One Luxembourg fintech’s journey to becoming Daimler’s global e-payment provider
Five years ago PayCash was an idea. Today, it is Daimler’s newest acquisition, entrusted with providing e-payment solutions to the group’s millions of mobile app users.
Like most stories with fairytale endings, this one has its ups, its downs and the occasional plot twist.
PayCash sprung from the belief that payments should be possible instantly at the point of sale via a mobile device, no credit cards required.
“The start was not easy,” said Jürgen Wolff, PayCash Founder and CEO. “We had no customers, no brand and no money, so everyone was better off than us.” The upside was that without a standardized product on the market, the playing field was open.
“We changed our original B2C model to B2B and without that change, we would have been finished.”
PayCash spent its first few years developing and marketing a system that makes digital payments easy and secure for a broad range of uses. During that time, it witnessed local competitors with 30 times more funding close up shop.
Undeterred and underfunded, PayCash stuck to the basics. “We knew that to have a successful startup you need a great tech guy and a great sales guy,” Wolff said. “Those were our priorities.”
However, they soon realized that their B2C offer was not gaining traction fast enough and faced a big decision: “We changed our original B2C model to B2B and without that change, we would have been finished,” he added.
Equipped with a new strategy that prioritized white label over brand development, PayCash entered a pitching call for Daimler AG, which encompasses a fleet of automotive brands, including Mercedes-Benz, and financial services brands.
“By this time last year our payroll was feeding 20-25 of our employees’ children. It was continuous stress, and hard work doesn’t guarantee success…”
“We won that pitch two years ago because of our people and technology. This is a service-oriented product. When you buy a Formula One team you do not just get the car or the driver. You get the whole team – the mechanics, the cook, everyone,” Wolff explained.
The global group brought in PayCash to handle the digital wallets of its application-driven mobility services. For example, when a customer rents a vehicle for 15 minutes using Car2Go, one such service, the payment process will be quick and seamless thanks to PayCash’s e-payment solution.
In an ever-digitizing world, speed is essential, and fintech acquisition is an effective way for corporations to adapt quickly, skillfully and safely. “Big companies are not generally the risk takers, but the startups can take the initial risk for them,” said Wolff. “We can also make decisions and move faster than large corporations.”
The partnership first launched in spring 2016 when PayCash handled the payment processing of Daimler’s car-sharing business in China. The run was a success. Upon the deal’s finalization, PayCash will become the Daimler Group’s electronic payment system, which will be known as Mercedes pay.
“When we founded the company the word fintech didn’t exist. The ecosystem here has grown and developed so much since then.”
The startup’s advice to peers also pursuing acquisitions is to always be honest with your team and investors as you search for a buyer that will take care of your stakeholders. Team chemistry plays a major role too. Daimler proved to be the perfect match on all fronts, with likeminded people, a shared vision and a hunger for digital innovation.
Wolff, who previously worked for a mobile marketing company in Berlin, remembers the stress of those early years. “By this time last year our payroll was feeding 20-25 of our employees’ children. It was continuous stress, and hard work doesn’t guarantee success, but you know that the harder you work the more chances you have to get lucky.”
PayCash, a largely German team, was originally drawn to Luxembourg because of the support provided to foreigners through state aid and responsive regulators who are open to innovation. It appreciated lux future lab’s central location, which made it easy to connect with relevant agencies and to regularly travel abroad.
“When we founded the company the word fintech didn’t exist. The ecosystem here has grown and developed so much since then. Luxembourg is really on the cutting edge, especially with blockchain, “ Wolff said.
Looking back on the road to this ultimate acquisition, funding comes up as one of the startup’s key challenges along the way. Many young digital companies are racing against the world and the clock, forced to rely on a lean crew and local investments from friends and family. “It’s breathtaking to see what a small, multi-skilled team can accomplish. It’s really a lot of work and there are so many things that are out of your control, but it is fun,” he concluded.
The future is bright for the PayCash – soon-to-be Mercedes pay – team, which will significantly increase in size within the first year since its acquisition. They will continue operating out of Luxembourg and are now focused on tailoring the product specifically to Daimler’s needs in Europe, North America and Asia.