EML Payments lifts fintech investment

EML Payments is stepping up its investment in fintech start-ups globally in a measured way.

EML chief executive Tom Cregan. Picture: Annette Dew

EML Payments is stepping up its investment in fintech start-ups globally in a measured way as it seeks to benefit from strategic holdings directly through revenue as well as part-ownership.

The ASX-listed company provides digital banking and payments services, prepaid cards and digital gift cards in 28 countries.

As part of EML’s three-year Project Accelerator and Finlabs strategy, the company has invested $US5m in New York-based financial platforms group Hydro­gen for an 11 per cent stake. It has also paid $US2m for a 10 per cent holding in payout platform Interchecks.

EML chief executive Tom Cregan said there were another two investments under consideration, but the Brisbane-based company did not have a target for strategic holdings under the Finlabs strategy.

“These investments have to earn their way back … so the intent is to earn revenue and sales,” he added, noting that EML had sought advice on the plan from venture capital firms and the board set clear objectives.

“By embedding other programs in our core business that will drive more opportunity for us.”

Mr Cregan said EML would focus on two to three fintech deals at a time to ensure the company could on-board and integrate the investments properly.

“We recognise too many of these things can become unstructured very quickly,” he said.

The Finlabs initiative aims to accelerate EML’s payments-as-a-service and banking-as-a-service platform offerings around the world. It is being managed in addition to $10m-$15m of direct investment across EML over two years.

Mr Cregan said the Finlabs project worked well during the global pandemic given limits to due diligence, and not being able to meet vendors and founders in person to assess whether they were a good cultural fit for an acquisition.

He highlighted that by taking strategic stakes EML got access to the company’s commercialised technology immediately, and could later decide whether an outright acquisition made sense.

“We can then decide we want to buy them down the track,” Mr Cregan said, noting that even if that didn’t occur EML could benefit financially if another party acquired the target.

On a larger scale, earlier this year — as COVID-19 turmoil started to hit financial markets — EML recut a deal to acquire Ireland’s Prepaid Financial Services.

EML is also hoping that still patchy consumer spending in different markets around the world picks up as the key Black Friday and Christmas retail trading period gets under way this week.

Mr Cregan said this week’s Black Friday sales and the US Thanksgiving period would provide a “good indication” of consumer confidence.

“The biggest part is a focus on digital payments and very much the fintech industry not in the malls,” Mr Cregan said.

The five days before Christmas are also a key period for EML’s gift card business, as last-minute shoppers snap them up.