A Diverse Array of Payment Methods, Plus M&A, Help Vault Paya to a 28% Jump in Volume

Hyper growth in e-commerce has lifted many processors over the past 18 months, but some are also benefiting from a diverse array of payment methods and clients. This group includes Paya Holdings Inc., which Friday morning reported a nearly 28% year-over-year increase in payment volume for its third quarter ended Sept. 30.

Contributing to the company’s $11.1 billion in volume was the full integration of independent sales organization Paragon Payment Systems, which Atlanta-based Paya acquired in April. But Paya chief executive Jeff Hack was quick to point out that diversity in payment methods and in client industries is also playing a starring role in his company’s growth. Paya processes in five primary markets: business-to-business, health care, non-profits, governments, and education.

One other key advantage of this diversity, he told equity analysts on an earnings call Friday, is that it can reduce competitive pressure on pricing. “The competitive environment exists, but we are very focused on business-to-business and municipal [payments],” Hack told equity analysts on an earnings call Friday. These markets, he added, are “not as competitive” as other general retail payments.

Hack signaled that further acquisitions are likely in the works. “We view M&A as a core part of our growth strategy,” he said. In the meantime, Paragon brings added strength in health care and nonprofits. An earlier deal, that for The Payment Group, brought in more capacity in utility companies and government entities.

Paya’s strategy is to bring capabilities in both card and automated clearing house payments, along with support for integration of payments capability in clients’ operating software. The company pursues this latter approach through independent software vendors, or ISVs. The ISV strategy can take time to develop, Hack cautioned. “Signing new partners takes longer, but if it takes longer that’s okay because once they’re onboard they’re with you for a long time,” he said.

ACH, meanwhile, is proving to be a fast-growing transaction category for Paya. The payment method, which clients typically deploy for higher tickets, accounted for $4.5 billion in volume for Paya in the quarter, up 55% year-over-year. That was enough to make up 41% of Paya’s total third-quarter volume, compared to a one-third volume share a year ago. But Hack was quick to point out that ACH activity is not displacing card volume. “It’s not about them displacing each other,” he said. “They work alongside each other.”

Because of Paya’s core markets, ACH capability, indeed, has become a strategic factor for Paya in winning and keeping business, Hack said. “ACH continues to be a key differentiator for Paya,” he told analysts on the call.

For the quarter, and with the Paragon integration complete, Paya reported $63.1 million in revenue, up 22% year-over-year. Organic revenue growth—the increase in revenue without accounting for acquisitions—amounted to 12%, underscoring the importance of Paya’s M&A strategy, company officials said.