Dunedin picks up GPS and looks to Asia

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Solomon Teague
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Private equity house takes stake in UK payments processor

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Dunedin has taken a stake in Global Processing Services (GPS) in a deal that concludes a three-year search for a suitable investment in the payments sector.

UK private equity house Dunedin invested in a £44 million financing of GPS, a payments processor, citing its potential for international expansion.

Oliver Bevan, a partner at Dunedin who takes a seat on the GPS board alongside fellow partner Dougal Bennett as part of the deal, says: “We want to support GPS to expand internationally. It is already well established in the UK and across Europe, but we want to help it drive into new regions, starting with Asia.”

GPS works with some of the biggest names in the sector, including Visa, MasterCard, Apple Pay and Google Pay. Its technology allows clients to provide their users, whether via cards or other technologies, with real-time updates on their transactions.

This is functionality that consumers increasingly expect as a matter of course, and one that card issuers with older legacy systems have struggled to deliver on their own. 

Joanne Dewar, deputy chief executive at GPS, says: “Before GPS, the issuer/processor area of the payments ecosystem didn’t support innovation and took way too long to launch new products to market. GPS was designed to support product additions or changes with configuration only or with API, reducing time to market and placing more control with the fintech client and, by extension, the cardholder.”

Despite increasing competition and innovation squeezing margins, the deal shows payments remains an attractive and profitable business, with platforms increasingly competing not just on the technology and functionality but on the structure of pricing.

Dewar says: “People don’t really believe that anything is ever free. They understand that good service comes with an associated cost, however what they want is transparency so they know exactly what they are paying. Some of the fintechs in the payments space have been very aggressive on pricing which can appear too good to be true. If it seems that way, it probably is.”

By contrast, she notes, other platforms have laid bare their fee structure, and Dewar believes there is a genuine movement towards products that offer this transparency, as part of an offering that is more socially responsible.

Other sectors

Meanwhile, Dunedin is still looking for other opportunities in payments. It ruled out investing in any company that competes with GPS, but is investigating other sub-sectors like FX and faster payments.

Bevan says: “Financial services is an important sector for us. We have invested across many areas of the industry; for the last three years we have been looking at the payments space for a suitable opportunity.


“There are venture capital funds that can really understand the technology and pick winners, but that is beyond our risk appetite. That would be like backing a specific individual in the gold rush. We prefer to back the people providing the picks and the shovels. And that is GPS”
Oliver Bevan, Dunedin


“Payments is an interesting space. Margins are being squeezed for some players, but it is a big and fast-growing market. The use of cash is diminishing all the time and innovative new players are finding ways to serve the unbanked. GPS delivers high-quality embedded revenue, allowing for modest levels of leverage.”

Dunedin was attracted to GPS in part because it gives exposure to a broader range of payments-related fintech technologies, a strategy that acknowledges how competitive the space has become and how difficult it is to identify which platforms will succeed.

Bevan says: “There are venture capital funds that can really understand the technology and pick winners, but that is beyond our risk appetite. That would be like backing a specific individual in the gold rush, something we don’t want to do. We prefer to back the people providing the picks and the shovels. And that is GPS, they are the company that provides the picks and shovels for the companies digging for gold in today’s fintech gold rush.”

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Oliver Bevan, Dunedin

For example, while GPS is not itself a blockchain technology, it can be used to connect blockchain-based platforms with fiat payments terminals, allowing people to use cryptocurrencies or gold to make purchases in national currencies.

Dewar believes that is a powerful position to be in, given crypto is some way off being in everyday use.

“Right now the crypto industry still has to mature and it is hard to predict how it will evolve, or how long it will take,” she says. “Storing value is very different to actually spending; it will require a big infrastructure change before cryptocurrencies are used to make payments anywhere in the world.”

The next frontier

Whether it is blockchain technology, AI or some other technological frontier, the fintech gold rush shows no sign of slowing down. Dewar cites international payments as an area of potential growth, but admits the business has a long way to go to close the gap on the advances made at the national level in many places.

But regulation ensures cross-border payments will never be as straightforward or as frictionless as national payments, she warns, despite many individual regulators doing what they can to facilitate innovation.

However, this isn’t necessarily a bad thing, and the key is to find the right balance, says Dewar.

“People want payments to be frictionless, but they also want to feel secure,” she says. “There have been instances where payments were made completely seamless, but the user experience is far from perfect. Automation for repeat transactions is one thing, but for a one-off payment, especially if the amount in question is significant? People want a small amount of friction to give them control, security and the peace of mind that the payment has actually taken place.”

Dewar believes GPS is positioned to serve as the connecting link between the banks and fintechs, to simplify and facilitate direct collaboration. And she stresses this collaboration, and banks’ open-mindedness to innovation more broadly, will determine whether or not they remain relevant in the rapidly evolving financial landscape.

“Tier-one banks have a natural advantage, given their brand recognition outside London. The challenger banks are still a very niche community,” she says. “But whether tier-one banks maintain their position will be down to their own strategies and whether they invest in innovation. The competition isn’t only coming from the fintechs. The mega technology companies like Amazon and Google have already moved into payments. If they decided to move into broader banking, they have the technology, the brand and scale to make it happen.”