FILE PHOTO: Banco Santander Chair Ana Patricia Botin speaks during the annual results presentation on January 29, 2020 at the bank headquarters in Boadilla del Monte, outside Madrid, Spain. REUTERS / Susana Vera / File Photo
May 20, 2021
By Jesús Aguado and Rachel Armstrong
MADRID (Reuters) – Santander expects sales in the PagoNxt payments business to triple to around 1 billion euros in the next few years to compete with key players in the business such as Apple Pay and Stripe. Spain’s largest bank is targeting payments as part of a broader strategy to increase its market valuation. The traditional lending business is hampered by low interest rates and tech companies venturing into other areas of financial services.
“In five years there will be ten, maybe fifteen global payment platforms, half of which are banks and the other half non-banks. JP Morgan and we (Santander) will be one of them,” said Ana Botin, Executive Chairman, in an interview with Reuters.
Santander merged its consumer, merchant and retail payments businesses into PagoNxt in September to build a financial technology brand different from its banking core.
At the end of last year, the company bought technology assets from the collapsed German company Wirecard in order to expand its European payments business. Payments were among the best-performing sectors in financial services over the past year, according to McKinsey as the coronavirus pandemic spurred the rise of e-commerce.
Market data firm Statista predicts the total transaction value in digital payments will reach $ 10.52 trillion by 2025, up from $ 6.69 trillion in 2021.
Frank D’Souza, strategic advisor for the payments business at Santander, expects PagoNxt sales to increase from 360 million euros in 2020 to 1 billion euros in the medium term.
Payment company valuations have soared over the past year, with PayPal surpassing the market value of Bank of America, the second largest U.S. bank, at one point earlier this year, while Stripe’s most recent valuation of $ 95 billion in March just before Goldman Lied Sachs. Botin said the growth of a successful payments business should support his strategy of boosting valuation of € 57.32 billion.
Santander is currently trading at a discount of 30% on its book value or 0.7 times its price-to-book value, which, according to Refinitiv, is slightly above the average of 0.65 times European banks in the European STOXX 600 index.
“UNLEVEL PLAYING FIELD” Botin said on a video call that Santander was considering listing PagoNxt but “has no plans at this time”.
However, the bank’s Brazilian unit plans to list 10% of its GetNet payment arm to help integrate with the broader PagoNxt business.
Botin and D’Souza said PagoNxt plans to continue investing in its retail, merchant and consumer businesses by hiring people and making small acquisitions.
However, Santander will face a number of competitors as tech companies from Apple and Google to payment specialists PayPal and Stripe keep getting bigger.
According to Botin, a major hurdle for banks is an “uneven playing field” when it comes to overseeing the supervisory authorities.
The surveillance of non-bank financial companies is under review after Wirecard’s implosion last year and disruptions in trading platforms like Robinhood in times of intense market trading in early 2021. “All of these incidents show that there is a systemic risk, there is an impact on consumers,” said Botin.
She once again called on technology competitors to share data generated by customers with banks, just as banks have to exchange data according to the European “Open Banking” rules.
“We open our data, so everyone should open their data, because banking is not about what it was. Banking is about payments, it’s about data,” said Botin.
(Reporting by Jesús Aguado; editing by Alexander Smith)
This article originally appeared on www.oann.com