emerchantpay, a global high-risk acquirer and PSP, reported lower revenue and profits in the year to June 2022 due to the ongoing challenges of Brexit and the deflation of the crypto bubble. Results had been delayed following the resignation of Grant Thornton as auditor citing governance concerns. Jonas Reynisson, founder and owner of emerchantpay, will be delighted that MHA, the new auditor, has given the accounts a clean bill of health.
Apart from crypto and foreign exchange transactions, emerchantpay specialises in gambling, including a strong market position with casinos. Like many high-risk acquirers, it has been diversifying its client base to include low-risk segments such as SME POS transactions.
In 2021/2, total payment volume rose 16% to $6.6bn. Directly acquired transactions rose 13% while those accepted as a PSP and routed to 3rd party acquirers grew more rapidly at 20%. Processing is through Fiserv using the Omnipay platform.
Reflecting a shift to lower risk merchants, the take rate continued to decline, dropping 60bps to 2.2%. Unsurprisingly, emerchantpay makes more money on transactions for which it takes the risk. The acquiring take rate stood at 2.3% while for PSP it was 1.5%, still quite healthy by industry standards.
emerchantpay is registered with the FCA in the UK. Following Brexit, it was obliged to move its European customers to E-comprocessing, a division of the company operating under the regulatory umbrella of Phoenix Payments, holder of an EMI licence in Lithuania. In December 2021, eMerchantPay loaned €12m to Phoenix Payments.
Revenue decreased 9% to $151m with PSP sales holding steady, down just 2% at $38m while acquiring revenue dropped 13% to $95m. $53m of acquiring revenue is now booked through 3rd parties, including Phoenix Payments in Lithuania. Management reports “a significant scaling back in the activity of crypto exchanges” but is pleased that the acquiring business is now bringing in a “wider and more balanced” set of merchants through its PSP and ISO partners.
Sales of payment terminals grew to $1.5m as sales teams began targeting retail and hospitality merchants. Customers have been offered PAX terminals from Handpoint but emerchantpay has recently launched a SoftPOS product based on Rubean’s software.
The new eZeeWallet, aimed at casino gamblers, grew swiftly from a small base, recording sales of $1.6m. The wallet’s VIP programme kicks in at €15,000/quarter spend so this is very much for high-rollers.
Geographically, revenue grew 9% in the UK to $60m but declined 19% in Europe to $77m. Germany, UK and India are seeing “significant growth in low and medium risk sectors” which management says is altering the overall risk profile of the group. However, emerchantpay will onboard merchants in all business sectors “so long as they are legal.”
Recent investments in the USA, Latin America and Asia came too late to make an impact in the 2021/2 accounts. America where emerchantpay acts as an ISO for Elavon and Westamerica Bank has been challenging. Following a number of delays “due to integration problems”, the proposition has been relaunched.
Operating profit was down sharply from $16.6m to $6.6m. Management attributes this disappointing performance to the strength of the US dollar and the strategy of continued investment in product development including extra IT headcount. Operating margin now stands at 5.5%, decent by most standards but well below the 16% recorded in 2019/20.
Headquartered near Newcastle, emerchantpay’s main operational activities are in Sofia, Bulgaria with local hubs supporting sales, underwriting and customer service in London, Amsterdam, Munich, Bagalore, Sao Paulo and Boca Raton. Total staff numbers were up 19% to 384 but cost per employee fell 10% to $58K.
emerchantpay has stakes in a few other payment businesses including a $18.5m investment in Ibanera, to support casino customers in Florida, 10% of Paystrax, a high risk gateway turned acquirer, founded by ex-Korta Pay execs and 20% of Noosa, an Israeli start-up providing embedded finance to online travel agencies.