While investors are starting to talk about a tech bubble burst, it seems that fintech is gaining momentum as more dollars flow into the industry. U.S. fintech investment grew threefold from $3.4 billion in 2013 to $9.9 billion in 2014. Even traditional Wall Street giants are starting to feel that their cash cows are in jeopardy as Jamie Dimon, chairman and CEO of JPMorgan Chase, warns investors, "Silicon Valley is coming."
Payments technologies are becoming a lynchpin of the fintech revolution, attracting more than $5 billion in investments in 2014 -- which is why the next unicorn may very well be found in payments.
Billions in electronic payments processing
Electronic payments are the financial force behind the online revolution. They enable online commerce, create marketplaces for goods and services, and power complex transactions - delivering a near seamless experience for today's consumer. In 2013, credit card payments value in the U.S. accounted for $4 trillion -- due to the fact the innovative payments technologies are contributing to a dramatic shift in the consumer mindset (i.e., they can now make online transactions securely, easily and instantly).
YapStone is an especially representative case study of such an innovative payments company that has been flying under the radar until recently. The company has been quietly built a leadership position by powering payments for global marketplaces and specific, large vertical markets. In 2016, the company will process over $15 billion in electronic payment volume and forecasts approximately $235 million in annual revenue.
Doing the heavy lifting
One of the secrets behind its success is YapStone's ability to earn more revenue from every dollar processed as compared to other payment companies such as Braintree (now owned by PayPal). The difference between YapStone and their competitors is that the company offers an end-to-end payments platform (in other words, a one-stop shop for online payments), allowing their customers to focus on growing their business while YapStone manages "all things payments."
In many cases, payments companies act as only the gateway/API layer and leave the heavy lifting -- such as risk, underwriting, customer support, pay-in, and disbursements -- to the merchant acquirer or the merchants themselves. But YapStone's end-to-end approach takes care of these time-consuming and complex tasks. This is increasingly important and in-demand as the payments landscape has become progressively more complicated with pricing, regulation, compliance, risk, and licensing.
Maintaining focused markets
Another major difference between YapStone and other payments companies is focus. YapStone is focused on marketplaces and businesses in specific large vertical markets -- primarily apartment rentals and vacation rentals -- which are $450B and $200B markets, respectively.
By learning the ins and outs of a single vertical market and catering to their specific challenges, YapStone has become the largest electronic payments processor for these markets.
YapStone's long-term strategy was to build a profitable company and gain market dominance through a focused effort on the business model. With accelerating growth in the past few years, it has launched a more serious brand strategy effort to raise the company's profile in fintech as well as join the "sharing economy conversation." With this in mind, Tom Villante, YapStone's CEO and co-founder, began promoting the company by speaking at conferences, conducting press interviews, and contributing to thought leadership articles.
Not yet a household name, YapStone has already attracted some investor attention. After resisting outside institutional capital in its first decade, YapStone has raised $110 million from prestigious tech investors Accel Partners, Meritech Capital, and Bregal Sagemount in the last 5 years. Accel Partners was also an investor in payments company, Braintree, which sold to PayPal for $800M.
As YapStone has matured and continued to focus on building a scaleable payments platform, its growth rate has continued to accelerate. The company has grown sixfold since 2011, with revenue growth approaching 50% in 2016. With a robust payments platform offering online and mobile payment solutions for global marketplaces and large vertical markets, YapStone has all the characteristics of a unicorn in the making.