kevin. A2A Payments A2A Payments
Image Credit: kevin.
Erik Howell and Alessandro Mighetto • 25 October, 2024

Challenges of In-Store A2A Payments and the Failure of kevin.

Payments software startup, kevin, once seen as Lithuania's next unicorn, has declared bankruptcy, leading the National Central Bank of Lithuania to revoke its PI license after months of financial struggles and employee layoffs. kevin’s insolvency underscores the critical importance of developing robust economic models that can effectively support scalability and long-term success in the fintech landscape.

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About Kevin

  • kevin offers a brand-agnostic white-label A2A payment solution that allows customers to pay directly from their bank accounts using existing card terminals, thus bypassing card transaction fees.
  • The platform features customizable interfaces, granting users complete control over payment processes and ensuring direct integration.
  • The company uses a multi-tenant network, allowing multiple customers to share infrastructure while keeping their data separate and secure.
  • Leveraging its A2A payment technology, the platform ensures real-time processing and instant fund settlement, benefiting merchants' cash flow.
  • The solution employs tokenization, replacing sensitive banking information with secure tokens, allowing consumers to link their bank accounts to merchants for one-click payments

Recent Developments

  • In Sep ‘23, kevin opened a new office in Dubai to strategically enter the Middle Eastern market. However, insufficient revenue generated hindered the geo expansion.
  • FTE count dropped from 113 to 22 between Jan ‘24 and Sep ‘24, following layoffs. The Lithuanian Labor Inspectorate received 62 employee complaints claiming up to two months of salaries.
  • In Jul ‘24, the Central Bank of Lithuania blocked kevin from taking on new clients due to delays in submitting annual reports and appointed a representative to oversee operations.
  • The company started accumulating social security tax debt in April ‘24, reaching ~€440k in liabilities by the time of kevin’s bankruptcy.
  • Despite raising ~$75 million in funding over the past years, kevin struggled to transform venture capital flows into a sustainable business model.

Key Challenges

  • Checkout flow: kevin's checkout flow highlights a limitation of the open banking model: multiple steps may deter users who prefer simpler card payments, negatively impacting conversion rates compared to the seamless experience of Apple Pay and Google Pay at POS. Additionally, while its 'Account Linking' feature streamlines e-commerce checkout, it lasts only 90 days and must be repeated for each merchant portal.
  • Margins & Economics: A2A payment schemes typically have lower margins than card schemes: achieving sufficient margins to compete with Visa and MasterCard is challenging. Merchants may save around 25 basis points on acquirer fees, but issuer-side economics still need validation.
  • Product Development: The product development cycle was relatively long: building the core product took about 3 years, requiring significant resources and costs.
  • Geo Expansion: Geographic expansion requires a carefully crafted strategy. While following customer trends can drive progress when aligned with the overall strategic vision, poor execution can waste valuable resources and efforts.

Implications & Success Factors

  • Adoption & Consumer Engagement: kevin's bankruptcy underscores the revenue model challenges of A2A payment systems, particularly the 'chicken or egg' dilemma in scaling consumer payment methods in physical environments. It illustrates the difficulties in achieving widespread adoption while resolving unmet market needs and ensuring strong merchant and consumer engagement with a straightforward payment experience.
  • Market Competition: Building an end-to-end payment system and driving adoption is challenging without large partners, especially in a physical POS environment. Success hinges on offering attractive margins and incentives for all players in the payment ecosystem.
  • A2A Success Factors: A2A holds strong potential in e-commerce, B2B, and sectors like subscriptions, high-risk, and high-value transactions. Key success factors to drive innovation and adoption are government incentives, bank coalitions, “open-access” networks, and simplified UX.

Please do not hesitate to contact Erik Howell at Erik@FlagshipAP.com or Alessandro Mighetto at Alessandro@FlagshipAP.com with comments or questions.