Trustly, one of the European leaders in account-to-account (A2) and open banking payments, reported a challenging 2022 including a significant fall in revenue and a fine from the Swedish regulator.
Headquartered in Sweden, Trustly connects its 8,300 merchants with up to 12,000 banks in 33 countries. Customers include Norwegian Airlines. Backed by Nordic Capital and Blackrock, Trustly styles itself with some justification as the “outright leader in A2A payments” having processed $42bn in 2022. This claim needs qualifying as it refers to merchant (ie consumer to business) payments. Other A2A flows are much larger. For example, JP. Morgan moves $10 trillion each day between business bank accounts.
In 2022, turnover fell 36% to €124m[1] due to “a new strategic direction and the decision to leave certain markets temporarily.” There was a particularly sharp decline in revenue from supplementary services – currency exchange and monthly fixed fees – which fell from €24m to just €5m.
The vast majority of revenue is from Northern and Western Europe. At the end of 2022, Trustly had business in Finland, Czech, Denmark, Germany, Malta, Netherlands, Norway, Poland and Spain. It exited the UK, Austria and Belgium although has since returned to the UK with the acquisition of Ecospend.
Unlike many open banking players, Trustly is trying to create a branded acceptance mark that is offered by eCommerce gateways such as Adyen as consumer payment option alongside cards, PayPal and so on. Trustly isn’t particularly cheap. Adyen’s standard price list offers Trustly at 50c per tx + 3% loading for gambling, travel and financial services. This compares with 27c for a SEPA direct derbit or 22c for iDEAL.
In February 2022, the Swedish Financial Services Authority fined Trustly 130m SEK (€12m) related to compliance with anti-money laundering regulations. The regulator was not happy with Trustly’s role in the payment chain between the gambling industry and the banks, saying “”a company that has chosen fast and simple as its business concept in the gambling industry needs to be very thorough in its work to prevent money laundering. We have identified in our investigation that this has not been the case.”
As a result, Trustly ditched plans for a $9bn IPO, reorganised its operations and implemented new business controls. 120 employees lost their jobs. Management says it has taken all requested actions by the regulator.
The reorganisation certainly helped control operating costs. Trustly sharply reduced employee numbers in Sweden but hired aggressively in Portugal resulting in personnel expense falling 47% although staff numbers remained constant at 377. Average cost per employee fell from €155K to €82K.
Despite falling revenues and the fine from regulator, Trustly still managed to break even in 2022 which is a creditable performance in the circumstances. The business is normally highly profitable. In 2021, Trustly had made €34m at an operating margin of 17.4%.
The refocused Trustly retains the backing of its key investors and made two major acquisitions in 2023 which position the group as one of the major consolidators of the highly fragmented European A2A and open banking payment market.
In 2023, Trustly bought Ecospend in the UK. Although the terms weren’t disclosed at the time, Trustly UK Ltd accounts show the purchase price was £28m. Ecospend, a licensed payment institution, brought a key customer relationship with the British Government and connections with 80 UK banks. Ecospend’s payment volume was reportedly £7.5bn in 2022.
The second key acquisition was SlimPay, the French recurring payment and A2A specialist. This deal, for a reported price of €70m, closed in January 2024. Slimpay reported post-tax losses of €1.8m on €11.3m sales in 2022. The deal brings Trustly 2,000 good quality merchant customers in transportation, media, fitness and financial services including SNCF and EDF.
The two acquisitions not only give Trustly greater geographical spread but help to balance Trustly’s reliance on iGaming and other high-risk sectors. With the usual warnings about execution risk, Trustly should be one of the winners as the European open banking payment market evolves.
[1] Trustly reports in SEK but I’ve converted the financials to euros at the average exchange rates for the year in question.
