With the acquisition of Global Reach Group, Fleetcor’s B2B payments arm Corpay is set to become the biggest player of its type in the space. Mark Frey, President of Corpay, explains more.
B2B payments is one of the most fragmented industries in the world, but there are companies looking to change that – not least Fleetcor-owned Corpay. The company is becoming one of the biggest players in the B2B payments space, aided by a series of high-profile acquisitions that are bringing together previously key names in the industry.
Currently formed of the 2017-acquired Cambridge Global Payments and 2021-acquired Afex, Corpay is now expanding further with the acquisition of UK-based Global Reach Group. Announced in early June, the acquisition is expected to increase Corpay’s headcount by around 20% when it closes in Q4 2022.
Global Reach currently sees yearly FX transactions of almost £7bn, and caters primarily to corporate and institutional clients. However, for Corpay, its focus on the UK and EU is particularly key to a broad international growth strategy.
“We are in the early stages of a very good growth story for this industry,” says Mark Frey, President of Corpay.
“We see an awful lot of upside in terms of the way that we’re positioned in the marketplace: the core products, the capabilities that we’re building, the geographies and the licensing footprint that we’re assembling. We’re certainly doing our best to reduce some of that fragmentation through our organic and our inorganic growth activities.”
Why Corpay is acquiring Global Reach
The acquisition of Global Reach is by no means a unique story for Fleetcor, but it does provide key additional strengths for Corpay.
“This is a portfolio play for us at its simplest level, and it’s one that we’re excited about in terms of the quality of the customer base and the quality of personnel,” explains Frey, adding that the company has a mindset that aligns closely with their own.
“This is just a good, well-run business with some really great talent; a great customer base and some innovative products that they’re building and have been focused on for the last couple of years.”
Much of the appeal of Global Reach is geographic, with the company adding its strong portfolio of UK and European customers – key regions Corpay has been focused on. However, Global Reach’s 2020 acquisition of Canadian EncoreFX also presents key opportunities for Corpay.
“It allows us to consolidate in the Canadian market with the old Encore business that was acquired by Global Reach now becoming part of our network as well, which certainly gives us a strength and position in the Canadian marketplace,” he says.
There is also the potential for some product benefits, with some of Global Reach’s products expected to “dovetail nicely” with some of Corpay’s recent product launches.
Building the biggest company in B2B payments
In terms of earnings and to a lesser extent revenue, Frey says that Corpay as a whole is “already larger” than Convera, formerly known as Western Union Business Solutions. While Corpay doesn’t release exact numbers, in 2021 Convera had flows of $150bn and revenues of $422m.
“This transaction puts the exclamation point on our position in the non-bank space of being the largest cross-border payments provider by a wide margin,” he says.
However, he adds that the company still has “an awful lot more to do” in order to realise its long-term plans.
At present, the company is split between “harvesting mode” in some markets, where it has already developed the products, services and geography and is now growing its presence, and those where it is still establishing itself, and building a similar infrastructure in the process.
In all markets, this is all built on “one core technology and operational system”, which Frey sees as vital to the company’s success.
“The acquisitions that we do and the businesses that we build, they all hang off of the same tech stack, which allows us to run a lot faster in terms of rolling out new products, features and benefits, because we only have to develop them once and we can roll them out across our global customer base,” he says.
“We see that as a big part of the overall strategy and it enables our business to run quite a bit faster.”
Corpay generates most of its revenue from the FX spread of transactions, but caters to a broad range of companies, from businesses looking to pay international suppliers through to other fintechs, as well as major corporates and even banks. However, Frey is keen to stress that the company’s focus now and in the future is B2B.
“We’re a corporate-focused organisation. We build products for that and our goal is to continue to enhance our network, our pay capability to move money faster, more reliably or accurately and to do it in a more localised fashion in as many markets around the world as we possibly can,” he says.
With this in mind, the future focus for Corpay is on building up the company’s automation and cross-border payments capabilities as well as continuing with its FX-centric business, albeit powered by a greater level of technology than has previously been the case.
“We see that as being another market that we can continue to grow in and post 20%+ growth year-on-year, which is certainly what we’re aiming to do organically and [via] more deals in this space as well.”
The importance of a strong payments network
Underpinning Corpay’s offering is its network, which Frey says ensures an FX liquidity offering “across a more comprehensive set of markets than perhaps anyone in the world with the exception of two or three of the world’s biggest FX banks”.
“We’ve cobbled together a network of local in-country liquidity providers and tier one money-centered FX banks that we trade with,” he explains.
“[This allows us to] truly provide world class liquidity and capability to the large and mid-size corporate market, ultimately, and service an institutional customer base, whether that be funds or financial institutions themselves.”
Networks have become a strong theme across the cross-border payments space, with many companies building their own solutions to compete with the likes of Swift. But with Corpay, Frey sees the company’s network as “foundational to the success of the business”.
He points to the company’s mix of in-country capabilities and payment rails that connect to local, in-country schemes, arguing that Corpay’s network “takes the best of each of those schemes and stitches them together”. This has enabled the company to build scale and local relationships in key geographies, supported by groups of banks that also provide access to their own platforms.
“When we started years ago, it was about building a connection in each particular market, and then it was about getting secondary providers in redundancy through a different type of rail connectivity,” he explains.
“Now we’re at the stage where we still have four or five alternatives that we can utilise depending on the type and size of payment and we have different commercial agreements in place to support those payments so that we can route them through the most economically advantageous rail and/or for the best service delivery and reliability of payment servicing.”
This has enabled the company to cater to different customer needs, be it cost, timing or mix of the two, which Frey believes adds far more than simply being able to say the company can send to a particular country.
“It’s more about how you reach those countries,” he says. “Whether it’s direct, whether you have a secondary provider, what do your redundancies look like? What is the level of connection? Is it Swift? Is it the local scheme? Is it an API? All of those things are really, really important.
“You come to realize very quickly that you can’t build a network overnight. We’ve been working on it for 10-plus years to get to where we are with a very strategic focus on this being a point of competition for us. This is how we will win: with the strength of this network.”
Digital currencies and payout capabilities
Bank-to-bank is currently the core of Corpay’s offering, although Frey has seen an increase in pay-to-card, particularly for areas such as payroll.
Pay-to-wallets has also been slowly increasing, which has led the company to develop its own wallet-like capabilities using its virtual IBAN network, which will enable customers to hold foreign currencies as required.
“Providing flexibility in terms of how we pay out and ultimately providing flexibility and capability in terms of how we can collect foreign currency receivables or businesses and/or financial institutions is an incredibly powerful tool,” he says.
“For a long time our industry, as a whole, has been focused on outbound payment solutions and I think that the next avenue for growth is really, with all the same vigour that we pursued those solutions over the years, building similar types of technology and levels of automation for incoming foreign currency receivables. Being able to provide basically a network of banking solutions to enable a business to go global in terms of its customer base.”
Looking beyond this, Corpay is also beginning to explore the digital assets space, with a focus on enabling cryptocurrency firms and virtual asset service providers to move funds from fiat to crypto.
“Potentially being a liquidity solutions provider to help them manage the FX risk of their fiat business and/or an on-ramp, off-ramp in certain select cases with blue chip organizations where we can become the service provider that helps them either collect and/or remit funds to institutional investors,” says Frey.
He points to the “tremendous amount of volatility” in the space, stressing that the company does not plan to handle crypto itself. However, he does highlight the space as a key potential area for future development.
“Facilitating the fiat currency payments for these firms is something that we see as a tremendous growth opportunity,” he says.
“This is definitely an area where we want to play and where we see a lot of runway for growth going forward as well.”
Beyond expanding its presence into the cryptocurrency space, Corpay’s future growth is ultimately centred around expanding the reach and utilisation of its core offerings. Here, acquisitions are expected to continue to play a role as the business expands further, with Frey highlighting three areas that the business is looking for.
The first, which includes the Global Reach acquisition, is focused on acquiring companies that add strength in markets where the company is already performing well, while the second focuses on adding companies that introduce new geographies.
“Certainly we’re always on the lookout for those opportunities as well,” he says, adding that the third focuses on adding new market-neutral capabilities.
“We’re also always on the lookout for organisational capability, network expansion, product expansion, technology capability that we can add to the network and then sell across the entirety of our customer base and integrate into our platform.”
Looking forward, we are likely to see Corpay make more acquisitions that meet at least one of the three of these requirements.
“We still see a very target rich environment out there. Lots of organizations are reaching a level of maturity and we know they will come to market. I expect we will be in those conversations when they come to pass.”