On January 29, 2018, Ralph Hamers, the CEO of ING Groep NV, one of Europe’s largest banks, proudly announced a significant move to enhance its presence in omnichannel payment services. ING had successfully reached an agreement to acquire a 75% stake in Payvision, a Dutch Payment Service Provider. The acquisition was valued at € 360 million, representing an impressive multiple of 52 times Payvision’s recurring EBITDA in 2017, which stood at € 6.9 million.

Only three months after the final milestone payment was made to Payvision’s founders, ING recorded an impairment on the recorded goodwill (€188 million) and the intangible assets (€125 million) accounted for at the time of the initial consolidation in 2020.

On October 28, 2021, ING announced that its subsidiary, Payvision B.V., would begin phasing out its services as a payment service provider and acquirer.

In October 2022, it was revealed that criminal proceedings had been initiated due to massive violations of anti-money laundering regulations since 2021. By March 2023, Payvision’s website had disappeared.

So, based on publicly available documents, ING has invested a minimum of half a billion Euros in this Fintech venture. Given the details of this acquisition (which will be elaborated upon shortly) and the timing, shareholders and analysts are supposed to have numerous questions for ING´s board of management.

The story of Payvision’s journey from promising fintech to a costly ordeal for ING serves as a cautionary tale in the financial industry.

The start of the Journey

Payvision B.V. founded by Rudolf Booker began its journey in the financial industry in 2002 as a technical payment service provider for the online business.   It secured a Payment Institution (‘PI’) license from the Dutch Central Bank (DNB) in 2011 under the European Union’s Payment Services Directive (‘PSD’). In early 2012 Payvision also gained principal acquiring membership with Visa Europe and Mastercard Worldwide, and actively participated in industry panels and working groups managed by Card Schemes.

Since its establishment, Payvision emerged as a preferred option for high-risk merchants. Notably, Wirecard, a prominent German Fintech firm currently undergoing bankruptcy proceedings and facing criminal charges, often appeared in tandem with Payvision while servicing similar questionable high-risk merchants. Subsequently, both companies were mentioned in U.S. and European court records, where these high-risk merchants were identified as scammers and international criminal organizations.

While Wirecard pursued a reverse takeover strategy by acquiring a bank to boost its momentum, Booker had been actively seeking a partner for Payvision over the course of several years (rumours).

ING had been managing the payment accounts of Payvision, establishing a longstanding business relationship. Nevertheless, it came as a surprise to the Dutch Fintech community when the acquisition agreement between Payvision and ING, announced in January 2018, was unveiled.

2018 – a year to celebrate business success!

Using the financial data from Payvision Holding for 2017, ING calculated a purchase price of €360 million by applying a multiple of 51 to the “recurring” EBITDA and 12 times the gross margin. In comparison to similar transactions, this valuation appeared significantly higher, even taking into account the heightened enthusiasm surrounding Fintechs in early 2018.

Ralph Hamers and Booker expressed their enthusiasm and celebration over the agreement.

According to the audit reports from both Payvision and ING, the payment business performed exceptionally well for the group in 2018. Payvision’s B.V. (without ACAPTURE) gross revenues increased by €62.618 million, representing a remarkable 66.4% growth, while the gross margin saw a €18.253 million increase, equivalent to a 63.3% rise.

This was undoubtedly positive news for Booker, given that the acquisition price came with a contingent clause.

Details of the transaction pricing!

In 2018´s ING annual report the acquisition details are described as follow:

So the total purchase price of € 360 million for 100% thus included several contingent liabilities depending on the development of the company – a very reasonable approach.

Also for the put/call option (purchase of the remaining 25%) a period of time of 3 resp. 5 years was agreed on – again with a contingent clause in case the fair market value is lower than € 210 mio – again a very reasonable approach.

A huge goodwill was recorded!

Effective with 1 April 2019 in the initial consolidation of its new subsidiary, ING recognized a goodwill of €188 million and intangible assets amounting to €125 million. The put/ call option for the remaining 25% triggered the recognition of a financial liability, with an initial recognition through shareholders’ equity of €87 million related to Payvision (with any prospective adjustments going through the profit and loss statement).

Booker envisioned a promising business future, as his close and personal business association with Uwe Lenhoff granted him access to significant players in the online gaming and fraudulent sectors, including business partners like Gery Shalon.

Some minor issues did arise, but they did not lead to significant problems. In August 2018, a raid occurred in Kiev, resulting in several arrests at Payvision’s merchant BINEX.ru (beneficial owner Vladislav Smirnov and Gery Shalon). Additionally, an investigative website called Fintelegram published bank statements that revealed Stichting Trusted Third Party Payvision as the largest acquirer for websites like safemarkets.com, optionstarsglobal.com, and xtraderfx.com. Notably, all of these websites were offering financial instrument investments to retail investors without the necessary licenses in Europe.

Beginning September 2018 ING announced that a settlement was reached with the Dutch FIOD for a money laundering of € 775 mio (including a disgorgement of € 100 mio) for massive money laundering failings.  Dutch financial crime prosecutors said ING had violated laws on preventing money laundering and financing terrorism “structurally and for years” by not properly vetting the beneficial owners of client accounts and by not noticing unusual transactions through them.

Ralph Hamers assured that the money laundering failures related to the past and that ING  has since improved its procedures for admitting and vetting clients, Hamers said, while the executive board has agreed to forgo a bonus for 2018.

2019 A good year for Booker! but Payvision´s figures started to decrease!

On January 21, 2019, Uwe Lenhoff, a reseller agent of Payvision, was arrested in Austria. Subsequently, on January 26, 2019, Gal Barak was apprehended in Sofia. The implicated websites (all merchants were serviced by Payvision) were shut down in February 2019. As more information emerged regarding the business ties between the detained individuals and Payvision, the company’s gross revenues for 2019 began to significantly decline.

In May 2019 the FTC filed a claim (Case 2:19-cv-04355 Document 1 Filed 05/20/19) against Allied Wallet INC and Ahmad Khawaja. According to the FTC Allied Wallet – a payment facilitator serviced by Wirecard and Payvision in Europe and the US – since at least 2012,  have knowingly processed payments for numerous merchant-clients engaged in fraudulent activities, including  merchants that have been subject to law enforcement actions by the FTC, the  Securities Exchange Commission (“SEC”), and criminal authorities.

Payvision is also listed as a defendant in U.S. lawsuits related to its role as the European Payment Service Provider (PSP) for T1 Payment LLC. Specifically, it was named in the Complaint, Counterclaim, and Allegation of Fraud filed by Onyx & Rose LLC, Case No. 2:20-cv-00008-KJD-NIK on 07/03/2019. This lawsuit revolved around a payment of $204,859.51 under a cannabis products payment processing agreement that was entered into on 09/12/2018.  More similar claims emerged in the next. months

Surprisingly, in contrast to the conditions in the acquisition agreement and seemingly unconcered about the latest revealings, ING exercised the pre-agreed call option for the remaining 25% shares in Payvision in September 2019. Over the subsequent months, leading up to April 2020, ING fulfilled its commitment by paying the remaining purchase price of € 90 million, which also included a success fee of € 20 million, to the founders

In late 2019, DNB, the Dutch supervisory authority – triggered by the reporting of Fintelegram – urged Payvision to undergo a comprehensive audit of its compliance department by a third party.

2020 Still a good year for Booker but a bad year for ING´s shareholders and Payvision´s business partners.

After having received the total € 90 million (still based on a valuation of € 360 million) finally Payvision’s founders departed in April 2020. ING still praized the acquisition of the last tranche of shares, in its annual report for 2020: this acquisition of last ranche of shares underscores Payvision’s importance to the ING group’s vision, positioning it as the Merchant Service Center of Excellence within ING.

While ING continued to commend its €360 million investment in Payvision, the release of the damning KROLL report on Payvision’s compliance system in the spring of 2020 prompted Payvision to cease the onboarding of new customers.

Subsequently, DNB (De Nederlandsche Bank) was compelled by KROLL’s unfavorable report to take action, initiating its own investigation in the summer of 2020.

Beginning July 2020 Uwe Lenhoff – Payvision´s reseller and Bookers`personal friend – was found dead in his arrest cell in Germany.

In the same reporting period when Booker got the latest part of the acquisition price,  ING recorded an impairment of the recorded goodwill and rintangible assets associated with the Payvision acquisition. On July 28, 2020, ING announced that, due to an impairment test prompted by the Covid-19 pandemic, it anticipated booking an impairment of approximately €300 million on its balance sheet already in its second-quarter 2020 results

On September 1, 2020, Gal Barak was pronounced guilty of severe fraud and money laundering in Vienna, Austria. The judgment explicitly identified Payvision as one of the payment service providers employed in the process of laundering the illicitly acquired funds.

On  October 7, 2020, DNB delivered a scathing report to Payvision and ING, highlighting the deficiencies within Payvision’s compliance department.

In November 2020, media reports further exposed Payvision’s involvement in fraudulent activities. ING responded by issuing a press release, acknowledging that, during the initial acquisition of the 75% stake, it was aware that a portion of Payvision’s customer base did not align with ING’s desired risk profile. The press release also stated that ING had taken appropriate measures to reduce its exposure to customers in high-risk segments, particularly in the ‘adult’ entertainment and gambling sectors, which were subsequently removed from Payvision’s portfolio

An increasing number of legal claims from T1 Payments merchants in the U.S. are emerging, with Payvision being named as a defendant. These claims allege that Payvision was involved in a fraud and  money laundering system operated by T1 Payments LLC

So due to these unfavourable developments and despite the overall growth in the online payment industry in 2020 due to the COVID-19 pandemic – Payvision experienced a significant deterioration in its business performance, leading to a negative operating result of €-24 million for the year 2020.

2021  ING invests more money in Payvision

According to Payvision´s audit report as of 11 February 2021, a share premium contribution was signed between ING  and Payvision  for an amount of € 40 million, accompanied on 27 September 2021 by a second share premium contribution  for another  € 30 million.

On 28 October 2021 ING announced that Payvision will start to phase out its services as a payment service provider and acquirer. The aim was to complete the phase-out process by the second quarter of 2022. According to the audit report of Payvision ING committed to provide sufficient financial means to fulfill all upcoming financial obligations of Payvision.

2022 Information about ongoing criminal proceedings got public!

In October, the Dutch FD (Financieele Dagblad) reported that in May 2022, the Dutch FIOD (Fiscal Information and Investigation Service) conducted a raid at Payvision’s office, as well as at other locations in Amsterdam. This action was taken in response to Payvision facing a criminal investigation for serious anti-money laundering violations.

A few days later, ING confirmed the investigations but declined to provide additional comments. ING emphasized once more their intensified focus on anti-money laundering measures, particularly since they received a significant fine in September 2018.

2023   ING is eager to bury Payvision!

In spring of 2023, Payvision’s website went offline, and the remaining staff, consisting of only a few individuals, relocated to the ING headquarters in Amsterdam.

Summary

There is no publicly available information regarding the total costs incurred by ING shareholders for the Payvision venture. However, estimating that these costs, including expenses for the high-priced lawyers engaged in Europe and the U.S. to counter the raised claims, may have reached half a billion Euros is a reasonable approximation.

By analyzing the published information about the deal as well as by comparing ING´s announcements and the real facts around Payvision, several open questions arise. It is indeed surprising that no one has been held accountable for the  deal within ING, For sure it’s possible that the complexity of such financial transactions and the legal aspects involved make it difficult to assign blame definitively. But let us see how corporate culture within ING resolves these issues.