Israel’s $15bn Rapyd aiming to acquire Gulf fintech startups

Blake Wisz, Unsplash

• Already made several fintech acquisitions in Europe and Asia
• Higher banking restrictions open “window of opportunity”
• Valued at $15 billion, Rapyd has raised $960 million to date

Rapyd, Israel’s highest-valued unicorn, is eyeing financial technology acquisitions in the Middle East and North Africa as it seeks to capitalise on the challenging business environment for startups.

As the US Federal Reserve continues to hike interest rates in an effort to curb rising inflation, the prospect of a worldwide recession dominates concerns, particularly among small business owners.

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“We are looking [to make acquisitions] in the region,” Arik Shtilman, Rapyd’s CEO and co-founder told AGBI.

“When interest rates go up, the first ones to get hit are actually small and medium businesses. Spending goes down. Small businesses borrow less, which means their growth will be slower or they [may even see] a decline in business,” Shtilman said.

“So overall, if you look at it in global payments it means that the growth of small and medium business clients is going to slow down significantly.

“More interestingly, I think there will be a lot of consolidation in the payments space, and smaller payments companies and smaller fintech companies will be acquired quite quickly and easily by larger players just because their business will go down, their ability to raise capital will go down. 

“Restrictions put on them by central banks will be higher because of the risk, and this will create a window of opportunity for companies like Rapyd and other big companies to acquire and move very quickly.”

Consolidation ahead

Remo Giovanni Abbondandolo, senior vice president for MENA at global payments processor Checkout.com, told AGBI last month that consolidation is coming to the Gulf’s fintech sector.

“In my opinion, if you’re a fintech, and you’re not profitable, it’s a challenging time at the moment,” he said.

Rapyd, which reached a $15 billion valuation in this year, opened its office in the Dubai International Centre (DIFC) in June 2022, becoming the first Israeli company to be regulated in the UAE.

For decades after Israel’s founding in 1948, Gulf countries including the UAE shunned the Jewish state in solidarity with the Palestinians expelled to create it.

The signing of the Abraham Accords, named after Abraham to emphasise the shared origin of belief among Judaism, Islam and Christianity, marked the first public normalisation of relations between an Arab country and Israel since that of Jordan in 1994.

The growing ties between the UAE and Israel have since been turbocharged by the signing of a free trade agreement in May.

Rapyd is described as a global fintech-as-a-service company and makes it easy for businesses of any size to implement localised payments without building complex infrastructure – an approach similar to Amazon’s AWS service. The company accepts and disburses more than 900 payment types in over 100 countries.

Last year it announced that it was launching Rapyd Ventures, which will focus on investing in early and growth-stage businesses developing financial services innovation. 

In July Rapyd completed the acquisition of Icelandic payments company Valitor in a deal valued at $100 million. Last year it bought Hong Kong-based Neat, a cross-border trade enabling platform for small businesses and startups, preceded by the acquisition of Iceland-based credit card payment processing company Kortathjonustan hf (Korta) in 2020.

Current restrictions

Rapyd raised $300 million in its Series E funding round last August, meaning it has raised $960 million in total to date.

“Our problem is that currently our ability to do acquisitions in the region is limited because the company is Israeli-based, so we can buy in the UAE but in some other countries we are very limited,” Shtilman said. 

“But we are looking very actively.”

UAE-Israeli relations returned to the spotlight last week when an official delegation from Abu Dhabi arrived in Tel Aviv.

Delegates included those from heavyweight names including Abu Dhabi Global Market, Mubadala, ADNOC, Abu Dhabi Investment Office, Abu Dhabi Department of Culture and Tourism, Abu Dhabi Chamber and First Abu Dhabi Bank.

Three milestone memoranda of understanding were signed to explore and enable various business opportunities in the financial world.

“I hope to see the leading companies in both countries build on the strong foundations in place, including our CEPA trade agreement, to cooperate and forge business ties and create fresh ventures reaching new markets,” Mohamed Al Khaja, the UAE ambassador to Israel said.

“This will, in turn, create jobs and drive further economic growth for the benefit of all Israelis and Emiratis.”

Rapyd’s office in Dubai is planned to create more than 120 jobs within the next 18 months.

The Middle East and North Africa payments market has grown rapidly over the past decade, to include global fintechs and tech companies, alongside incumbent banks.

Local and global giants like Network International, Stripe, Checkout.com, Amazon Payment Services, Hyperpay and many others, are part of the same online battlefield.