Episode 133 - Payments are (still) on Fire - Steve Sarracino, Founder, Activant Capital

You’d have to be aggressively disinterested in the payments industry not to be aware of its attraction to investors. The COVID-19 pandemic has done nothing to dampen the interest, if not outright enthusiasm, for the payments industry among investors of all stripes. Actually, the pandemic has lit a fire under key industry segments like the e-commerce domain, digital banking, and disbursements. The dynamics of change pushing the payments industry ahead are only increasing. Incumbent Consolidation The payments industry has been dominated by networks and processors. While networks have remained largely independent, the processing industry has undergone tremendous consolidation over the last decade, accelerated recently by the giant acquisition of First Data by Fiserv. Scale really matters in processing. But that scale comes at the cost of agility because the incumbents must rely on the systems they already have and the ones they’ve acquired. Consolidation onto just a few platforms is hard. And that means incumbents don’t benefit as clearly from newer technologies based on cloud computing and APIs. Start-ups Abound While investor interest in what are typically public companies remains strong, it is interest in start-ups and young companies demonstrating early success that drives early investors. These companies need cash to grow and equity financing is a primary source. It could be an individual with cash looking for a higher return on a portion of her portfolio. Family and friends as well as wealthy individuals are typical of “angel” investing. Venture capital is another source that often fuels the shift from proof of concept to the first minimum viable product and, often beyond, through multiple rounds of raising venture capital. Fueling the Next Incumbents Fueling the growth from business teenager-hood to young adult are growth equity firms that bulk up the business’s overall capabilities. While a cool technical idea can form the core of a new business, it takes business infrastructure like a global salesforce, enterprise-grade financial controls, and more to build a company that can execute on its potential. In this Payments on Fire® podcast, George talks with Steve Sarracino, Founder and Partner of Activant Capital, a growth equity firm based in Greenwich, CT. Steve’s firm is an investor in Finix and Bolt, companies that precisely fit his investment criteria. And he loves the payments industry for its past and, of course, for its potential. (Listen to Payments on Fire® Episode 106 with FInix's Richie Serna) Like those of us at Glenbrook, Steve sees lots of change ahead for the payments industry. And, like us at Glenbrook, he wants his company to influence and prosper from its evolution.