Strong cost and risk controls boost AIBMS

AIB Merchant Services recovered strongly from the pandemic in 2021 with full year revenues and profits both up on the previous year.

Dublin based AIBMS is a JV between Fiserv and Allied Irish Banks. In Ireland, it is the largest domestic merchant acquirer serving all business types, large and small. Lead generation is primarily via the bank network. In the UK, AIBMS mainly supplies SMEs through ISO relationships such as  Fidelity PaymentCard SaverCardcutters and Payment Plus. Finally, there is a more internationally focused, high-risk business with domain expertise in gambling and gaming. AIBMS can pay out in 18 currencies and offers multi-functional Merchant IDs (MIDs) which greatly simplify multi-currency and multi-channel operations for complex merchants.

Merchant service charges rose 51% to €601m in FY 2021 with other fees (terminal rental, chargeback fees, DCC etc) rising 29% to €40m. Total fee and commission income for the international business rose 82%, in Ireland by 36% and in the UK by 28%. 

Excluding Interchange and scheme fees, net fee and commission income (net revenue) rose 19% to €97m. Management says the improved performance was due to “economic activity returning to pre Covid-19 levels…. And the consumer shift from cash to card.”

Strong cost and risk controls saw total operating expenses up just 2% to €51m. Staff costs rose just 6% and processing costs by 9%. Management had been worried about “merchant chargeback risk and negative balance risk” but credit losses were down from €2.7m to €1.7m. Cautious risk management saw merchant deposits (as protection against future losses) rise 49% at €19.6m.

This operational leverage drove net operating income up 40% to €47m with margins expanding 700bps to 49%. However, AIBMS does not yet feel confident enough in the future to resume dividends to its parents “due to the difficult trading environment and uncertainty.” 

Post Brexit, AIMBS still running on temporary regulatory permissions and is seeking a UK Payment Institution licence to keep trading. The company says this should be live in early 2023.

AIBMS sells Fiserv’s Clover POS products and has added a set of apps from Dublin-based Loylap covering gift cards, loyalty and order ahead. It has also launched a new merchant portal with deep insight capabilities including the ability for merchants to compare their sales with similar businesses located close by. The payment industry has been testing similar products for some time but it’s always proved tricky to get small businesses to access the data often enough to want to pay for it.

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