Cash & Liquidity ManagementFXSantander’s Ebury deal ‘big news in banking’s digital arms race’

Santander's Ebury deal 'big news in banking's digital arms race'

Banco Santander’s GBP 350m investment in Ebury, the UK-based FX and payments fintech serving SMEs, is a natural fit given the Spanish group’s strong focus on the mid-market segment. It is also a noteworthy development in banking’s digital arms race.

Santander, a Spanish multinational commercial bank and financial services, will take majority stake in Ebury, a trade and foreign exchange facilitator for small and medium-sized companies for £350m.

Roughly £70m of the £350m will be new primary equity to support Ebury’s expansion into Latin America and Asia. This capital will allow Ebury to enrich its existing product offering, invest in new ways to serve SMEs trading internationally and continue to grow its business. The bank is forecasting a return on invested capital (RoIC) of more than 25 per cent in 2024.

Santander executive chairman Ana Botin said: “Small and medium-sized businesses are a major engine of growth around the world, creating new jobs and contributing up to 60 per cent of total employment and up to 40 per cent of national GDP in emerging economies.”

Juan Lobato and Salvador García, co-founders of Ebury added: “Combining a big bank with nimble fintech means we can offer our clients the best of both worlds: they can benefit from our technology and high quality service safe in the knowledge that they are counterparty to one of the world most important financial institutions. It is an exciting time for Ebury, we have just completed our first acquisition, and the new capital from Santander and our existing shareholders will allow us to invest in new ways to serve SMEs trading internationally and continue the growth in our business while keeping our entrepreneurial culture.”

Ebury has an established track record, operating in 19 countries across 140 currencies. In 2018, the company processed £16.7bn in payments for 43,000 clients. Santander said Ebury had generated consistent average annual revenue growth of 40% in the last three years. That includes through its own acquisitions: in October 2019, Ebury acquired UK-based FX and payments company Frontierpay.

Partnership combining a major bank with a leading global fintech

This partnership, combining a major bank with a leading global fintech, will ensure Ebury’s clients benefit not only from its technology and high-quality service, but with the added confidence of dealing with a counterparty backed by Santander.

The bank noted that the investment fits its digital strategy of accelerating growth through new ventures and will strengthen its Global Trade Services offering. Santander boasts more than four million SME clients, 200,000 of which trade internationally.

Ebury will join Santander’s successful payments ecosystem, which includes Getnet, the Brazilian payment company. The bank had previously invested in Getnet and acquired it in several stages over the past decade.

Marco Troiano, deputy head of the financial institutions team at Scope Ratings commented: “This transaction shows that larger banks can position themselves well in the digital arms race. Smaller banks may struggle to put together the investments needed to effectively compete in this type of scenario.”

But at the same time Troiano sounds a note of caution around Santander’s ability to replicate with Ebury the success story it has had Getnet. “Execution risk with this type of transaction is usually elevated as being part of a larger group can dilute the innovative drive of the fintech,” he noted. “On the plus side, Getnet has created a blueprint for Santander to follow, which somewhat reduces such risk.”

It is not by chance that while the company will continue to be managed by Ebury’s top management, Santander’s appointee as chairman is Sergio Rial, CEO of Santander Brasil, who has direct knowledge of and involvement in Getnet’s growth story. Rial also doubles as executive sponsor of Santander’s Global Trade Services business.

Want to be a leading global platform for mid-market corporates

Paolo Giabardo, chief commercial officer at Ebury speaks to Global Trade Review about how the deal was struck: “The main reasons for the deal are that Ebury has been growing very strongly for a number of years. We are mainly a European business with a sizeable presence outside of Europe. However, we want to be a leading global platform for mid-market corporates to trade internationally, so in that respect this partnership makes a lot of sense.”

He says the partnership enables Ebury access to infrastructure capabilities in new markets like Latin America, which is a key region for the company in terms of expansion, and to new products in global transaction banking services that it doesn’t currently offer to clients. It also gives Ebury vital capital to support its growth.

“When mid-market corporates in Asia, Europe and the Americas are thinking about who their trade services’ provider for international trade should be, they will immediately think of Ebury as a counterparty,” he said.

Two years ago, Ebury expanded its European operations by opening an Athens office and expanding its Paris and Warsaw branches.

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