The year 2023 has unveiled a series of regulatory and legal challenges for PAYONE GmbH, a notable joint venture of the global payment sector leader, Worldline. With German financial watchdog BaFin’s intervening enforcement actions against PAYONE for acute money laundering risks and significant non-adherence to prevention standards, the storm clouds have gathered ominously over the enterprise. This enforcement action, effective from 29th August 2023 revealed PAYONE’s questionable commitment to due diligence, revealing a client base inundated with connections to fraudulent online activity.
Notably, Worldline’s shares took a deep plunge, with the company witnessing a drastic fall of nearly 60%, a stark juxtaposition against its thriving valuation at over €11 billion during its 2014 spinoff from Atos. Worldline’s downturn may not be merely a reflection of an economic contraction or a reduced growth outlook; but may be compounded by the regulatory actions against PAYONE. The interconnected challenges of these two entities are real.
Hannes Leitner of Jefferies has indicated that the recent downturn, marked by both regulatory challenges and market dynamics, signifies a broader paradigm shift in the payment sector’s outlook.
It appears, that where post-Covid optimism once heralded a consumer spending boom, a slew of factors, including PAYONE’s regulatory challenges, Worldline’s technical glitches, and a broader economic slowdown, have now collided, tempering that optimism.
Adding layers to PAYONE’s legal and regulatory predicaments, allegations emerged earlier this year involving Orrick UK , Worldline & PAYONE’s legal counsel. Accused of contravening the SRA Warning Notice 2020, Orrick UK was reported to have propositioned a substantial settlement to a former PAYONE employee. The offer? A tempting December 2022 correspondence asking the former employee to retract AML regulatory disclosures made to regulators including BaFin between May to November 2022. The embroiled employee, formerly managing the Foot Locker EMEA retail account, rebuffed the offer, further unveiling PAYONE’s alleged involvement in money laundering-related breach activities.
In a culmination of these challenges, PAYONE GmbH prepares for an appearance before the UK High Court on 14th November 2023. This hearing, includes a strike out application part related to money laundering due diligence allegations and protected disclosures by the former employee, looms for PAYONE.
Gilles Grapinet, CEO of Worldline, in his recent comments, delineated the myriad challenges facing the company, from European economic downturns to unforeseen regulatory complexities, particularly stemming from Germany. As the payments industry continues to grapple with this turbulent phase marked by both cyber risks and shifting economic sands, the trajectory of giants like Worldline and their associated ventures, such as PAYONE, remains the focal point for market watchers.
The evolving saga encapsulates the nuanced challenges faced by the global payments industry, with both macroeconomic factors and company-specific issues playing a pivotal role. Investors, regulators, and analysts are bound to monitor the forthcoming developments closely, given their profound implications for the sector at large.
by Loopline media
Sources: Financial Times 25 October 2023 article (author: Sarah White)
