How Do Nuvei's Financials Compare to PayPal?
Established in 1998, PayPal remains the titan in the online payments industry. According to Paypal's 2019 annual report and Nuvei's prospectus for investors, PayPal is still the dominant player on most but not all measures.
- Profitability: PayPal reported $2.4 billion in net income for 2019, while Nuvei reported a $69 million loss in 2019. However, Nuvei has reported a net income of $13.9 million for the second quarter of 2020.
- Revenue: In Fiscal 2019, Nuvei generated $248 million in fiscal 2019, far less than PayPal. In 2019, PayPal generated $17 billion in total revenue.
- Customer Base: Nuvei reported 50,000 customers in its September 2020 prospectus for investors. Once more, PayPal has a dramatic lead with more than 305 million active users as of early 2020.
- Employees: Revenue per employee is one way to evaluate the efficiency of technology companies. By this measure, PayPal earned approximately $760,000 per employee in 2019. In contrast, Nuvei's 2019 revenue per employee was $300,000.
Since Stripe is a privately owned company, it isn't easy to make a direct comparison. One industry estimate suggests that Stripe's annual revenue is at $329 million. Also, Stripe's estimated revenue per employee is $178,000. That means Nuvei's business model and employees appear to be pulling ahead of Stripe. Certainly, Nuvei's expanded cash reserves from its September 2020 IPO will make expansion and innovation easier.
One Surprising Area Where Nuvei Is Pulling Ahead of PayPal
If a competitor had stores in more than 100 countries and your company only had stores in 25 countries, would you be concerned? That's an essential question for PayPal to ponder. Nuvei reports that they process payments in approximately 150 currencies. In contrast, PayPal only accepts payments in 26 currencies. This advantage suggests that Nuvei may achieve a more significant market share, especially in the developing world. By accepting so many currencies, Nuvei also has far greater exposure to foreign exchange risk. Time will tell if the company can manage this risk effectively.
Nuvei's Path to Success: A Long Road From 2003
Managing payments is a long-established business model. Furthermore, there are well established financial companies with millions of customers. So, how did Nuvei have a chance in the payments industry? The company differentiated itself from other companies in several ways since it was established in Montreal in 2003.
Unlike legacy companies with aging infrastructure, Nuvei does not need to worry about maintaining or operating old systems. That gives it a speed advantage over older companies. As a younger firm, it is also free to question assumptions about payments. For example, why do wire payments have to take several days for processing in the digital age? Some payment transactions, like debit payment, already happen in a matter of minutes. It's reasonable to assume that gaming enthusiasts want to see their winnings as soon as possible following the end of a bet. That makes gamblers a good fit for a company that offers fast payments.
How Big Could Nuvei Grow Based on the Gaming Industry Alone?
Aside from startup speed advantages, Nuvei has also made progress by focusing on a niche market: the sports betting industry. Since many in this market make many transactions, it is a good market for a payments firm. According to the Canadian Gaming Association, there were more than $450 million in sports bets in Canada as of 2010. That's just one segment of the broader Canadian gaming industry, which is worth more than $16 billion in 2017. If Nuvei earned 1% of the broader industry's revenues, it would earn an additional $160 million.
As a digital company, Nuvei may grow further beyond Canada to other markets with broader gaming markets. Take the UK, where betting on everything from soccer matches to royal baby names has become a national pastime. According to the Gambling Commission, the UK's online betting industry is worth £5.5 billion ($7 billion). By continuing to focus on the gambling market, Nuvei can continue to grow for years.
About the Author
Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.