The EML Payments Ltd (ASX: EML) share price has sunk 15% after the payments business announced a fraud incident at Sentenial.
EML has a payments solutions platform. It says that whenever money is in motion, its technology can power the payment process, so money can be moved quickly, conveniently and securely.
Sentenial is described as a leading European open banking and ‘account to account’ payments provider. Its customers include four of the top seven banks in the UK and some of the largest merchant acquirers in Europe.
Fraud has been detected
The company told the market that its Sentenial business has identified “recent fraudulent activity” relating to an identified set of “fraudulent merchants” within its direct debit processing business.
EML said that it’s taking steps to investigate and understand the circumstances around the fraud, and has “commenced steps” to recover any losses.
The company said it’s confident that the “maximum amount of any losses will not exceed €5.5 million”, or A$7.9 million, but it could be lower depending on the success of recovery actions.
EML noted that the fraudulent activity primarily occurred in August 2022 and came to the company’s attention on Tuesday, 23 August.
The board of EML convened a meeting early this morning so that in could inform the market.
What to make of this for the EML share price
As the company indicated, it’s still early in terms of the company’s response to this. However, a $7.9 million hit to earnings would be painful considering that would be a sizeable chunk of the profit. FY22 profit was hurt by the Central Bank of Ireland (CBI). EML needs to regain investor confidence.
For a business that aims to be a leader in secure payments, it’s not a good look that this happened. How will EML be able to reassure the market that this sort of thing can’t happen again? Will this put off existing or potential clients? What does this mean for the EML share price and its recovery?
We’ll have to wait and see about what the details are about the situation, but it has reduced my confidence in the business’ longer-term prospects and what it could do for its reputation.
