SaltPay’s 2021 accounts reveal spectacular growth matched by equally spectacular losses as its ambitious management spent heavily on acquisitions. The mastermind is Eduardo Pontes, a Brazilian entrepreneur with a track record in building payments businesses. He has raised $1.1b capital for SaltPay from Tiger Global and others to build a European SME-focused payment service provider.
Where Stripe, Adyen and Square have built a modern payment stack from scratch, London-based SaltPay is doing the same through buying the individual pieces as separate business acquisitions. We’ve listed 24 transactions at the bottom of this post and it’s a remarkable roll-call. This is a bold plan and one fraught with execution risk. But management says that if it succeeds, “the unit economics will provide strong financial returns.”
The frantic pace of deal-making saw annual revenues growing from €74m in 2021 from €20m the previous year with merchant numbers rising to c.100,000.
Payment acceptance generated €26m revenues in 2021. This division includes Salt Pay Iceland (formerly Borgun) which provides acquiring/processing as well as ISO’s in UK, Hungary, Slovakia, Portugal and Czech Republic. The report shows RMS Group, a large UK ISO bought by SaltPay for $267m at the end of the financial year, lost €3.3m in 2021.
SaltPay was hit by the continued impact of Covid on acquiring revenues from the travel sector. It decided to “end the relationships with larger enterprise merchants… which represented complexity in the service model.”
SaltPay wants to offer a full acceptance service with no third-party involvement and has even written its own software for the payment terminals. Acquiring payment volume was €14.1b giving a rather low take rate of 0.2% which suggests that little ISO volume had yet been moved across to SaltPay’s processing. This is likely to be a key focus in future plans.
Software revenue was €18m. SaltPay has several ePOS vendors – Storyous (Czech), SalesCloud (Iceland) and Loyverse (Cyprus) as well as a Weasy, a webshop vendor (Portugal). It has also purchased businesses that bring capability in booking software, bill payments and tax-free shopping. €2m of hardware sales were related to the ePOS businesses.
Issuer services revenue was also €18m. The largest components were Paymentology and Tutuka which have now merged and trade under the Paymentology brand. Management intends to use this capability to issue cards to its small business customers as an alternative to business bank accounts.
Lending revenue was €5m. This includes merchant cash advance and a consumer BNPL product.
Turnover came from a variety of businesses across Europe, Turkey and South Africa that span the whole payment value chain from processing to software.
Cost of sales was €32m resulting in gross profit of €42m.
Saltpay has taken on significant expenses related to the integrating its many platforms into a simple merchant proposition that delivers a consistent customer experience. This is proving harder than anticipated with management stating, “we realised more complexity than originally forecast in our plan.”
Staff numbers grew to c.1,500 by the end of 2021 and total employee costs were €66m. The company reported difficulties in recruiting technology specialists and software developers.
Total expenses were €120m resulting in an operating loss of €78m which is slightly larger than total revenues. After impairment of €7m goodwill from the acquisition of Yoyo Wallet and losses from sales of assets, the final pre-tax loss was €97m.
During 2021, seven acquisitions added a total of €614m of goodwill onto the balance sheet. Even so, SaltPay still managed to exit the year with €524m of cash. Some of this would have been spent on a further 20 corporate transactions noted between the end of 2021 and March 2023.
The business is very much a work in progress. For SaltPay to succeed, it will need to join together its wide array of capabilities into a consistent and coherent merchant proposition. And it will need to master the art of cross-selling products from one service line and one country to the next. These are not trivial tasks. Fortunately, SaltPay is very well resourced for the challenge ahead.
List of businesses acquired or invested in by SaltPay since 2019
Borgun, the Icelandic acquirer (renamed Saltpay IS) was purchased in 2020 from two local banks – Islandsbanki and Eignarhaldsfelagia. for an undisclosed sum. According to its 2021 report and accounts, pe-tax losses in were c.€10m but management now expects break-even in 2024 as the outlook for travel to Iceland improves. SaltPay has injected additional capital. Borgun serves clients in Iceland, UK, Hungary, Czech, Croatia and Slovakia.
ISOs & PSPs
B-Payment – a successful Hungarian ISO which has been working with Borgun as its acquirer for many years. B-payment services 10,000 clients generating c.6m transactions per month and has 50 staff. The business is now called Salt Hungary.
Merchant Payment Acquiring Services– a leading ISO in Slovakia, with 3,500 SME customers with 58K POS terminals. MPAS operated in both Slovakia and Czech Republic and was an early adopter of PAX Android in Europe. In 2021, the business lost €0.4m on €9.4m revenues.
Pagaqui Pagamentos – Portuguese ISO with 3,400 merchant customers. Its main service is a network of bill payment locations in convenience stores. In 2021, lost €3.8m on revenues of €2.5m.
Poscom – Slovakian ISO now trading as SaltPay Slovakia
Retail Merchant Services – one of the larger UK ISO, RMS uses Elavon and Global Payments as acquirers. RMS was acquired from its founder by TCV, a US investment fund, in 2017 and sold to SaltPay in 2022 for $267m. In 2021, RMS Group lost €3.3m on revenues of €41.2m.
Mea Wallet – Oslo HQ’d tokenisation specialist which provides services to banks, issuers and merchants including Islandsbanki, former owner of Borgun. SaltPay invested €19m in July 2022 according to a local blog and reportedly took full control at the end of 2022.
Paymentology – London based, cloud issuer processing platform with clients including Natwest, Islandsbanki and Quicko. Paymentology competes with GPS and FIS. SaltPay has merged Paymentology with Tutuka, an issuer processor headquartered in Mauritius. In 2021, the two companies lost €5.7m on revenues of €10.7m.
Switch Payments – gateway and orchestration platform based in Portugal. It claims 300 merchant customers including TAP Air Portugal. In 2021, Switch lost €1.2m on revenues of €2m.
Flexpay – South African issuer of pre-pay Mastercards to help companies pay wages to staff without bank accounts.
Small business software
Storyous – a Czech ePOS business focused on restaurants/cafes. It claims over 5,500 customers and offers integrated payment processing from SaltPay, ČSOB or Global Payments. In 2021, the business lost €1.3m on €3.1m revenue.
Weasy – based in Portugal, Weasy offers webshops to small businesses with 85,000 accounts created. Weasy offers a great many payment options including Multibanco, Stripe and Braintree.
Fanbase Technology – Edinburgh HQ’d software for lower league football and rugby clubs. SaltPay has a 20% stake but also formed a JV company with Bobby Skinstad, the ex-Springbok South African investor who is listed as an advisor to Fanbase.
Odeal Odeme Kulus – Saltpay paid $3.5m for a 10% stake in this leading Turkish POS terminal and ePOS provider. Odeal has 75,000 merchants and offers access to five banks processing through its integrated POS terminals. SaltPay subsequently raised its share to 25%.
Loyverse – Cypriot ePOS vendor operating in Europe, North and South American as well as Australia. Its website claims 1m merchants have registered although Salt Pay’s report gives a more modest customer number of 134,000. In 2021, Loyverse lost €0.3m on revenues of €2.3m.
Value added services
Stamp – Amsterdam based Tax Free Shopping start-up competing with the established players – Planet and Global Blue. Salt Pay has a minority stake.
Noona – booking software for appointment scheduling, Noona claims 600 customers and sells in Portugal, Czech and UK as well as its home market of Icleand. SaltPay invested $1.2m for a minority stake. Borgun is its processor.
Yoyo Wallet – a very high profile UK startup that span out of Imperial College, Yoyo provides loyalty solutions to quick service restaurants such Dunkin Donuts and KFC in the UK and South Africa. Yoyo claims 5m active monthly users spending at 18,000 stores. SaltPay controls 94% of the company. In 2021, Yoyo lost €6m on revenues of €10m. SaltPay’s parent company has taken a €66m impairment charge on this investment.
So Connect – based in Amsterdam, So Connect claims to have empowered more than 50,000 local businesses by improving their online visibility by boosting listings and reviews. The service is live in UK and Spain.
Flow Money Automation – 10% investment in this Dutch openbanking money management tool which raised €3.5m total in April 2022.