Two European clones of Square have merged. SumUp (Backed by Groupon and BBVA) and Payleven (Backed by Rocket Internet) have merged, terms of the deal were not disclosed. The new business will be led by SumUp's CEO, Dan Klein. The combined business will include 1m customers in 15 countries. It's believed that the merger is a result of both companies realizing how hard it is to build a successful payments company. These business command slim margins from card transactions and therefore need to achieve massive scale to succeed.
Although there truly are tens of millions of merchants and small businesses that have yet to take card payments because of the fees for traditional services were too cost prohibitive for companies of that size, that didn’t directly correlate to all those SMBs signing up once they had the chance to pay lower rates with these startups. “In Europe we discovered that it just takes a lot longer to adopt card payments at this scale than people originally thought it would,” Klein explained in an interview. Earlier, there were projections that by now we would have some 25 million SMBs using dongle-based card payment services, but in reality there are only around 8 million today, Klein said.