Reid Hoffman's Anti-Poverty Venture Joins Fintech M&A Boom

(Bloomberg) -- It started out as social impact investing for Reid Hoffman, but the LinkedIn billionaire ended up joining the dealmaking spree reshaping fintech’s hottest sector.

British-based Crown Agents Bank said Thursday that it would acquire part of Segovia, an African-focused payment-software venture where Hoffman was the lead investor. Hoffman and other backers of Segovia will become minority shareholders in Crown Agents Bank, which is controlled by Helios Investment Partners. Terms of the deal weren’t disclosed.

Once an arm of the British Empire that handled funding to far-flung colonies, Crown Agents Bank now manages reserves and deposits for small countries’ central banks and specializes in trading less liquid, frontier-market currencies. Buying New York-based Segovia’s enterprise and payment-gateway product will beef up Crown Agents Bank’s business-to-business payment capabilities and foreign-exchange transfers.

Segovia was founded in 2014 by Harvard-educated economists Michael Faye and Paul Niehaus to provide the multi-trillion-dollar humanitarian and development industry with modern technological tools to ensure the money spent on aid more effectively reaches the world’s poor.

Financial Inclusion

“We provide foreign-exchange services; they are doing some great things on payments,” including services to mobile-phone wallets in nations where few people have bank accounts, Albert Maasland, Crown Agents Bank’s chief executive officer, said by phone.

“They want to improve financial inclusion,” said Maasland, a former foreign-exchange banker at firms including Chase Manhattan and Deutsche Bank AG. “We want the same thing. Rather than me building that technology, why don’t we come together?”

Other Segovia investors who will get a stake in Crown Agents Bank include biotech investor Mark Lampert, hedge funder Bill Ackman’s Pershing Square Foundation and Flourish Ventures, part of EBay Inc. founder Pierre Omidyar’s family office.

Hoffman, 51, is worth about $3.2 billion, according to the Bloomberg Billionaires Index. He was a co-founder of LinkedIn, the world’s most popular professional networking website, which was sold to Microsoft Corp. in 2016. Hoffman said in a statement that he invested in Segovia because of its “potential to re-imagine emerging-market payments and financial inclusion,” and combining with Crown Agents Bank’s network “brings us closer to that vision.”

Segovia’s consumer remittance offering, Taptap Send, will be spun out into a separate entity. Maasland said his firm doesn’t deal directly with consumers, but it does service the remittance providers that let a country’s emigres send money home.

A boom in the payments sector has gathered pace as consumers make more international transactions and use their phones or tap their cards to make purchases, putting greater demands on back-end software. Adyen NV was one of the hottest initial public offerings of 2018, and last month, Fidelity National Information Services Inc. agreed to buy Worldpay Inc. for more than $35 billion, the sector’s biggest-ever deal.

Crown Agents Bank is far smaller than those firms, with about 1.1 billion pounds ($1.45 billion) in assets, but is focused on some of the world’s fastest-growing economies. It says it’s processed more than $15 billion in foreign-exchange transactions since 2016.

After more than two centuries, the entity’s ties to the British government were severed in 1997, and its financial-services arm was split off in the sale three years ago to Helios, an African-focused investor founded by Nigerian-born dealmakers. That left Crown Agents Ltd. as a not-for-profit international-development firm.

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