$5 billion fintech Zepz looks to take on rivals like PayPal with digital wallet, M&A plans

LONDON — Zepz, the owner of money transfer firms WorldRemit and Sendwave, is on the hunt for mergers and acquisitions after cutting 26% of its workforce last month, the company's CEO told CNBC.

With a $5 billion valuation, Zepz is one of the largest fintech companies in Europe, backed by leading investors including Accel, TCV and Leapfrog.

The company enables users to send money from a smartphone or computer to people abroad, who can receive it in their bank account, mobile wallet, or as a mobile airtime top-up.

The service is a challenger to large banks and established money transfer services like Western Union, touting cheaper fees and the ability to move funds rapidly. A close rival is Wise, which also claims to offer cheaper international money transfers than banks.

Mark Lenhard, Zepz's CEO, said the firm wanted to grow its portfolio of businesses in an effort to own a larger part of the global digital payments pie.

Lenhard didn't identify which companies Zepz was looking to buy, but said the sharp slump in private fintech valuations made it an attractive time to kick off M&A exploration.

The overall value of cross-border payments is forecast to increase from $150 trillion in 2017 to over $250 trillion by 2027, according to the Bank of England. It's a highly competitive industry with various players operating and taking a slice of each transaction a consumer makes.

A particular focus for Zepz product-wise in the near term is digital wallets, Lenhard said, with the company planning to launch its first digital wallet "imminently."

"We want to be a core financial hub for a very particular segment," he told CNBC Wednesday, with a particular focus on migrant communities sending funds home.

The push into M&A is a surprise move in many ways as it follows a significant amount of cost reduction at the 13-year-old company. In May, Zepz laid off 420 employees, equating to about 26% of its global workforce.

Zepz says it cut the jobs to consolidate its operations after its acqusition of U.S. remittances firm Sendwave led to a duplication of certain roles.

Still, at the time, Zepz said it wasn't pausing hiring, and was actively trying to fill 200 roles.

It marked the second time in just under a year Zepz laid off staff. In June 2022, Zepz cut around 5% of its workforce, according to Sky News.

"Any time you're laying off individuals it's hard, it sucks, but it was certainly the right thing to do. We've expanded things out of that," Lenhard said Wednesday.

He added that he hopes the company's upcoming digital wallet product will convince customers to rely more on Zepz, rather than using competing digital banks and other financial apps which have grown their services to offer a much wider range of products.

PayPal, for example, offers users mobile wallets, the buying and selling of cryptocurrencies, and buy now, pay later installment loans, among other things.

Like other fintechs, Zepz has been in cost-cutting mode as the industry faces huge pressure from a slump in technology valuations, stoked by a host of macroeconomic headwinds including higher inflation and interest rates.

Despite this, Zepz says it has been less susceptible to those economic pressures than other firms in the space. World remittances is less impacted by broader macroeconomic pressures than, say, banking, according to Lenhard.

Zepz's overall customer transactions are up 25% year-to-date as of April 2023, the company said, while its customer growth accelerated to 30% on average and by as much as 80% in certain areas.

The company, which hit monthly profitability in the first half of 2022, wants to achieve profitability on a full-year basis this year.

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