Swedish Payment Fine Appeal Warns Of 'Far Reaching Consequences'

July 25, 2023
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Stockholm-based fintech company Zimpler claims an order against it to halt transactions to operators without a Swedish licence is “incorrect” and will have “far-reaching consequences” for the payments and gambling industries, as it appeals the decision.

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Stockholm-based fintech company Zimpler claims an order against it to halt transactions to operators without a Swedish licence is “incorrect” and will have “far-reaching consequences” for the payments and gambling industries, as it appeals the decision.

On July 6, the Swedish Gambling Authority (SGA) ordered Zimpler to stop enabling transactions with unlicensed gambling operators or face an SEK25m (€2.1m) fine.

The order prevents Zimpler from offering payment services containing BankID to online gambling companies that lack a Swedish licence.

Zimpler argues in its appeal that payment service providers are allowed to mediate payments to operators not licensed in Sweden, but are licensed elsewhere in the EU, as long as they are not targeting the Swedish market.

The company supported the Swedish government’s proposed changes to gambling regulation in 2021 that included blocking unlicensed operators' websites, “but the government has so far not implemented it”, Zimpler CEO Johan Strand said in a press release on July 20.

“The appeal is also a measure to ensure legal certainty in companies' relations with the authorities. Companies must be able to plan and conduct their operations with predictable application of laws and regulations. It is a fundamental principle — both in Sweden and within the EU,” Strand said.

Zimpler told VIXIO that it “does not accept any non-licensed operators. Hence, in the EU we only work with merchants with a licence from an EU country.”

The company said it undertakes a comprehensive process to ensure that none of its non-Swedish licensed merchants target the Swedish market and monitors the SGA’s “blacklist” to ensure that none of the merchants it works with have been deemed to be targeting the Swedish market.

It also requires all merchants to certify during onboarding that they are not in breach of criteria set out by the SGA and “monitor this as part of our ongoing customer due diligence”.

“This means merchants e.g. cannot accept Swedish currency, have Swedish customer support, market in Swedish or mention typical Swedish phenomenons such as BankID and will be off-boarded immediately in case of breach,” the payments company said.

The SGA says "several" criteria points towards online gambling targeting the Swedish market in Zimpler’s case.

For instance, the website or a company associated with it "uses payment alternatives and/or payment service providers that are registered in Sweden or are exclusively or largely used by Swedish consumers".

Additionally, "the website or a company associated with the website uses an e-identification system that is used exclusively or largely by Swedish consumers".

The SGA told VIXIO it found that “Zimpler offers specifically developed payment methods for gambling companies without necessary licences, targeting Sweden. Deposits from Swedish customers are verified with Swedish BankID, a system that is solely used by Swedish consumers. Therefore there is no reason for gambling companies not targeting Sweden to use Zimpler’s BankID-solution.”

Gustaf Hoffstedt, secretary general of the Swedish Trade Association for Online Gambling (BOS), said it is crucial for its members and “the legitimacy of the entire Swedish gambling regulation” that payment providers do not cooperate with unlicensed gambling companies.

“We are also convinced that the commercial future for payment providers is to exclusively cooperate with nationally licensed gambling companies, after all, that is where the large player collective is located. And there are few things that raise the wrath of the licensed gambling companies as much as unfair competition, which is, after all, offering services to unlicensed gambling companies,” Hoffstedt told VIXIO.

Zimpler was given until July 31 to comply with the order.

The company announced in May that it had ended deals with operators without a Swedish licence as part of its strategy to “contribute to a sustainable payment market through financial services with increased consumer protection”.

Despite this, the company argues that the SGA’s decision is “misdirected” and that it affects Zimpler’s “commercial ability to act in a way that is not supported by law”.

“The decision also contains several legal issues that need to be clarified by the court in order for certain payment service providers to be able to conduct their business without risking interventions from Swedish authorities,” Zimpler said.

The fintech company wants to know if promoting gambling that is “not in itself illegal really constitutes illegal promotion”.

“Under what conditions should a foreign gambling operator with a licence in a country other than Sweden be considered covered by the Swedish Gambling Act, and what significance does the use of BankID somewhere in the payment chain have for this assessment.”

Additionally, “how does the Swedish gambling legislation relate to the free movement of services, such as payments, which are fundamental within the EU”.

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