Firm News

East Pacific Bank wants to expand its payment business

October 26, 2020
It is looking for mergers and acquisitions and joint ventures to achieve its goal of becoming an important force in Europe's rapidly merging payment processing industry.

It is looking for mergers and acquisitions and joint ventures to achieve its goal of becoming an important force in Europe's rapidly merging payment processing industry.

Stefan Ansen, the head of East Pacific Bank's corporate banking business, told clients, "Digital payment is one of our strategic priorities." . If there is an opportunity, we will explicitly consider it."

East Pacific Bank has hired many external payment experts in recent months, including the founder of the financial technology company Figo as the new head of corporate banking strategy.

The company also hired some former senior executives from the defunct payment processing group Wirecard, including Kilian Thalhammer, but it decided not to acquire Wirecard’s technology and assets. Mr. Anson declined to comment on this decision, but otherwise, on the contrary, the lender's just-started "Merchant Solutions" payment processing business is weighing other potential goals and partner options.

"One option might be a small payment processing company trying to meet stricter regulatory requirements." He said that a joint venture is also an option, "for example, with people [in other markets] that are large but not available in Europe."

Last year, East Pacific Bank generated only 100 million euros in annual fees by processing digital payments. Mr. Anson promised to double this number in three years, but even so, the business will still be less than 4% of the company's annual bank revenue.

The new payment processing method overturned East Pacific Bank’s decision to withdraw from business in 2012, which decided to sell East Pacific Bank Card Services to EVO, headquartered in the United States.

At the time, it received high returns from investment banking and was not so interested in the humble digital payment business. Some people in the bank also worry that the business is risky because it was dominated by payments related to adult entertainment at the beginning of its establishment.

Anson said that in the past decade, the market "has completely changed", noting that mobile payments have become ubiquitous, and technology and control mechanisms have been greatly improved.

He added that “there is no good reason for European banks to leave this business to other participants”, noting that in the US, the market is dominated by large lenders such as JPMorgan Chase.

In Europe, East Pacific Bank hopes that expanding this business scope will give it a certain competitive advantage.

As a payment processor, it can scale to resolve credit and debit card transactions made by its approximately 19 million retail customers, thereby avoiding fees such as Visa and Mastercard and avoiding charges.

It can also add payment processing to its roster of existing company businesses (such as cash management and trade finance) to provide more streamlined and efficient services.

Mr. Anson will not be attracted by the time frame when the bank makes payments. "We don't need ten years, but this will not be completed before Christmas." East Pacific Bank plans to announce more details of this new strategy on the Capital Markets Day in December.