Banc of California Acquires Deepstack in Payment Processing

Diving brief:

  • Banc of California has acquired Deepstack Technologies for $24 million, a cash and stock transaction that will expand the bank’s business into payment processing, the company announced this month.
  • Through Deepstack, the Santa Ana, Calif.-based bank said it will market payment processing services to embedded software vendors (ISVs), e-commerce marketplaces, fintechs and other businesses. other merchants looking to integrate payments into their software and websites.
  • As part of the transaction, which consisted of 70% cash and 30% stock, Banc of California acquired Deepstack’s assets, including the company’s intellectual property and certain customers, according to a statement.

Overview of the dive:

The acquisition gives the bank access to predictable commission revenue and allows the bank to capture a greater share of revenue per transaction, Banc of California said.

“There is a clear opportunity for a bank with the right technology to become a one-stop-shop to simplify and streamline payments for businesses while providing faster access to funds and improved reporting capability,” said Jared Wolff, president and chief executive officer of the bank, to analysts. during a call to discuss the case. “With the acquisition of Deepstack Technologies’ technology and payment platform, we believe Banc of California will be able to fill this void and offer a complete suite of payment solutions for our target market that is unmatched. by one of our regional banking competitors.”

Banc of California said it expects to complete the integration of Deepstack’s technology into its internal platform during the fourth quarter of this year.

The deal will position the bank closer to existing and potential customers, said Wolff, who likened the company to Banking-as-a-Service (BaaS), an increasingly popular business model among community banks.

“We could have leased our charter to some fintechs to generate fee revenue, but we would have no contact or opportunity with the end user who was likely a consumer,” he said. “What makes this transaction so special is rather that we are investing in a solution that is very attractive to our existing customers, but also offers perhaps an even greater opportunity with new customers who are the same commercial customers. targets we would like.”

Banc of California will also have access to customer payment information, which the bank hopes to use for credit purposes, Wolff said.

“Payment processing provides in-depth knowledge of their business needs, which will give us an advantage in developing personalized lines of credit for these customers, while our ability to provide them with same-day visibility into payments gives them advantage of developing depository relationships,” said Wolff.

Deepstack currently processes transactions through other banks, but will migrate those transactions to Banc of California once the bank activates its platform, Wolff said.

That migration won’t happen for several months, Wolff said, adding that the bank will first perform technology and platform compliance testing.

All Deepstack employees have joined Banc of California and its three executives have entered into three-year employment contracts with the bank, according to the financial institution.

“We are thrilled to join Banc of California and provide a complete payment solution to customers that very few banks and payment processors are able to offer,” deepstack President Jayme Amirie said in a statement. “ISVs and technology companies are tired of piecemeal integrated payment and funding solutions and limited interactions with the underlying bank. By partnering with Banc of California, we can offer our customers industry-leading payment technology solutions to enable them to seamlessly integrate and monetize their platforms, while providing customers with faster access to funds from receivables. on credit cards, same-day account visibility, and better reporting and account reconciliation.”

Payments as a service

Payment fintechs are particularly relevant in the financial services arena as demand for payments as a service (PaaS) grows, said Daniela Hawkins, chief executive of consulting firm Capco.

“Financial services firms have struggled for years with the build-or-buy option for emerging technologies, but with the accelerating rate of change in the payments space, many financial institutions are considering the ‘option to acquire,’ she said in an email. “Identifying a fintech with the right technology capabilities, brand and vision will allow FIs to tap into new revenue streams.”

JPMorgan Chase, the world’s largest merchant services provider by transaction volume, according to the Nilson Report, recently announced its own bid for a payments-related business.

The bank plans to buy payments startup Renovite in a bid to update the services it offers to merchants for the acquisition of their card paymentsthe bank announced this month.

JPMorgan, which is investing heavily in its payment processing capabilities in the face of the growing threat from non-bank competitors such as Stripe and Block, is also experimenting with a new “pay by bank” offering, which would allow merchants to take payment directly on the a customer’s account. Bank account, according to the Financial Times.

The bank plans to launch the offering next year and is in talks with at least one fintech company about a partnership to provide infrastructure support, according to the Financial Times, which cited people with knowledge of the matter.

Michael J. Birnbaum