In this heady market environment, initial public offerings (IPOs) have come fast and furious. Within the payments space, the parade of disruptors continues, as Paymentus became the most recent market entrant, rising nearly 40 percent in its trading debut to end the day at $28.61, up from its issue $21 issue price.
As noted in this space earlier in the month, Paymentus had been seeking a valuation of up to $2.4 billion through its IPO.
It’s a long way from the indignities of losing out to the fax machine to debuting on the New York Stock Exchange. More on that in a moment. But the numbers tell a tale that might illuminate why investors are, at least in this initial go round, sanguine about the prospects of the firm, which is focused on getting bill payments up to speed in the 21st century.
Paymentus saw its Q1 revenues increase by 32 percent to $92 million in the first quarter of 2021, after rising 28 percent for 2020 to $302 million, aided by the ongoing digital shift that has seen businesses and consumers turning to online channels to get things done.
The company said in its prospectus that it had processed more than 195 million transactions last year, across more than 1,300 billers, spanning 16 million monthly consumers and business users.
The reach and scale indicates a widespread pain point that exists, tied to the complexity of bill payments, and specifically the inefficiencies of paper checks and paper statements. Those are the facts. As to the fax, here’s something that may make you smile.
In an interview with Karen Webster, Paymentus CEO Dushyant Sharma said that when he first set out to get the patents that would give rise to an online billing and payments platform, he was told by the Patent Office that the pain points could be solved by that piece of technological wizardry known as the fax machine.
But, as he told Webster, there are trillions of dollars in household spend that could benefit from modernization, standardization and digitalization.
“I knew that if I could build a disruptive platform, which provides ‘customer to cash’ lifecycle automation and improves customer experience, it would become a successful business,” he said. In essence, it’s a business model that moves bill payment to a “managing spend” mindset through an Instant Payment Network.
Sharma said that a relatively concentrated number of monthly bills — 10 of them — represent 58 percent of household spend, at $4.6 trillion in the United States alone (it’s a staggering amount of money that in fact eclipses retail spend). Utilities, electricity and gas payments, after all, come due every month.
It’s a fragmented industry, he said, and consumers crave simplicity. The platform approach, he said, streamlines the bill payment ecosystem where a significant number of billers rely on legacy bill payment systems from financial institutions or biller-direct solutions.
Other Use Cases
He noted that business such as PayPal, Walmart and others can leverage the Paymentus operating system to design apps, and improve engagement with customers. PayPal, for example, lets U.S. consumers pay their bills directly from PayPal apps.
Sharma said the data that is captured on the platform can be leveraged across other financial services, such as in evaluating credit worthiness. Alternative lenders, said Webster, tend to look at bill payments as a key component in evaluating underwriting risk. As Sharma said, the platform can transform raw data into actionable intelligence, while improving the DSOs of companies.
“This is all about creating an ecosystem that provides customers a choice — and ubiquity of bill payment, anytime, anywhere,” he told Webster.