Innova Capital will promote cashless payments in Romania, a country with a strong preference for physical money, with payment services provider Netopia Group, senior partner Krzysztof Kulig told PE Hub Europe.
Netopia, headquartered in Bucharest, offers SMS, card and mobile payment products. Innova announced the acquisition of a majority stake in the company, the first transaction from Innova/7 fund, in late May.
Netopia provides services to 25,000 merchants, mostly in the SME sector, and is responsible for 25 percent of Romania’s online card transactions, according to Innova. The Warsaw-based private equity firm also holds a stake in PayPoint Romania, an operator of consumer payment terminals.
“There is a secular trend that drives transactions up in the financial services industry: low penetration of cards and low number of transactions per card in Romania, which is now changing,” said Kulig.
During the covid pandemic, between June 2019 and June 2021 payment transactions made with cards increased by 60 percent, according to data from the Romanian central bank BNR, quoted by News.ro.
Promoting electronic transactions in a country where cash is king is no easy task. Boosting consumer confidence is key, according to Kulig, which is why Innova will focus on promoting the security of the transactions. This will be done by offering a variety of products to merchants, and with the help of international card schemes.
Similarly to Romania, Italy’s relationship with cashless payments has not been the warmest. Copper Street Capital saw potential in the country’s cash aversion when it invested in payment platform Satispay in 2018. “We thought that was quite interesting, it was proven technology, it was scalable and it could be the platform that cracks the cash conundrum in Italy,” Jerry del Missier, founder and executive chairman, told PE Hub Europe in an interview on the exit from Satispay.
Netopia will remain predominantly focused on Romania due to the growth opportunities the country presents.
Innova believes that Romania is a few years behind its home country of Poland, in which it has seen 10 years of growth. “It is going to pretty much repeat the same route,” said Kulig. The firm will “definitely” look at cross-border opportunities too, should those arise.
Netopia’s growth will mainly be organic, as Innova has identified a lot of room potential for increasing the number of card users. However, the firm does not exclude additional M&A, Kulig added.
Rules of co-operation
Netopia fits in Innova’s portfolio from several perspectives. Industrial, consumer, healthcare and business services are key sectors of interest. The firm files financial services under business services, a segment of the portfolio where Netopia fitted in particularly well. “We have a special appetite for payment processing,” said Kulig.
Founder succession deals are also some of Innova’s favourite transactions. The firm tends to go for majority stakes, as was the case with Netopia. The founder of Netopia will remain as an active minority shareholder in the company. Innova’s previous experience with founder succession deals can make the transaction “less scary” for the founders, said Kulig. “We want to set up the rules of co-operation straight away, even prior to signing a deal,” he added. “Especially around corporate governance when it comes to exits.”