Thank you, thanks a lot, good evening everyone, and thank you for joining us today. Worldline has been attacked today by a violent media campaign on a narrative which is clearly unacceptable for all stakeholders: our clients, our shareholders, and our team members. What we are talking about is a very serious matter, and I mean it coming myself from a bank. Robustness in what we do, especially in compliance with law and regulations, is essential for the trust in any company that touches money, and even more when we speak about Worldline, considering its importance in the payments ecosystem in Europe. I insisted on this at the recent General Assembly, and I can tell you that I'm spending significant amounts of my time on making sure that Worldline reaches the highest standard in this domain.
First, let me define HBR, High Burn Risk, which is a legal, regulated, and limited part of our business. What is HBR? HBR is not illegal per se. These are merchant businesses that are operating in industries deemed higher risk by international card schemes such as Visa and Mastercard due to their business models or customer behaviors, typically reflected in higher chargebacks and refund rates. This includes sectors such as online casinos, online stock broking, or adult dating services, for instance. Again, these activities are legal in most European countries, although the regulatory frameworks may vary. For instance, online casinos are prohibited in France but legal in many other jurisdictions. As regulated entities, the subsidiaries of Worldline, when they act as an acquirer or a payment facilitator, have the responsibility to ensure controls and compliance with regulation and scheme rules.
When we play a technical role, such as our gateways or payment orchestrators, we do not have such responsibility. In 2024, our portfolio of merchants operating in HBR verticals accounted for around 1.5% of Worldline's acquiring volume, which means it's a very marginal part of our activity. Since 2023, the company moved from awareness to structured action. As you know, Worldline increased over the recent years, since 2023 in particular, its compliance standards and initiated a full review of the HBR portfolio versus those standards. The company launched a rigorous process to identify merchants whose practices did not align with our updated standards, with a view of taking appropriate actions where necessary. As it has been communicated by the company, this process has been carried out under close regulatory oversight, particularly in Germany, where our subsidiary is under supervision by BaFin.
As communicated, this led to the termination of commercial relationships with the most sensitive cases now behind us. We are continuing the ongoing due diligence remediation process for the last part of the portfolio, which is marginal, and we have even decided to extend this review to situations where we are just technical orchestrators but where we want to make sure that the businesses that need a license to operate effectively have the required license, especially in the gambling industry. Nothing new here, and I want to insist on that. We said that those offboardings would impact our revenue by the equivalent of EUR 130 million in full year 2024. From the information I have and the review that we performed recently, I can confirm that we should remain in this order of magnitude, and we will confirm the figures again at the end of July.
Beyond these corrective measures, the company implemented a reinforced compliance approach to strengthen risk supervision and control mechanisms. The company increased its resources in first and second-line control to implement this framework across the group as part of the third year's financial crime compliance strategy. This strategy includes more robust onboarding, ongoing monitoring, and a harmonized framework for reviewing sensitive clients to ensure continuous compliance with both external regulations and our strengthened internal standards. All the remaining HBR merchants, again, 1.5% of our volumes, are now subject to this enhanced risk framework in line with our regulatory obligations and internal risk management objectives. Whenever signs of non-compliance are identified, additional checks are conducted without delay. This may lead and continue to lead in the future to the termination of client relationships as part of the normal course of business.
To conclude, the company Worldline has gone over the recent years through a demanding sequence. Our board of directors, through its dedicated committees, has been and remains actively involved at every stage and extensively covers remediation plans, regulatory audits, and compliance enhancements. At the end of the day, we can say that all this sequence has helped us to strengthen our model, identify potential gaps, and act with full clarity and determination. My commitment as CEO of this company and the one of the board of directors is to position Worldline among the most secure and compliant players in the European payments industry, which means upholding a no tolerance approach to any deviation from our standards. I'm focused, obviously, on this topic, and I can tell you that I'm monitoring our progress closely.
I want to say that we are also making good progress for repositioning the company and putting it back on track of robust cash generation, and I'm looking forward to sharing more on this during our semi-annual results presentation and then at our CMD in the autumn. We need and we will overcome this media campaign. Thanks for your attention, and I'm happy to take your questions.
Thank you. If you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. You will be advised when to ask your question. We will take our first question from Adam Wood, Morgan Stanley. Your line is open. Please go ahead.
Hi. Good evening. Thanks for taking the question. I've got a few, if I could. Maybe just first of all, on the volume exposure. As you say, 1.5%, not that material, but I guess the take rates on these merchants would be more significant. Could you maybe just give us some order of magnitude idea either of how different the take rates are or even better, what the net revenue exposure would be on those merchants? Maybe secondly, could you just talk about the relationship with Visa and Mastercard and other major schemes in Europe? Have there been any investigations or issues with them in terms of your A&L and KYC and onboarding practices over maybe the last kind of 12 months that have caused issues?
Maybe just finally, you talked about the payment orchestration side and obviously not taking acquiring risk there, but maybe looking a little bit more in detail into that from here. Could you talk a little bit about how the KYC and onboarding process has been different in that business, if it has been different, to how you would approach and onboard a normal acquiring merchants, please? Thank you very much.
Okay. On your first question, obviously, the HBR business deserves higher fees, higher merchant fees. We are speaking of something like 2-3% in terms of merchant fees and the value of the transaction. That is for your first question. The second question is that the relationship with Mastercard and Visa is good. There has been no issue in the past with them on those topics, as far as I am aware. Obviously, we are in close dialogue with them following this campaign. Regarding your third question, which is the orchestration, the orchestration is a pure technical solution where we are between the merchant and the acquirer, which is a third party in most of the cases. Our role is just to provide the smart routing between the merchant and the acquirer. As a consequence, there is no KYC.
There is no monitoring of flows in merchants which are just going for technical integration of an orchestrator.
Perfect. Thank you very much.
We will take our next question from Grégoire Hermann, Barclays. Your line is open. Please go ahead.
Yes. Good afternoon, everyone. Just a few questions on my side. The first one would be a follow-up question on the HBR clients. I think you mentioned 1.5% of the volumes in 2024. Is this before or after merchant terminations? Maybe just one question on the potential feedback that you've received from especially your financial services customers and card schemes today after this media release. Can you tell us a bit what were these? I think over the past month, you've been clear that you've been cooperating with the BaFin and the special commissioner appointed. Just wanted to know if there is anything out of today's media report that is new to the regulator. Thank you.
Okay. Sorry. On the financial institutions, I mean, obviously, 1.5% is at the end of 2024. It is after the offboarding of most of the portfolio that was an issue, as said. On your second question, obviously, we engaged considering the gravity of this campaign. We engaged with all our counterparts, whether it be enterprise merchants, financial institutions, and the schemes. We explained to them exactly what I have been explaining to you during this introduction. I mean, no one is pleased, and this is why such a campaign is so serious for us and so unacceptable that no one is pleased with such a situation. Everyone understands that there is nothing new as compared to what we knew.
Maybe, sorry, just on the last one, the relationship with [Charles-Henri de Taffin] and whether there is anything new to them?
No. There is nothing new to anyone.
Okay. Thank you.
We will take our next question from Justin Forsythe, UBS. Your line is open. Please go ahead.
Thank you very much for letting me on. Just a couple of questions here, if I might. Just wanted to follow up on the tie-in to the schemes here. We know that the schemes have individual risk thresholds for a percentage of chargebacks for fraud, and I think the allegation that was said is that you guys were two times higher than that. Just wondering, in that instance, what recourse does Visa or Mastercard have? Would they be willing to shut you down if, as an example, or limit your activities in any geographies if you did not adhere to those thresholds? Maybe you could just talk a little bit more on the process on either side of that. I wanted to just clarify something you said, and I appreciate the 2%-3% higher fee on the high-risk merchants there.
You alluded to the fact that you do some of this business in your orchestration business as well, so non-full-stack acquiring. Maybe you could just give an indication of the size of that business that is tied to high risk as well, understanding, again, that you have different regulatory requirements there, but it seems like it is perhaps a somewhat meaningful part of the business. I guess I'm referring to maybe more directly the Ingenico e-payments or the former Ingenico e-payments business there. I guess, sorry, I said a couple, but one last one to clarify. It sounds like you're saying I think some of these articles are suggesting there are illicit illegal activities going on in some of these instances, and it sounds like you're suggesting that that is not the case, understood the definition of high risk per Visa MasterCard standards.
To be clear, you're saying that there were not any illegal activities taking place on the Worldline platform. Thank you very much.
Okay. On the forward, as we stated this morning, our forward is below the average of the industry, as we can see that in the report from the schemes. We are in a situation today which is below the average of the industry, which is that we are below any threshold. To answer more precisely to your question, it is fair to say that when you have too high chargebacks, the schemes may trigger some restrictions in terms of exemption to strong customer authentication. They may require you to adapt your portfolio of merchants so that you fall into the threshold of the schemes. That is the way it works. Again, we are today in a very safe situation in this regard. On your second question, back to the orchestration.
The orchestration layer that we are talking about has nothing to do with the Ingenico e-Payments, especially the Global Collect one, which is considered for us as, so it is a payback business, so we consider it as regulated. Okay. What we are talking about is not linked to what was the former Ögon solution, which is a technical gateway, but there is no type of business like that. It is more referring to a specific business that we have in Sweden, out of Sweden, which is an orchestrator for gaming and gambling, which is not, again, which is not regulated, where we do not have any KYC and supervision responsibility on the merchants. This business is a EUR 50 million EBITDA business, so it is not true.
What we are considering is to go beyond our regulatory obligations and to make sure that the merchants all have their license to operate in the countries that they are licensed. We are pursuing, we are extending our controls of that situation. There might be some offboarding of merchants if they do not justify their license. Again, we will still be in the order of magnitude that has been mentioned, which is this EUR 130 million of loss of revenue.
Got it. I guess the last one was around just any illegal activities on the platform. I guess quickly, just to clarify on the Visa thing, if in that instance they tried to—and maybe you're saying this does not apply to you—but if they tried to get you to fall into that range and you refused to do so, is there any other remedial action that Visa and Mastercard would take on the back of that? Thank you very much. I appreciate you letting me on.
No. As I said, I mean, being legal is part of the requirements from the schemes. We have reviewed all the portfolio that could pose any issue in terms of compliance with the schemes, including compliance with law, and we have offboarded those merchants.
All righty. Thank you.
We will take our next question from Frederic Boulan, Bank of America. Your line is open. Please go ahead.
Hi. Thank you very much. A couple of questions from my side. First of all, do you foresee any legal risk on the back of allegations mentioned in the press today? I mean, there are some issues flagged which go beyond quality of merchants that may incur some illegal actions. Secondly, just to clarify, do you plan to further strengthen the threshold on quality of merchants to avoid issues like that going forward that would increase your role impact of merchant decommissioning beyond the EUR 130 million that you disclosed before? Lastly, just to follow up on Adam's question on the exposure of the 1.5% of high-value clients, I mean, can you just give us an overall magnitude on the revenue exposure?
I mean, you mentioned 2-3% value of transaction, but if you could just tell us either whether that compares with the rest of the group or more simply the kind of net revenue exposure, that would be great. Thank you.
Okay. On the first question, today we have a framework which has been put in place over the last years. This framework is strict, and the policy that we have is to have no tolerance against this framework. From what I've seen at this stage, and we had extensive discussions and meetings with the relevant organizations, I do not see the need to ever strengthen this framework. We will just continue to check, to do the controls that have to be done, and to make sure that the way we do the controls is industrial enough. I won't tell you that everything is perfect because this type of remediation takes time, tooling that you need to put in place, and so on and so forth. From what I see, I do not expect a significant evolution as compared to this amount that we already disclosed.
Again, that this continues, I mean, monitoring might lead to some continuous offboarding, but it will be, from what I understand, part of the ordinary course of business. Okay. On your second question, I mean, it's difficult for me on top of mind to tell you what it represents, but have just in mind that when we are speaking about 3%, it's something that can be 1.5% or 2% above the standard fees that we take from a merchant. Based on 1.5%, you see the magnitude.
Okay. Maybe just on the first question around any legal risks that you think we should be aware of around the kind of media reports?
I mean, to be absolutely transparent with you, I do not have any knowledge of any litigation or claim on the company linked to those topics. If it were to happen, obviously, we would cooperate with the authorities, but today there is nothing to mention.
Okay. Thank you very much.
We will take our next question from Alexandre Ferre, BNP Paribas. Your line is open. Please go ahead.
Hi. Good evening. Thanks for squeezing me in. I have maybe two, three questions. The first one is really a clarification because I am sure I get it. The orchestration business, and the portfolio of customers in your orchestration business, has it been fully reviewed as part of the portfolio cleanup that started, say, summertime 2023? Or is the review still ongoing and might carry on for a few months? The second question is on how to think of other regulators outside of Germany. Have they carried audits into Worldline, or would you expect them to? Have you been in contact with them today? My final question, I think you just said that you are not quite happy with the risk management procedures you have in place. Yet it is not like as you joined, you felt the need to bolster that team by hiring a new Chief Risk Officer.
Where do you see further room for improvement? Thank you very much.
On the first question, as I said, we have extended this review of the orchestration portfolio, although it was not part of the regulatory scope of the company. This review is in progress, but from what I have as input from the team, potential remediation will be part of the current envelope that we've been discussing over the last year. Okay.
Got it.
That is clear. Your second question, to some extent, you are never happy with compliance and with supervision, especially when you come with a bank reference in mind. I think that we need to have the same references. I think what matters today is to go more into industrialization of those controls, to leverage more on GenAI so that we make the life of the merchants and the life of our teams easier, and that our control can be even more continuous than what they can be today when you have not industrialized enough. That is the direction. Again, I would not say that the situation is perfect. It has probably significantly improved over the recent years, but there is still room for improvement across the board as many topics in this company.
Got it. On my middle question around regulators outside of Germany, could you add it to that one?
Yeah. I mean, we are in close contact with all the regulators in the jurisdictions where we are regulated. There are, I mean, regular audits which are performed on the company. There will be some audits this year as there have been last year, and there will be in two years from now. It is a normal course of business, obviously.
Understood. Thank you very much.
We will take our next question from Emmanuel Matot, ODDO BHF. Your line is open. Please go ahead.
Thank you for taking my question, hello gentlemen. Do you disagree at all with the allegations of those journalists, meaning Worldline, had a policy to develop actively business with Provident Online merchants? Sorry to ask you this question, but what your audit is saying about that, is it just related to a problematic risk management policy at that period, or definitely there was a policy to develop this specific Provident business? Thank you.
I mean, I'm not here to judge and to rewrite the story of the company. I was not there. I mean, this HBR business, again, you have HBR business in any portfolio of any merchant acquirer, especially online. It requires sophisticated controls. The company did increase in the last two years drastically their processes and their controls. The situation was not perfect. It has dramatically improved. This is what I can say. What matters for me is looking forward and turnarounding this company and making it growth and cash generative again.
Okay. I'm just surprised when you are saying that there is nothing new from those allegations. Nothing new for you. It means that you were well aware about the situation at the time you joined Worldline.
No. When I say there is nothing new, that when we look at the portfolio, when we look at what has been mentioned in those articles, and when we look at the portfolio that has been curated, there is nothing more to be done at a significant scale. This is what I say. When I joined the company, I knew the public information. I knew what had been told to the external community in terms of issues, in terms of issues with the regulators, in terms of offboarding of merchants, reinforcement of the procedures, what was at stake in terms of revenue that would be offboarded. As compared to that, there is nothing new in these articles. What is new in these articles is the way this media campaign has built a narrative that, again, is clearly unacceptable for all the stakeholders.
Okay. I understand. Thank you very much.
We will take our next question from Tammy Qiu, Berenberg. Your line is open. Please go ahead.
Hi. Thank you for taking my question. The first one is, this kind of situation is usually quite, let's say, uncomfortable for investors. Would you ever think about doing something like external audit or external kind of consultancy confirmation type of project to make sure that you have an external or third party to further verify? Also, the second question is, previously, when you have this kind of situation since 2023, have you seen any merchant reluctant to onboard with you or continue to allocate more market share to you because you are just worried about you may have any legal framework issue at all? Thank you.
On your first question, you know the situation in which I am myself. Okay. I am a new CEO. I have nothing to hide by definition. My purpose is that we are as transparent as we can be. Okay. Today, I tend to consider that we have enough transparency across the board, that we have done multiple audits already, that we knew what had to be cleaned up, and this is performed under the supervision of the regulators, under supervision of the board of directors. I am not sure I want to spend time and disruption to do an additional external audit. Again, my interest is to give the full comfort to anyone around this table. We will advise if necessary. On the second topic, I mean, up to now, there has been no issue with merchants.
We have a framework which is absolutely consistent with the standards of our framework and with the standards of the industry, even though there is potential improvement, as we already said. I will not tell you that the merchants in which we are talking today as prospects are happy with the situation, and they expect clarity, and they expect all this to be behind us. It is not good news for the business and for our sales guys, but this is what it is.
Okay. That's very clear. Also, lastly, regarding your comment and say what has been reported or written in the news report was actually unacceptable narrative, would you actually consider legal action against those writers or publishers because they have created damage to your business?
This is something that we are considering, obviously. That is something that has to be thoroughly sought out because, you know, when you go to court, I mean, you need to be properly equipped. We need to qualify that with our lawyers. That is something that we are considering, yes.
Okay. Amazing. Thank you.
We will take our next question from Daniel Wong, HSBC. Your line is open. Please go ahead.
Hello. Thank you very much for taking my question. I guess just to follow up on the last one, I presume given the magnitude of some of the allegations, at a minimum, you're probably supposed to do a full audit from an independent company because one thing we know across the various verticals in this very complicated sector is that things can often slip through the cracks. I guess the second question is, trust is at the fulcrum of any payment firm. You mentioned, I believe, that you weren't aware of any ongoing investigations related to HBR, but would you be able to tell us if you're aware of any other significant investigations across the broader business that we should be fully aware of? Thank you.
On your first question, which is the external audit, I take your point. You are the second one to ask the question, so I take the point seriously. On the second point, I mean, we are subject to regular audit from the regulators in our various countries that can be followed by recommendations. As of today, I have nothing in mind that should be disclosed.
Thank you very much.
We will take our final question from Simonette Tacheros, Mediobanca. Your line is open. Please go ahead.
Yes. Thank you. Good evening. Just a question on the orchestration business. If you could repeat the contribution of these servants to EBDA and how much of this business refers to HBR? Thank you.
The contribution in terms of EBDA is something in the range of EUR 40 million-EUR 45 million. Okay. Most of the customers, which are sophisticated customers, cross-border merchants using several acquirers, so a significant part of it is linked to gaming and gambling sectors. We also have retailers, international retailers, which are customers. You have variety of business. The portion that is supposed to be regulated as gambling, I understand it's something like half of the volumes. This is where we stand.
Thank you.
Okay. Thanks a lot for being present this evening. I hope I have been in a position to clarify the situation, and we will meet again at the end of July to update you on this, but also to present the situation of the company and the perspectives for the full year. Thanks a lot and have a nice evening.
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