Barclays Has Much at Stake in the Fintech Future

Barclays Plc is trying to work out how to make the best of its payments business in its quest to increase the appeal of its shares. One option is selling a stake in the unit that handles card transactions for shopkeepers and other businesses, Bloomberg News reports.

That won’t be a shortcut to boosting the stock through advertising the high value put on an overlooked part of the group – the last refuge of uninspired executives. More likely, such a sale would be a way of injecting extra investment into the unit and bringing in the expertise of a tech-savvy partner to aid its development. Given Barclays’s returns on equity lag behind peers, getting some outside help could be the smart choice.

It would be an odd time for Barclays to think about cashing out of the payments business. The field has high growth potential, but industry leaders such as Stripe Inc. or Adyen NV have recently suffered steep drops in valuations. Barclays also needs to diversify its earnings and find more reliable income streams to offset its volatile corporate and investment bank. Deal-making, fundraising and trading used nearly 70% of Barclays’s equity capital, while producing 53% of revenue last year.

Barclays Business is Skewed Towards its Investment Bank

Several European and US banks sold their payments units after the 2008 financial crisis as a way of raising capital. NatWest Group Plc – formerly Royal Bank of Scotland – offloaded the business that became WorldPay Inc., for example. But since then, the rapid growth of online retail and a wave of investment in fintech startups have seen the dull backwater of processing and settlement become a hotbed of innovation.