The outage that specialist payments bank Tyro suffered last month has already cost the company around A$3 million and will cost it a further $19 million dealing with merchant claims and replacing obsolete terminals.
The cost is equivalent to more than double Tyro’s EBITDA for the six months to December and will take a big bite out of earnings in the second half.
At the company’s December 2020 half results briefing yesterday, Tyro chief executive Robbie Cooke was keen to reassure stakeholders that apart from these costs, it is pretty much back to business as usual.
On January 5 Tyro suffered a system failure that lasted over a week and affected 30 per cent of its merchant customers. Nineteen percent of its merchants lost all access during the outage.
Cooke said that since then the company has not seen any abnormal increase in merchant termination rates, while application rates from new customers are back to near-normal.
While things have pretty much got back to normal, Cook is not taking the situation lightly. “We have not had a similar event in our 18-year history. It did not sit comfortably with us and we know we have to rebuild trust. We are contacting all merchants.”
He said the company was working on a redundancy solution, which involves developing a payment dongle that will be supplied to all merchants and will serve as a “failover” – a duplicate system that takes over in the event of a failure.
For the six months to December, the company processed a record $12.1 billion of transactions - an increase of 9.5 per cent over the previous corresponding period.
Merchant numbers increased by 13 per cent to 36,720, with the bulk of its customers in the retail, hospitality and healthcare sectors.
Despite the higher transaction volume, payments revenue was down 5.2 per cent to $108 million. This was because there was much less spending on international cards, which attract higher merchant service fees.
International card transactions accounted for 0.7 per cent of total transactions in the half, compared with 4.4 per cent in the previous corresponding period.
However, the change in the mix helped boost the company’s gross profit. This was because merchant acquiring fees rose on account of a higher proportion of debit card transactions.
EBITDA rose from $1.5 million in the December half 2019 to $8.4 million in the latest half. After adding interest expense, IPO expenses, depreciation and amortisation, and a loss on an investment, the company reported a loss of $3.4 million.
Cooke said the company has a number of projects underway. These include the dongle, which will be trialled from April; the payments partnership with Bendigo and Adelaide Bank that was announced last year; and Tyro Connect, an apps hub that is designed to integrate a range of services for merchants.
The banking division had a difficult half, with loan originations down by more than 90 per cent after Tyro tightened its underwriting standards and suspended its automated approval system. Banking revenue fell 20.5 per cent to $2 million.
Cooke said credit assessment criteria have been eased