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The ING Group, the Netherlands largest bank, has announced that it will begin phasing out its subsidiary, Payvision, acknowledging that the payment service provider has not been sufficient for achieving its ambitions.
ING has informed its clients that it intends to complete its phase-out of Payvision by the second quarter of 2022.
In most cases, this will mean that many Payvision and ING clients will need to select a new payment service provider.
Payvision and ING will support their clients in this transition the bank confirmed in a press statement, adding that until the termination of services, Payvision will continue to fulfil its contractual obligations to meet clients’ expectations.
The winding down of Payvision represents a stressful phase for ING, which acquired a 75 percent stake in the payments company in 2018. The acquisition was aimed at expanding the bank’s acquiring services, with a particular focus on the rapidly growing e-commerce segment.
However, instead of offering ING the capability to compete with other payment processors like Adyen and Worldline, it has instead spurred negative publicity for the bank, with one source branding it a “problem child” for the financial institution.
In part, this is due to links with the gaming, gambling and adult content industries, with customers including controversial pornography platform Pornhub.
“Portfolios like adult content and gambling are highly profitable but also highly risky,” warned one payments insider. “They are somewhat alien to clean, high-street banks such as ING, so one might wonder whether it actually fit together in the first place.”
Unwelcome comparisons
The payment service provider was even branded the “Wirecard of the Netherlands” by the European Funds Recovery Initiative (EFRI), a non-profit organisation that recovers funds for victims of scams.
In 2019, the EFRI wrote to the Dutch Authority for the Financial Markets (AFM) accusing Payvision, as well as ING, of being involved in “several fraudulent investment scams damaging thousands of European consumers by more than EUR 250 million”.
This escalated even further in July of this year when the EFRI wrote to EU-level institutions requesting that they mandate the European Banking Authority to initiate a breach of law investigation against the Dutch National Bank for its failures to investigate Payvision under the EU’s money laundering rules.
“Despite ING supporting the idea about Environmental Social Governance (ESG) in so many press releases and stress the importance of integrity heavily, they evidently do not care about harmed European consumers,” the letter states at one point.
A reputation at stake
Last November, the company announced it had sold parts of the subsidiary off due to the controversy and closed the company’s entire adult industry portfolio as it fell out of the scope of ING policy.
Yet with this sell-off, ING faced another problem — a dip in profitability.
A source familiar with the EU’s payments industry said that it was a case of "deja-vu", pointing to Deutsche Telekom’s acquisition of ClickandBuy, an e-payment service, which it subsequently shut down in 2016.
As with Payvision, ClickandBuy had links in the gambling, gaming and pornography industries. "They didn't understand the asset, and then they were shocked when performance went south after they'd shut down these profitable portfolios."
“ING shouldn't have purchased it in the first place. Banks with an ambition to go outside core competencies usually fail,” said Wojciech R. Bolanowski, a banking and digital finance specialist currently working with Quara Holding as product lead.
ING is a global behemoth, he said, arguing that this makes it difficult for it to pay enough attention to small businesses that operate in new ways. “But the ambition to be even more digital is like curiosity kills the cat,” he said.
Digital banking’s history is full of cases where big companies were unable to manage tiny digital challengers they bought or tried to build, he continued, noting JPMorgan’s decision to close its digital banking arm, Finn, in 2019, as well as Raiffeisen Banking Group failures with digital lender Zuno.
