Visa’s Currencycloud acquisition amplifies focus on cross-border payments

The news: Visa signed a definitive agreement to acquire Currencycloud, an API-based cross-border payments startup. Currencycloud powers foreign exchange banking and payment services for nearly 500 global firms, including Monzo and Revolut. The deal values Currencycloud at GBP700 million ($898 million) and builds on Visa’s relationship with the startup: The issuer led an $80 million investment in Currencycloud in early 2020.

How we got here: Cross-border payments were throttled early last year—the onset of the pandemic led to dips in international trade and supply chain disruptions and an overall drop in consumer spending. Visa’s cross-border volume sank 37% year over year (YoY) in its fiscal Q3 2020 (ended June 30, 2020).

But now, volume is rebounding: Visa’s cross-border volume decreased 11% YoY in its fiscal Q2 2021 (ended March 31, 2021)—though this is still short of the 9% YoY growth Visa notched in its fiscal Q1 2020 (ended December 31, 2019).

The opportunity: Visa and Currenycloud both stand to benefit from the acquisition as cross-border payments recover.

• Currencycloud can drive Visa’s cross-border ambitions. Before the pandemic, Visa used new services to extend its reach in the market: In 2017, it launched Visa Direct, its near-instant push payments platform that facilitates cross-border transactions. And in 2019, Visa introduced its cross-border B2B payments platform, Visa B2B Connect. Acquiring Currencycloud reignites that push by opening up new payment opportunities for remittances and B2B payments and building out its noncard business.
• And Currencycloud can tap into Visa’s vast partner network. The startup can use that global network to expand its client base, which can help the company increase revenues and become a leader in the cross-border payments space, which hit $130 trillion in 2019, per McKinsey.

The bigger picture: Currencycloud is Visa’s second major fintech acquisition this year—in June, it acquired open-banking provider Tink. This suggests that Visa is moving toward fintech acquisitions to help it expand and scale its own solutions—an approach that may prove to be more cost-effective than in-house R&D.