders are seen as a promising way to improve efficiency. Ongoing investment in infrastructure that supports cross-border payments is driven by the need for faster and more reliable transactions.
Implications for the Year Ahead
Expect continued innovation in cross-border payments, with a focus on digital technologies and partnerships between banks and fintech companies. Regulatory environments will continue to shape the adoption of new technologies like stablecoins and CBDCs. Banks and private credit firms are likely to form more partnerships, leveraging advanced technologies and networks.
International M&A Activity
Q1 2024 saw international M&A activity, with acquisitions occurring in France, Nigeria, Australia, and other countries. Notable among these was the estimated $6.3bn deal between Canada-based Nuvei and Advent International, which will take the company private.
Fundraising Trends
Fundraising amounts this quarter were generally modest, with a focus spanning both consumer and B2B applications. AI capabilities played a role in two of the deals announced in Q1 2024, indicating a rising interest in AI in the payments industry. The VC landscape has become significantly tougher over the last few years, making raising funding considerably more difficult for startups. Many startups are now required to show stronger, shorter paths to profitability to attract investment.
Emerging Markets and Startups
Investors are showing increased interest in emerging markets for potential growth. Several startups based in Qatar, Nigeria, UAE, Colombia, Argentina, and other countries raised funds this quarter. The full impact of Capital One's acquisition of Discover is yet to be felt, but it could ultimately put Capital One into a position to rival Visa and Mastercard.
The Nuvei acquisition could have a considerable impact on payments, reflecting a similar move by MoneyGram last year. The Nuvei acquisition is expected to close in late 2024 or Q1 2025.
In conclusion, Q1 2024 has been a period of significant activity in the cross-border payments sector, with a focus on digital technologies, strategic partnerships, and international M&A activity. The trends observed in Q1 2024 are likely to continue shaping the sector in the coming years.
Businesses in the cross-border payments sector are investing heavily in technologies that address fragmentation in global money movement, with a focus on infrastructure that supports digital currencies, stablecoins, and real-time payment systems. The fintech sector has been active in M&A activity, strategically expanding payment networks and improving efficiency, as seen in the Capital One acquisition of Discover and the Nuvei acquisition by Advent International.
