PayPoint has on Thursday announced that it has agreed to make a further strategic investment in open banking technology provider obconnect, increasing its interest to 59.3 per cent of the company.
In July 2022, PayPoint made a minority investment in obconnect, an early-stage technology platform with the capabilities to provide complete market ecosystems across open banking, finance, data, energy, confirmation of payee and enhanced fraud data.
The investment comprises the £3 million original convertible loan note, which will now be converted into ordinary shares along with a new investment of £10.5 million in cash.
“‘We’re delighted to be taking majority ownership of obconnect and strengthening the partnership we have forged over the past two years,” Nick Wiles, chief executive of PayPoint, said.
“The obconnect team, led by Darran Morford, will continue to drive further growth opportunities in the open banking sector for the business and this investment further underpins our confidence in achieving our target of £100m EBITDA by the end of FY26.”
PayPoint said the partnership with obconnect has enabled it to leverage this technology platform and range of capabilities, offering open banking services to both new and existing clients. The group has already made strong early progress, with over 25 clients contracted for open banking services, including American Express and Citizen’s Advice, along with a growing pipeline of opportunities across new and existing clients.
Over the same period, obconnect as a standalone business has made significant progress, securing contracts with a number of banks and building societies, and is on track to achieve profitability in H2 2024.
PayPoint said the new investment will further leverage obconnect’s open banking technology platform and unlock greater opportunities within both the PayPoint business and obconnect’s new business streams working with a number of key financial institutions and payment organisations.
The agreement also includes a put option for PayPoint to obtain the remaining 40.7 per cent of obconnect for a total cash amount of up to of £20 million, with the consideration dependent on the future performance of the company.
“PayPoint have been the perfect partners for us over the past two years and we’re pleased to be cementing that partnership to fuel further growth in the next few years,” Darran Morford, chief executive of obconnect, said.
“Our mission to deliver industry-leading technology solutions in open banking and confirmation of payee across the world, and we’re delighted to be working more closely with PayPoint to unlock further opportunities in this fast-growing sector.”
The investment is subject to regulatory approval, with completion expected in early October.
A positive quarter with further progress on building blocks to £100m EBITDA by end of FY26
PayPoint has also released its trading update for the first quarter of its 2024-25 fiscal, ended on 30 June, reporting an increase of 9.5 per cent in group net revenue, driven by a strong performance by the shopping, e-commerce and Love2shop divisions.
“Consumer behaviour across a number of our businesses has improved over the quarter, though we continue to monitor energy and cash bill payment activity as we head towards the second half of the year. Our expectation remains that the consumer outlook will improve during the course of the year,” Wiles said.
Shopping divisional net revenue increased by 3.8 per cent with both retail services and card payments registering an increase of 3.8 per cent.
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