Prepaid Financial Services (PFS) has been acquired by EML Payments for an upfront value of €264m (£226m), plus an earn-out component of up to €64m (£55m).
Founded in Navan by Noel Moran in 2008, PFS started as a facilitator of prepaid plastic cards, before expanding to services for virtual banks, providing the back-end for e-wallets and IBAN accounts.
PFS now has more than 1,700 clients, including governments, banks and telcos. The business has offices in Ireland, the UK – where it is headquartered – and Malta.
Moran’s company has grown rapidly in recent years, and turnover was €65m in 2018. PFS booked a profit of €7.3m last year and net worth was €17m.
Earlier this year, PFS announced plans to expand its Irish headcount by 50, having already hired an extra 50 staff at the start of 2019. The company employs more than 140 staff in Ireland.
In Association with
New owner EML Payments is an Australian business that provides card technology solutions. Its services in Australia, Europe and North America include issuing mobile, virtual and physical card solutions for pay-outs, gifts, incentives and rewards, as well as supplier payments.
An IDA Ireland client, EML Payments has a sales and marketing operation in Wicklow after acquiring Perfect Card from Nikki Evans in September 2018. In March 209, the company announced plans to open a technology and innovation hub in Galway, employing 20 people.
Speaking about the deal, Noel Moran (pictured) said that he is happy to see PFS listed on the Australian stock exchange as a result of the transaction. “I look forward to working with the EML team and cross-selling our expanded payment solutions over a global footprint,” he stated.
Tom Cregan, managing director of EML, said that the acquisition consolidates EML’s market position as one of the largest fintech enablers in open banking and prepaid globally. “PFS is highly complementary to EML’s existing solutions suite and adds digital banking and multi-currency offerings to our existing suite, while expanding our global market footprint and ability to cross-sell PFS’ solutions,” said Cregan.
• Renogiated terms for PFS/EML deal March 2020
EML said that c.€48m of the consideration will be in the form of EML shares. To fund the deal, the Australian company is tapping shareholders for €155m in fresh equity, and raising debt of €80m.
Keefe, Bruyette & Woods’ specialist financial technology investment banking team in London acted as sole and exclusive financial adviser to PFS, Eversheds Sutherland acted as legal counsel and GBW Accountants Ireland provided accounting advisory.
The buy-out comes as the Financial Times’ Inclusive Boards #IB100 listed Valerie Moran as one of the Top 100 Most Influential BAME Leaders in Technology.
Valerie Moran, Head of Operations & Client Relations at PFS, commented: "PFS has been diverse and inclusive for 12 years since the company was founded. This spotlight has enabled me to share our message with the world - companies must embed diversity and inclusion as a key strategy of growth.”
Meanwhile, European CEO magazines has selected Noel Moran as its Entrepreneur of the Year for the second year in a row. According to Noel Moran: “It is true to say that PFS has enjoyed another record-breaking year. I also wish to thank my wife Valerie for being by my side every step of the way in this journey and for starting out as our very first employee.”
PFS History
Noel Moran’s business space is fintech, which is all the rage now but wasn’t in 2008 when the entrepreneur got going with Prepaid Financial Services. The business started as a facilitator of prepaid plastic cards, and has morphed into a hand-holder for virtual banks, providing the back-end for e-wallets and IBAN accounts.
When the Post Office in Spain wants to provide banking facilities to customers, it turns for PFS for the technology. That’s facilitated by PFS staff in London and Navan, as well as 35 software developers located in Malta.
Enthusiasm for fintech innovation from alternative banking players has helped PFS grow rapidly. It’s not something Moran envisaged when he started out from the kitchen of his 1-bed Craven Hill apartment in London in 2008, shortly after being made redundant.
Noel Moran began his cards payments career with AIB and then Permanent TSB. He moved to England to set up MBNA’s corporate cards operation and then spent three years with Alter Financial, which was establishing a prepaid cards business. With the financial crash, the Alter project was abandoned and Moran decided to run with the prepaid idea on his own. In this April 2019 interview with Business Plus magazine, Moran picks up the story.
What was the initial offering when PFS started trading in 2009?
We launched with a prepaid card aimed at the corporate market. A decade ago if you had a small business with five or six people, or even a larger one with 50 or 60 people, for staff travelling abroad you really had to give them access to the company debit or credit card, and that obviously carries a lot of risk. In larger companies with employees all over the place, they were having their expenses reimbursed after the event.
Our initial target market was medium sized corporates that we could service for travel. We gave them a prepaid card with a platform around it so that the employer could manage the money on each individual card, and restrict the card spend to certain types of outlays such as dining and accommodation.
You had a useful new product - how did you get people’s attention?
I think we spent about six months after launch when we couldn’t get any customers. Then we got lucky by landing a corporate client who ended up buying about 30,000 cards from us, which was a significant order for us back then.
They were using the cards for affiliate payouts. In an affiliate business, a company may be paying small commissions to hundreds or thousands of intermediaries all over the world in multiple currencies. A prepaid card is ideal for that, because we can give that card to the corporate, they distribute it to their affiliate, they control the payment, and they have a platform for doing that in real time. The affiliate takes their debit card to an ATM and withdraws the payment due as cash. Previously such payments were effected by costly bank transfers.
That first deal kept us going for a couple of months and we invested all the revenue in improving the technology. We moved into the government side of things fairly quickly after that, and started to develop a platform specifically for local authorities in the UK.
Why do councils need PFS cards?
Local authorities have varied payments requirements, from making payments to benefit recipients or asylum seekers, corporate expenses, and a whole host of other things. With the banks it was a take it or leave it option and it didn’t really work, as there was no functionality for what the councils needed. We started working with one local authority in 2008 and we developed a platform specifically around their needs. We now service 120 local authorities in the UK.
What was PFS doing that was better than its rivals?
We focused on the turnkey technology, so that customers had control and could tailor the platform online to suit their own needs. Even today our offering is more flexible in terms of technology. On the card issuing side, there are only two options, and we work with MasterCard as they are more dedicated to prepay than Visa.
What is the PFS charging model?
We’ve now issued over four million cards and there’s a bit of a mark-up on each one. Every time the card is used, we will have a couple of cents revenue on the transaction. We also provide other back office services to clients, but basically it’s a transaction based model. The more transactions, the more money we make.
How did PFS expand out of the UK?
The business has changed from when we started, and our focus now is mostly on providing a white label solution. For example, our client Correos, the national post office in Spain, sells a current account service over the counter, with IBAN, sort code, the whole lot. People can load cash over the counter in the post office and then make payments online or through an app. We act as a provider of that technology. What we don’t do is sell the product to the end user.
What about the prepaid cards activity you started with?
We still serve corporates direct in some cases, but it depends. We don’t have a great offering direct for consumer and corporate if I'm being honest - our model now is providing technology to our partners. If someone wants ten cards for payroll or expenses, we can still do that, but for multi-currency and travel we wouldn’t be set up for that type of product. The business model has changed - 90% of the business is now provision of B2B branded solutions.
How has the changing e-money landscape impacted PFS?
Rules and regulations around electronic money and financial services have changed over the years, and basically e-money allows us play in some of the space that banks inhabit. We can provide current accounts, prepay cards, debit cards, payments processing, Sepa payments and direct debits.
We are involved in multiple financial services that previously would have only been delivered by banks. We can hold electronic money on behalf of customers and provide online acquiring services and point of sale terminals. Ten years ago you were only able to get a POS terminal from AIB or Bank of Ireland. Now you have multiple players and they are all operating under the similar regulatory environment as us.
Four years ago you branched sideways with the establishment of Ecom Merchant Solutions. What was the rationale for this venture?
In the payments space with PFS, some of our card customers started asking could we provide them accounts to facilitate online payments. We couldn’t service that under PFS and we didn’t for a long time. And then we just decided to set up a separate entity that would focus on that type of business.
We spent two years developing Ecom and it commenced trading two years ago. We started off with online only and now we supply in-premises terminals as well. We located Ecom in Navan because we wanted to move back home ourselves, and we wanted to do something locally as well.
PFS was also expanding in London and that’s a costly place to rent office space, so we relocated some of the PFS back office roles to Navan. Our development centre is in Malta, and between the three sites we currently have 192 employees.
How is Brexit going to impact the PFS business?
PFS is regulated in the UK so Brexit absolutely affects us. We currently have passporting rights for our service out of the UK into Europe. That could end with Brexit – at the moment nobody knows. You can’t have that type of uncertainty in your business, and we have submitted a licence application to the Irish regulator to cover that off.
I anticipate that the UK passporting rights won’t survive Brexit. I don’t think you can have it both ways. There may be a long lead time of two to three years to sort it out, but I do think it will be lost eventually.
Who owns the business?
The business is 95% owned by myself, my wife Valerie and some staff, and we are actively looking to sell up to 25% of PFS. We still want to stay committed for another two or three years as there is still a lot more growth in the business. Our plan is to expand PFS outside Europe and make it a more international payments company. The regulatory regime in America doesn’t allow us to do anything there at the moment, so it will be Asia and Africa.
The business is profitable and we don’t need the investment, unless we were to do an acquisition. It’s more about taking some money off the table after ten years of hard work. Ecom Merchant Solutions is totally separate to PFS and is still in its infancy. We have a lot of work with Ecom.
Photo: Noel and Valerie Moran
