Paysafe Group PLC

World leaders in Making Payments Relevant, simple and secure

In an often intimidating, ever-changing technological world that seemingly becomes more complex with each passing day it is comforting to know that a company with Canadian origins called Paysafe Group PLC has established itself as a proven and trusted leader in dispensing safe, secure online and mobile payment services to merchants and consumers around the globe.

Based out of the Isle of Man, Paysafe is an international technology enterprise and a leader in digital payments and transaction-related solutions for businesses. The company has in excess of 2,000 employees worldwide, including more than 400 in Canada at its offices in Montreal, Gatineau and Calgary. It is publicly traded on the main London Stock Exchange.

Supported by two decades of experience, the company offers a suite of integrated payment solutions to business software providers with proven payment processing solutions that improve merchants’ day-to-day efficiency and profitability. Paysafe is now incorporated by merchants and consumers in over 200 countries using more than 100 payment types and 40 currencies. Transactions are straightforward with fast, convenient and secure methods to pay-before, pay-now and pay-later options made available through its digital wallets, prepaid solution, payment processing and card issuing and acquiring products and services.

The Canadian Business Journal recently spoke with two of Paysafe Group’s top Montreal-based executives: President and CEO Joel Leonoff and Chief Operating Officer Danny Chazonoff about the tremendous success they have achieved.

Although the company has been known as Paysafe for one year, since November 2015, its origins date back to 1996 in Montreal where Leonoff was originally working with Chazonoff at MPACT Immedia. An ecommerce-oriented establishment, it was publicly-traded on the Toronto Stock Exchange. A deal was transacted that brought about a merger with the ecommerce division of Bell Canada, resulting in the creation of BCE Emergis.

After about a year, Leonoff approached the board of directors and wound up purchasing the payment processing division and rolled it into another publicly-traded company called SureFire Commerce.

“It was a payment processing business and we were focused on online processing of transactions, ultimately looking to help companies that were selling goods and services online to facilitate the payments and to help manage fraud and risk,” says Leonoff.

In the late 1990s ecommerce was very much in its infancy and had yet to take hold to any significant degree, other than the adult industry and online gambling. The company decided to focus on the online gaming industry at that time. By 2003, an enterprise that was public on the NASDAQ called the Optimal Group purchased the company and renamed it Optimal Payments. Leonoff decided to leave to pursue other opportunities. Soon thereafter the online gaming industry became considerably more complicated due to the implementation of strict new U.S. laws taking effect as of 2006.

“In 2006 I helped some friends who had started an online poker site out of Gibraltar called Party Gaming and the product was called Party Poker. They took it public on the London Stock Exchange with a $10 billion valuation. I spent a year there as the COO helping them to manage the operations,” says Leonoff.

By 2007, onerously strict rules and regulations made it illegal to process payments for U.S. residents in the online gaming sector so the Optimal Group ultimately looked to exit the payments space.

“Danny Chazonoff, who was still at Optimal, had contacted me and I helped orchestrate a management buyback of the business. In 2008, the company was privatized keeping the Optimal Payments name,” continues Leonoff, who came onboard in the dual role as president and CEO.

The company continued to grow with an ongoing presence in European online gambling to a certain degree, but mostly it was the continued development of ecommerce and helping companies accept credit cards and other payments on websites around the world that became the primary focus.

A noticeable upswing in transitional transactions became noticeable by 2011. Optimal Payments was acquired by Neovia Financial, the former parent of NETELLER, to create a global player in mainstream online payments in what in what was effectively described as a reverse takeover.

“They were significant in the online gambling space,” states Leonoff. “We saw that there was movement in the United States for online gambling to be legal again and they did legalize it in Nevada, New Jersey and Delaware.”

Furthermore, there had been ongoing discussions about expanding the legalization in California, Pennsylvania and New York. On a state by state basis online gambling is definitely making a return. NETELLER had a very credible and trusted reputation with a robust brand and so it was felt that resurgence was inevitable.

“We inherited their public listing on the London Stock Exchange and we changed the name from Neovia to Optimal Payments. We probably had a $200 million market cap but we certainly had a lot of energy and a lot of ambition,” says Leonoff.

Dawning of a New Era

In 2014, the Group acquired California-based payment processor Meritus Payment Solutions and U.S.-based online payments company Global Merchant Advisors. In August 2015 the Group completed the acquisition of its largest competitor, Skrill Group, in a transformational deal, which essentially doubled the company’s profit.

“When we acquired Skrill we decided to change the name of our company, collectively, to Paysafe,” says Leonoff. “We felt it was a new beginning. “They (Skrill) had a product that was called paysafecard, which is a cash voucher that you can buy at retail and then enter into various websites and into our electronic wallets. paysafecard, which sits within our prepaid division, sold about $3 billion in vouchers last year and complements our Digital Wallets and Payment Processing divisions.”

The official name change to Paysafe was unveiled on November 10, 2015.

“Our market cap has gone from about $5 million in 2008 to about $200 million in 2011 and it was about $3 billion U.S. in 2015,” reveals Leonoff. “Certainly we have aspirations of pursuing very aggressive growth and hopefully we can ramp up to a number closer to $10 billion over a certain period of time. It’s been a great story and a lot of hard work. Now it’s a mix of Canada, the United States and Europe with new hubs in India, but certainly this was a very Canadian-centric story for a long time.”

In the early, formative years the company was comprised of about 100 people, with 95% of the personnel based out of Montreal.

“Our business really got its start here in Canada out of Montreal. If you fast forward to today our very small beginnings have manifested themselves into something far larger,” adds Chazonoff.

Paysafe also operates sizable locations in Vienna, Austria, Sofia, Bulgaria as well as London and Cambridge in the UK and there are more than 100 people in Irvine, California. In March, Paysafe acquired Dallas-based payments business MeritCard solutions.

“In the last 18 months we’ve also made two acquisitions in Montreal. We purchased a business called Fans Entertainment, a company that focuses on mobile development. The second is a group called Income Access, which helps to complement not only a gambling platform but also some of our other verticals and niches with respect to online marketing, affiliate management and some other really interesting ways of driving traffic and assisting our clients,” says Chazonoff.

Creating a Unique Identity

One of the most important objectives for both Leonoff and Chazonoff was a desire to be in control of their own destiny and by extension have the ability to build out their own payment platform.

“We wanted to build something that was going to help any merchant category that was looking to facilitate payments online; keeping in mind this was 18 years ago when there was not as much activity to say the least,” notes Chazonoff.

Most of the Group’s sophisticated system was built within a year in Canada through technologists, engineers and architects in Montreal and Gatineau. Many of the personnel working in the Gatineau office had previous experience in the Nortel labs. The core of that initial platform is still being used today, which is scalable, secure, robust and redundant – all the important factors that a merchant and consumer would expect and demand.

“We have a lot of very high-profile Canadian clients,” remarks Chazonoff. The impressive clientele list includes a variety of large services-related companies, retailers and government agencies.

“Today, we are approaching about $1 billion in revenue and close to $300 million of adjusted EBITA (earnings before interest, taxes and amortization) so we’ve come a long way,” Leonoff proudly states.

The necessity to embrace innovation and remain ahead of the curve is absolutely critical. Paysafe’s secure servers are very well distributed around the world for a variety of reasons, including redundancy, security and performance.
“Over the last three to five years the space has changed quite dramatically,” says Chazonoff. “People say that more has changed with payments in the last two years than the prior 20 years to that.”

The company invests a great amount of time and money on research and development with a primary focus on new technologies and innovations to ensure the user experience is an appropriate balance between not creating too much friction to the consumer or the merchant while at the same time providing all of the necessary safeguards to conduct secure, safe transactions.

“The name Paysafe really reflects what we are all about,” says Chazonoff.

The technology world has evolved significantly over a relatively short period of time and the vast majority of merchants and customers are now quite comfortable with the notion of executing online transactions. Any misgivings about using advanced technologies can quickly be alleviated by educating people about the numerous safeguards that have been put in place. As such, Paysafe has consistently demonstrated a willingness to stand behind its claims of safety and security for everyone using the system.

“We have digital wallets that cater to specific industries where we actually indemnify the funds and take on the fraud risks so it’s not even an issue that merchants have to concern themselves with,” reveals Leonoff.

“Technology is a core attribute of our offering,” says Chazonoff. “There is also risk management, which involves making our merchants fully understand what the pitfalls are and how to manage them. Additionally, although we’ve grown significantly in a relatively short period of time, we haven’t lost our entrepreneurial drive and spirit.”

Corporate Diversification

The master plan of the executive team at Paysafe is to build relevance in a variety of industries. They’ve already accomplished that goal in online gambling where the company caters to more than 95% of the entire industry throughout Europe with its digital wallets. The company also helps sites with customer protocols and anti-money-laundering objectives that they must be in compliance with from a legal standpoint.

Paysafe will safely store credit card and banking information on behalf of many merchants. They also indemnify funds and have payout cards and prepaid cards attached to wallet balances. In Canada, Paysafe just recently put forth a soft launch in Quebec of a new product called GOLO, which is oriented towards merchants who desire to offer their consumers the ability to order through a mobile wallet, pay for the goods and services on their mobile device and then coordinate a pickup time or have the product delivered to their personal address. GOLO is also being unveiled in Ontario. The concept has already been working exceptionally well in the fast-food industry where people can order food and have it delivered to their homes. The potential for future growth appears limitless.

“I would consider pharmaceutical, grocery, flowers, books, magazines and possibly alcohol, where the convenience to the consumer is obvious,” Leonoff says. “We’re trying to build relevance for both the consumer and the merchant.”

To emphasize the usefulness of Paysafe’s services, an analogy that Leonoff points to is McDonald’s, one of the biggest marketing companies in the world. Regardless of whether he eats there three times a day, 365 days a year, they still wouldn’t have any insight about him as an individual, including his habits. Paysafe’s tool is one that provides visibility, data and analysis for merchants. Analytics can then accurately categorize each customer, which in turn allows the merchant to provide personalized preferences to those customers in an effort to encourage them to return to purchase additional products and/or services.

By virtue of the many Paysafe acquisitions the company is consolidating its platform to one common cashier that encompasses all the different payment types. Users don’t necessarily have to pay with a credit card. There are wallets that enable storage value much like a PayPal type of approach. There is the ability to have straight-through processing where a single transaction can be executed without storing value in a wallet and there are also cash vouchers.

“We sold in the vicinity of $3 billion cash vouchers at retail locations that are ultimately turned into digital currency. We also offer merchants the ability to extend credit to their customers so that they can buy merchandise online and pay for it in installments that Paysafe coordinates and takes the financial risk on,” Leonoff says.

As further proof that the company is continuing a commitment to excellence, Paysafe was recently named Best Merchant Acquirer/Processor at the 2016 Payments Awards in London, England.

“We understand the need to keep innovating to remain relevant in this rapidly-evolving industry. I am delighted that the hard work and contributions of the team have been recognized among our peers,” says Leonoff.

Leonoff, Chazonoff and the entire Paysafe team are forecasting continued growth at accelerated rates while adding to the core technologies and thus becoming an even better known and highly-regarded payment processor. Ultimately, success is measured in the value created for shareholders.

Leonoff believes Paysafe will be able to reach out to merchants and process ecommerce transactions on their websites. Pickup and delivery services are also available through GOLO, and for the bricks and mortar terminal business it is anticipated that Paysafe will soon be in a position to offer a smart point-of-sale device on an iPad and ultimately be capable of processing all three, while offering a consolidated analytics dashboard.

“I don’t think there is anything like our consolidated payment platform,” says Leonoff. “On the worldwide stage, I don’t believe anyone will possess the level of comprehensive tools and value that we’re going to bring to the table.”

www.paysafe.com

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