Nuvei Corporation Founder, Chairman and CEO Philip Fayer
After its IPO debut last September, registering as the largest tech IPO on the Toronto Stock Exchange at the time, payments pioneer Nuvei Corporation (TSX:NVEI) didn’t take much time to celebrate – and has since posted some impressive growth metrics for the year, recently pre-announcing its fourth quarter result ahead of the scheduled release in March.
Operating heavily across omni-channel, ecommerce, and iGaming – Nuvei provides a single payment platform integration to help merchants of all sizes and in any location access the global marketplace. IPO Edge had the opportunity to ask Nuvei founder, chairman, and CEO Philip Fayer about what helps Nuvei stand out in the red hot fintech market, and what are some of the trends and business drivers contributing to his company’s success. The full interview follows:
IPO Edge: With tremendous momentum for the category in 2020, it seems fintech is continuing to be a hot sector in 2021. What are the key areas of differentiation for Nuvei in the payments ecosystem compared to peers?
There is no doubt that 2020 shined a bright light on the impact and opportunity fintech offers to investors, as well as the global markets at large, inclusive of virtually all geographies and industry sectors. At Nuvei, it’s important to start by explaining how we have built the most complete payment technology solutions that go well beyond just merchant acquiring. Our main purpose is helping make our world a local marketplace and simplify the way merchants can operate from country-to-country, by providing a single payment platform integration. Within that single integration, Nuvei combines all aspects of technology that merchants need. Foundationally, our payment gateway enables businesses to collapse multiple inefficient structures that they’ve been forced to cobble together piece-by-piece over time, in addition to providing local acquiring in more than 200 global markets with 450 alternative payment methods.
Further, we focus on very specific industries that have three key elements: longevity, growth and the propensity to operate globally. These verticals also tend to be complex, both from a regulatory and product perspective, including iGaming, social games, online retail, marketplaces, digital goods and services, ﬁnancial services, and travel. Our differentiation also drives meaningful performance, as reflected in our recent preliminary Q4 results in which we reported a 50 percent increase in total volume ($13.8-$14.1 billion), 40 percent increase in revenue ($114-$118 million) and adjusted EBITDA growth of 50 percent ($50-$52 million).
Particularly as it relates to 2021 trends, we have 14 years’ experience in iGaming, providing a payment technology infrastructure that helps merchants scale around the globe. We believe navigating through the complexities of the industry requires subject matter expertise, which can only be acquired through decades of experience. Many of the world’s largest gaming operators have entrusted Nuvei as their partner of choice and rely on our knowledge to continue providing a seamless payment journey for their customers. We can deliver on the operators’ key requirements from A-Z: from pay-ins and payouts locally and globally, to enhancing approval rates, fraud and risk management, and back office reconciliation.
IPO Edge: Speaking of gaming, sports betting, lottery and social gaming are taking off in the US – How is Nuvei positioned to compete and capture market share?
Over the last year, the pandemic dramatically impacted the iGaming market, continuing to push consumers towards online platforms and governments looking to expand their tax base. This was due to shifts in consumer behavior and preferences combined with restrictions on attending live sporting events and casinos during lockdowns. Following an initial surge, this market is seeing long-term positive trends. For instance, over the next few years, 75 percent of the American population is expected to have access to legally place online bets in their state.
Overall, the global online gambling market is projected to grow at a CAGR of 11.94 percent during the forecast period (2020-2025), according to Mordor Intelligence. Google Trends has also reported a significant increase in the total searches conducted by users for online sports betting. This increase has been recorded as an impressive 2,850 percent when compared to 2019. The global online gambling market size is expected to reach USD 127.3 billion by 2027, registering a CAGR of 11.5 percent from 2020-2027. The growing popularity of betting across the globe and freemium model in online gambling are among the potential opportunities likely to unfold in the next few years.
While there are a number of big players in the sports betting space, companies like Nuvei that handle the foundation of lottery and gambling transactions understand the regulatory environment as more states continue to legalize online gambling. More specifically, Nuvei has a robust international presence, which makes us uniquely equipped to dive right into the rapidly expanding American market. And as the iGaming industry continues to grow, Nuvei offers operators the immediate benefit of our proven, market-tested solutions that deliver on key consumer pain points—deposits and payouts—that are critical to attracting and maintaining their customer base.
If anything has been made clear in the gaming market in 2020 leading into 2021, a reliable payment process is the best way for brands or platforms to build a large base of returning users.
IPO Edge: What are the key trends you’re seeing drive the payments market in 2021 and how will these trends impact Nuvei and its customers?
Increasingly, eCommerce merchants that are looking to expand their global market reach require the ability to accept more alternative payment methods (APMs) and local currencies. As I stated earlier, Nuvei provides the most complete stack of APMs—over 450, in fact—which have quickly become table-stakes to operate in certain markets because the mix of preferred payment methods is very different from what we’re used to in North America. As consumer payment preferences continue to evolve, we’re strategically positioned to become an integral partner to ensure greater agility and acceptance rates in the accelerating digital payments marketplace.
IPO Edge: Coming out of the pandemic, how do you see digital payments and eCommerce volumes and preferences evolving this year?
According to a recent McKinsey study, 10 years of eCommerce adoption was compressed into just three months. Further, the eCommerce marketplace is increasingly global and continues to accelerate, so merchants’ needs—big and small—must be met with simple, accessible solutions. This is the essence of Nuvei’s platform with eCommerce representing approximately 80 percent and 76 percent of total volume in the fourth quarter and full year of 2020, respectively. The rapid acceleration of digital commerce points to merchants across all market segments seeking out partners that collapse their technology stacks and whose business is intimately aligned with their own.
IPO Edge: How will payment technology propel post-pandemic travel?
We’ve seen customers’ expectations make a 180 degree turn since the pandemic began last March, as noted in a recent research report we collaborated on with Visa and Edgar, Dunn & Company. People are looking for a touchless payment experience from all travel merchants— from OTAs to airlines and everyone in between. Payment technology can be utilized as a key support system to protect cash-flow and to help generate revenue in the new world of travel. Digital-first and touchless payment solutions aim to reassure customers that precautions against COVID-19 have been taken. Already, this can be seen in the rise in contactless payments and the uptick in QR codes. And the travel industry is beginning to meet customer demands regarding payments including payments in installments, “hold my fare” reservations, subscription options and the adoption of virtual cards.
IPO Edge: Can you tell us about Nuvei’s M&A strategy and how the recent acquisitions of Smart2Pay and Base Commerce have benefited Nuvei’s customers?
Overall, we are focused on both organic growth through net expansion and new logos, as well as interesting opportunities for inorganic growth through M&A. Specifically, our M&A strategy is driven by a three-prong strategic philosophy: 1) expand into new geographies, 2) accelerate expansion of technical capabilities, and 3) scale to accelerate global expansion.
The Smart2Pay acquisition helped Nuvei strengthen its position in online marketplaces and social gaming. And the acquisition of Base Commerce was a great opportunity for Nuvei to enhance its technology offering to provide real-time ACH processing to US gaming merchants, as the space continues to expand rapidly.
Looking at the market, targets in eCommerce have commanded a higher valuation over the past year, with a strong appetite from buyers and a scarcity of eCommerce assets.
Our goal is to go beyond acquiring, to help make our world a local marketplace and simplify merchants’ requirements as they operate country-to-country, by having a single payment integration.
John Jannarone, Editor-in-Chief