As you turn into Prepaid Financial Services’ driveway in the Navan business park, the first thing you notice is the cars. There are cars parked on the lawn, on the verge, and on the driveway. Cars parked on every square metre of tarmac. 

Stepping into the office, you’re hit with a wall of chatter and beeping telephones. In one huge L-shaped room, about thirty metres long in each direction, 169 people are working away. 

The room is big, but not big enough. Desks are packed closely together. If there’s a sense the place isn’t quite settled, it’s because they’re in the middle of moving out. In three weeks’ time, they’ll have moved to bigger digs in Trim, with plenty of parking.

It’s a busy time. This week, Prepaid Financial Services’ founders Noel and Valerie Moran agreed to sell the company to Australian-based EML Payments for €327 million. Their own share of the deal could amount to €266 million.

It started in their flat in Paddington, London. Noel Moran was living there with Valerie, his then-girlfriend. He had just been laid off. He was still owed four months’ pay. 

His previous employer was a company called Altair, and it was one of the first to try and build a business around prepaid debit cards. Its target market was large corporates, who it hoped would buy thousands of cards at a time. 

“Oh goodness. This is something new, and this is something big, and I’m onto something.”

Valerie Moran

Altair failed, but Moran saw something in prepaid cards. He thought there might be an opportunity at the bottom end of the market, providing small and mid-sized companies with a couple of prepaid cards at a time. Enough to keep him and Valerie going. 

Noel says: “I started up because I needed to get a job, first of all. I’d just lost the job from the previous company. 

“So initially, it was set up to try and you know, give me something to do, and set up a job for myself. The initial thinking was: ‘Okay, maybe we can make it successful enough that we can live off it ourselves.”

Valerie came on board to help. Because they weren’t going be closing any deals over the kitchen table in Paddington, they took out an office in town. 

The office was above Bond Street Crossrail station, one of the biggest building sites in the UK. That suited Moran just fine. Between the building site and the 2009 panic, which was then in full swing, he was able to negotiate a few months of free rent from the landlord.

They had their idea, and they had their office. But they had no customers. The first big sale was slow in coming. After a couple of months dodging the landlord, it was eventually decided that they’d fold the company if nothing happened by the following Wednesday. 

A short time later, an order came in for five thousand cards. The client paid in cash, up front. That was the start of it.

Sean Keyes (SK): At the very start, were you confident you’d be successful?

Valerie Moran (VM): I suppose the answer is no! When you start off a business, you’re starting off with very little capital.  We were reliant on Noel’s knowledge of the industry and the vision he had. So that would have brought confidence. 

As we started to grow, we got more confident and we realised our potential. It’s when you realise your potential and when you realise what you have is unique and what you’re providing, and the solution that you have, there is a demand for it, then your confidence grows.

SK: It must have been very exciting, for a business that had started on the kitchen table, to get to that point. Was there a specific inflection point when you realised, wait a minute, this thing could be very big?

VM: I think it was already a few years into it. When you realise you’re one of MasterCard’s largest issuers, that’s when you start to think “I’m onto something big”. And then as you grow your market and you start being pioneers in different areas in Europe and you realise “Oh goodness. This is something new, and this is something big, and I’m onto something.”

The road from Navan

Noel Moran has made his own way to the top.

He left St Patrick’s Classical School in Navan at 17 to work in his dad’s furniture shop. But it didn’t take. “I wouldn’t be too good with me hands or with manual labour,” he says.

A school guidance councillor got in touch to tell him Permanent TSB was hiring clerks. Moran says: “It was office work I was looking for. That was the start of it. It just happened to be financial services.”

SK: You started your first job as a clerk in 1989, and by 2008 you felt ready to go yourself. What changed in the intervening time?

Noel Moran (NM): I was in Permanent TSB for I think 12 years. I worked my way up through a few different departments there. From filing, I moved to accounts and into testing and then to mortgages and all of that. So I ended up in the testing area, which really covered mortgages and payments and current [account]s and a bit of everything. 

And then I left there after 12 years, I went to work for AIB and that was specifically during a card migration for them. So I was managing the testing around that. So this is the start of moving into getting into more detail with the card side of things. 

I think I was at AIB for about two years and then I left and went to England and I set up corporate cards for MBNA. And then I worked with almost all the banks in England. I was a contractor then, so I worked for RBS, the Co-op, Lloyds. And they were all projects around either debit, credit card or commercial cards. 

So really when I left PTSB everything was revolving around payments and cards. That was where I got a bit more interested in the mechanics behind it and how it worked, and other possibilities outside debit and credit. So then I moved into prepaid in two years, three years before we started PFS. 

In 2004-2005, I moved to a new startup company in London called Altair Financial Services. They were one of the first to start dabbling in prepaid in the UK. And they had a different angle than what we did initially, they were more geared towards large corporate clients, large card orders. Obviously, they were not profitable. So when the crash came in 2007-2008, it couldn’t raise any more funding and eventually went into administration, then were bought out of administration, went into demonstration again, and eventually ended up folding in 2009/10 after I had left.

SK: But you felt there was an idea there.

NM: Yeah, there was. That was where the idea came from. So they targeted very large corporate clients that were kind of looking for a minimum of 5,000-10,000 order. And what was coming to us as part of that business was, you know, small to medium-sized corporates who want five cards, 10 cards, 30 cards. You couldn’t walk into a bank if you’re a medium or large corporate and say, you know, can I get 20 travel cards for my staff, can I get 30 gift cards, whatever it is.

They were just too early. That was the difference. They were a bit too early in the market. Because it’s not always good to be first. 

Noel Moran

SK: So Altair was focused on large corporates and you thought there was a way to do it on a smaller scale. 

NM: We went to the opposite end of the market. We said, let’s try to service the guys who just want 20 cards here, 30 cards there. So initially, we actually started selling the brand of someone else, it wasn’t even under our own brand. And eventually, you know, over a short period of time, we actually managed to get out a couple of thousand cards, which was significant enough, and 5-6,000 became 10-20,000. And we built up a fairly decent customer base over 18-24 months. 

Then we just started to build more technology around trying to improve the offering. Funny enough, it turned 360 degrees because we’ve ended up doing what Altair did. The majority of what we do now is actually servicing large corporates, so it’s just changed by default. It wasn’t where we started out.

They were just too early. That was the difference. They were a bit too early in the market. Because it’s not always good to be first. 

SK: From an ordinary person’s perspective, a card is a simple thing. How do you build a complex business with hundreds of employees on something as seemingly simple as prepaid debit cards? What problem does your company solve?  

NM: Well, there’s a lot of different ones. To be honest, we started with a lot of different markets. So basically anywhere where there’s cash or checks, we can automate that to be electronic. So we built solutions that allowed us to replace cash effectively. So it could be anything, I mean, name me somewhere where there’s cash, we have a solution for it. 

So if it’s a corporate, say, and they have a lot of employees, spending per diem, you know, that’s normally given in cash. And giving employees cash obviously involves a risk and you have to balance cash and blah, blah, blah.  

Whereas we can just give them an electronic card and that can be monitored and controlled from someone sitting in the finance department office, they can load the cash in real-time. They can monitor the spend as well. So they don’t need receipts anymore, it cuts out the receipts. We give them reporting so that they can see exactly where the spend is, they can balance and reconcile at the end of the day, and they can literally control where that employee is spending the money. So it gives them an awful lot of control. 

And if it’s travel, companies would have given over the company debit or credit card. And that’s a risk. So we provide travel cards. Again, they load it, they can determine the currency that’s on it, and the employer has full control over it.

VM: It’s also been a way of streamlining processes for companies. Like with some of the local authorities we work with. 

Basically, they want the card to be used, let’s say in certain stores or certain merchant category codes. We can restrict that, because we have that technology. So they can issue a card that can be used in grocery shops but can’t be used to buy Xboxes, for instance.

And then in another context that we also have, which has been great for us, which has also been fulfilling, is humanitarian aid. We’ve had projects where we’ve worked very closely with non-governmental organisations where there was a crisis, and we’ve provided the cards as a cashless solution. And that has been very rewarding for us. And it’s also been a workable solution for those NGOs. 

So there’s a lot of things that we have done with prepaid and there’s a lot of requirements for prepaid. One may not realise it, but it is really a huge requirement for a lot of different organisations and different companies.

SK: Why isn’t this business controlled by a bank or big financial intermediary? Why were you first to market?

NM: I suppose if you look at what happened at the time we started, we started in the middle of the crash in 2007-2008. We were in the middle of London.

The last thing the banks wanted to do was move into new business ventures, it was the exact opposite in 2008/9/10. They were streamlining their process, anything new that was set up was nearly canned overnight. And so that actually gave us two or three years where there was no way banks were going to look at it.

And to be honest, that has kind of continued throughout the years. Although there may be a business in it, it’s still not core for the banks at the end of the day. It’s about core fundamentals, you know, the bank’s core focus is on lending, deposits, mortgages, things like that. 

We tried in the early days, we did try. And the truth of it was that no one wanted to invest. That is the truth. And thank God we didn’t!

Valerie Moran

There’s more money in that at the end of the day, so it wouldn’t be core. You’re still seeing all of the other banks moving out of this space over the last five, six years. You know, we bought a portfolio off Barclays in the last year. They moved out of it as opposed to coming into it. The honest answer is it’s still not core for banks. It’s still a pretty small business for banks in the scheme of things.

SK: And then, you end up in the unusual position of selling a company in which you own more than 80 per cent of the equity. I’m guessing that’s a function of your early days, and starting out as you did. Did you ever try to raise venture or growth capital?

VM: We tried in the early days, we did try. And the truth of it was that no one wanted to invest. That is the truth. And thank God we didn’t!

So what we did was that the money we were generating from the clients, the little that we had, we just used that money to pop back into the business and grow the business slowly. And that’s what we did. 

And then it turned into, as the years went on – we didn’t want investment, we were financially stable. So what was the point of bringing somebody, a venture capitalist or somebody to buy equity into us, when we didn’t want to give away?

Because as a business, the most important thing is to hang on to your equity. The more you give away, the less you get.

SK: The discipline that was imposed in those early days, when you were constrained by money, must have really informed the culture of the company.

NM: Yeah, absolutely. I mean, you mind the pennies. But one of the things we also wanted to do was make sure that the staff is also part of the same journey with us. So all of the staff that have been with us for more than 12 months qualify for shares. So it’s a good result for all of the staff as well too, they’re all shareholders. So they’ll hopefully get a payday in another two months.

VM: We just didn’t want it to be about us. I think it was important to say we appreciate everyone who’s been part of the team or part of the growth of the business.

And if you ask how many staff in broad numbers have qualified for this 12 months, it’s over 100. 100 plus. 120 or 30.  If you want to give a percentage of all the staff, would say nearly about 85 per cent of our staff.

[Note: if 120 staff have taken up the offer, that’s an average of €350,000 each when the deal goes through next week.]

The hand he was dealt

Some CEOs work to a blueprint. From the outset, they know exactly what they want to do and how they want to do it.

Elon Musk would be one. In 2006 he published a plan which explained in precise detail how he was going to turn his tiny car company into a global player. Jeff Bezos is another. As early as 1992, he was describing his plan to build a “middleman” internet retailer that would dominate the world.

Other CEOs are more reactive. Instead of following through with big plans, they play the hand they’ve been dealt to the best of their abilities. 

Henry Singleton, the legendary CEO of Teledyne, is famous for this. When the market was weak he bought back Teledyne stock and acquired other businesses; when it was strong he issued stock and sold off parts of the company. As he said, “My only plan is to keep coming to work… I like to steer the boat each day, rather than plan way ahead into the future.”

Noel Moran strikes me as a Singleton type. He found himself in financial services. Having found himself there, he found himself specialising in payments. With that knowledge he was able to recognise the opportunity in prepaid cards. And then as CEO, he has shown he understands there’s a time to acquire, and a time to divest.

SK: You’ve experienced extraordinary growth of 46 per cent per year over the last four years. How have you achieved it?

NM: Probably the sum of a couple of things to be honest, we have obviously grown organically ourselves. 

But we also acquired a couple of portfolios along the way. So there was a couple of other businesses which wanted to move out of this specific sector. We acquired the portfolios, and then migrated them over to ourselves. Similarly, Barclays’ prepaid portfolio we acquired last year. 

So it’s the sum of three things I think. Number one, we were growing organically ourselves. Number two, we’ve added on some portfolios along the way just to give growth an extra boost. And number three, the product has also evolved a lot over the last two, three, four years. 

So, you know, anywhere where there’s cash now, we will have a solution to replace electronically. But we’ve also moved away from prepaid. It’s not just prepaid we do anymore. We do payment services in terms of payment processing, direct debit processing, separate payments, separate instant payments, faster payments in the UK. So there’s a lot of other services we provide outside of just normal bog-standard prepaid.

SK: Over the last few years, you’ve been a buyer of card businesses. Now you’re a seller of one. What’s changed? Is it the price being offered in the market?

NM: I think there’s a couple of things. You know, at some stage you have to know when it’s right to exit. We’ve got it to such a stage now where it does take another larger company to move it forward to the next level. 

We found a very good partner now in EML, and that deal is a very good deal for both sides because it opens up the Australian market to us and the US market immediately, which we have nothing in. And for them, it opens up the European market, which they have some presence in, but wouldn’t be as significant as what they have now. So it’s a very good deal for both sides. It makes us a very significant player now globally in the payment space. And we’re excited about actually picking up the different locations we can sell in; but also cross-selling their products to our customers and vice versa. So there’s a whole host of opportunities that will open up to us as well off the back of the transaction.

SK: You got what seems like a great price — 17.5 times forward Ebitda. What was your approach to the negotiation?

NM: Yeah, it’s a good price, I mean, split up into three parts. So we have an upfront cash consideration. We also become shareholders in the enlarged group. And there’s an earn-out. So I suppose all of those things have to come together to hit the top number, but hopefully we’ll achieve that. 

So, you know, 17 and a half times is probably a decent multiple for our space. We know there were some transactions in this area previously, they would all be somewhere between 15 to 18 times multiple. I think we’ve got a good multiple and a good return from us if we can maximise earn-out. More importantly, if the share price increases and the two businesses together continue to perform, the shares should be worth a lot more in three years than there are today.

SK: The deal is great news for the 100-plus employees who will get a chance to cash in their shares as part of this deal. But at the same time, you’re combining two businesses. EML describes synergies of €3-4 million per year, including cost reductions. Do you foresee job losses as a result of the merger?

NM: No, definitely not. The exact opposite. 

VM: We have teams here where we need to recruit. So we don’t see job losses. 

NM: We have 30 or 40 vacancies as it stands today. You know, we’re still on a huge growth drive and upward trajectory. So we need more employees, not less. If anything, it will open up a lot more opportunities for us and create more jobs.

***

In a year’s time Moran will step down as CEO of Prepaid Financial Services.
He and Valerie are restoring an old manor House outside Navan, and setting up a stud farm.

Competing with the horses for their attention will be their other business — eCOMM. eCOMM, and its 54 employees, is part of the reason they’re moving to bigger offices in Trim.

eCOMM makes payments gear for merchants. It’s a lively industry. Big, well-capitalised startups like Square, Clover and Intuit are aggressively going after the incumbents, whose technology isn’t up to scratch. There’s plenty of room for growth. And deals to be done.