Wonga is a UK-based startup best known for its online payday loan services, but today the company made a move that could see it not only extending across to other markets in Europe but also into other services like payments: the company today is announcing the acquisition of BillPay, known as the “PayPal of Germany”. This is yet another major exit for Rocket Internet, which incubated and backed BillPay.
Other backers included Holzbrinck and AB Kinnevik (regular co-investors with Rocket Internet).
Terms of the deal have not been disclosed, and we’re now listening to a call with Wonga and BillPay execs, where we might find out more. Update: And they’ve declined to provide any information on the details on the call, but we are still digging. :)
“The acquisition significantly accelerates our development into a broad-based, digital finance group and will also speed the development of our PayLater online retail product, together with the company’s international expansion,” the company noted in a statement today.
If the ambitions of Wonga — which has raised some $145 milion in funding from VCs like Balderton, Accel, Greylock, Meritech, Dawn Capital and Oak Investment Partners — were not clear before, they should be now. The company would like to compete against the likes of PayPal and other e-payment services across Europe — taking on “the future of finance, which is digital” as CEO Errol Damelin noted in a call on the deal earlier today. That’s in addition to more global targets, too: the company last year also eyed up expanding to Canada and South Africa.
In the call today, Wonga defended itself against questions of whether this deal is being made to move away from its image as a “payday loans” company, noting that it’s more about making a bigger move into e-commerce and payments. The questions about image and public perception come at the same time that Wonga has faced a backlash in the UK market for the profits it makes on its loans business, with some politicians calling for a new “Wonga tax” on companies like Wonga to channel more funds to low-cost lenders in the UK.
“The combined Wonga and BillPay business will consolidate our position as a pioneer in the financial revolution, offering customers a range of bold new payment and credit solutions for the modern world,” Damelin said in a statement. “As well as giving Wonga Group a presence in Europe’s second largest online retail market, this deal continues our on-going transformation into a fully international, digital finance business with operations across three continents and more than three million customers.”
To date, BillPay, which has 2 million users and agreements with 3,500 sites/online storefronts, has largely been operating in German-speaking countries — Germany, Austria and Switzerland — but it is expanding, most recently to Holland. The deal could see the UK become BillPay’s next market, as well as provide a lever for Wonga to extend into countries where BillPay is already active. In all, Wonga says that the combined effort will cover seven markets — because in addition to its mainstay UK market, it is also active in Poland and Spain, markets it has entered in the last year.
It also gives Wonga some openings for how it can use its e-loan and financing services to work directly to buy big-ticket items from merchants. This is something that Wonga has already been pursuing with its PayLater option to pay for items in installments. Current customers of BillPay include the CBR Group (CECIL and Street One), Runnerspoint, Fahrrad.de, DriveNow and Home24.
BillPay currently sees an annual transaction volume of €300 million ($409 million). Wonga does not break out revenues yet from its comparable PayLater product, but as a wider point of comparison on the sizes of the companies, Wonga in its last annual report from August reported loans of £1.2 billion ($1.94 billion), across some 4 million loans for the year. Wonga’s revenues on that were £309.3 million ($500 million) with net profit of £62.5 million ($101 million).
Wonga says Nelson Holzner, the founder and CEO of BillPay, as well as other senior colleagues, “will remain within their current roles as part of the enlarged group. “All of us at BillPay are delighted we are joining forces with such a large and innovative group as Wonga,” Holzner said in a statement. “We feel our services and ethos are entirely complementary and we look forward to working with them.”
With margins on many online transactions remaining thin to keep services competitive and more compelling to use than legacy payment systems, the business of e-commerce remains one of scale. That could see Wonga — which has been behind other attempted acquisitions in the last year — buying more properties going forward to consolidate even more.