Irish payments company identifies fraud that could cost parent €5.5m

Irish payments company Sentenial has identified fraud within the direct debit arm of its business that could lead to losses of €5.5 million for its new Australian parent.

Brisbane-headquartered EML Payments agreed to buy Kildare-based Sentenial in a deal worth up to €110 million last year. The deal included an upfront payment of €70 million, with an earn-out component of up to €40 million.

Sentenial is a cloud-native enterprise-grade payments company operating in the European open banking sector with its Nuapay brand. It is regulated in the UK and France, and processes €45 billion per annum.

EML informed investors on Wednesday that its Sentenial business had identified “recent fraudulent activity relating to an identified set of fraudulent merchants within its direct debit processing business”.

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It said it was “taking steps to investigate and understand the circumstances” surrounding the fraud and has “commenced steps to recover any losses”.

“EML is confident that the maximum amount of any losses will not exceed €5.5 million but may be lower depending on the success of recovery actions,” it said. Shares in EML sank more than 11 per cent in Australia following the news.

EML said the fraudulent activity primarily occurred in August of this year and came to its attention on Tuesday. A meeting of the board was convened early on Wednesday morning for the purposes of informing the markets. EML said it would update the market when it has material new information.

EML is expanding Sentenial’s platform and products into the North American and Australian markets. At the time of the acquisition, EML said it would provide the group with the capabilities to manage payments across Mastercard and Visa, and account to account, as well as both card and non-card payments.

“EML has transitioned over the years from primarily a gift card company to a company with a diverse revenue base across multiple prepaid products,” said Tom Cregan, EML’s managing director and group chief executive.

“The acquisition of Sentenial will be the next evolution for EML, as we transition into a broader payments business by adding instant account-to-account [open banking] payments into our suite of solutions for current and prospective customers.”

He said Sentenial was a “similar business to EML but servicing a different customer set with different payment types”.

“The net result of bringing the companies together allows EML to increase our total addressable market by expanding our product suite, and we see a number of opportunities to cross-sell account to account payments into existing EML customers, and vice versa,” he added.

Sentenial’s main base is located in Ireland, with offices in London, Paris, Brussels and Krakow.

Sean Fitzgerald, founder and chief executive at Sentenial, said he was “hugely excited” to become part of EML. “From the moment EML approached us, we’ve been impressed by their vision, ambition and growing ecosystem,” he said.

EML bought Irish-founded Prepaid Financial Services in November 2019, with the deal closing in March 2020.