With ASX stocks joining the global fintech payments revolution, Novatti’s boss offers an insight into a fast-moving, sometimes confusing sector.
Today, we seem some way along that path.
Around 55 million payments worth about $650 billion are being made in Australia every day, a great many of which are facilitated digitally via smartphones.
Not only are these digital payments quicker, they’re also becoming more secure, accessible and convenient than cash-based payments.
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The sheer size and potential of this market has attracted companies to launch their own products, including global players such as Apple, Google, Block, and China’s WeChat Pay.
Mark Healy, the CEO of payments fintech company Novatti (ASX:NOV), says the digital payments space is complex and can be confusing for consumers to understand – with legacy players, global tech and small fintechs all jostling each other for market share.
“You’ve got these fintechs that are innovative and have features-rich products, and you’ve also got big-tech players that are muscling their way in,” Healy told *.
Apple Pay, for example, is a big player that’s been rapidly grabbing more of the pie, with some analysts calling it the biggest fintech disruptor right now.
Healy explained that Apple was simply leveraging its exisiting customer base and technology to jump into the payments space.
“Instead of the consumer taking the card out of their wallet and tapping on to the terminal, Apple embedded that process in the phone.
“Who would have thought that putting that card in the phone and using the phone instead of the card would be so adopted at scale?” said Healy.
Big Brother is watching
In Australia, the pace at which the digital payments industry is moving has forced the government to swiftly step in.
In June, Australian Treasurer Jim Chalmers said he would give the Reserve Bank more powers to regulate fintech companies that provide payments services.
Outgoing RBA Governor Philip Lowe has also called out Apple Pay, saying the company’s policies are anticompetitive.
“Apple is on our radar, definitely.”
Mr Chalmers, meanwhile, said that while our regulatory frameworks had not kept up with the big trends happening in finance, especially when it comes to payments, innovation was necessary.
“A more modern payments system means more innovation, more productivity and more growth,” he said.
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Global mega trend
Meanwhile, the B2B (business-to-business) digital payment companies such as Novatti have been reporting stellar growth.
In the latest quarter update, Novatti reported $10.3 million in Q4 sales revenue, up from $8.9 million in the previous quarter.
The company’s processing volumes were up 15 per cent quarter-on-quarter to $1.19 billion, while gross margin was at 51 per cent, up from 35 per cent.
Healy, who was promoted to CEO in June this year, says that he wants Novatti to break away from its entrepreneurial past that focused solely on on top-line revenue and growth.
“The real target for us now is to move the business into a self sustaining state, and actually achieve profitability,” he said.
Heal says Novatti’s business revolves around four pillars – local payments, international payments, technology solutions, and investments.
“We believe that a strong differentiator for us is that very few providers outside of banking can provide a full end-to-end payments ecosystem like we do.”
Healy also says that Novatti is capitalising on the global mega trend towards digital commerce, which is being reflected in the company’s payment-processing volumes.
“Payments as a theme still has many years to play out, despite the current uncertainty constraints in the economy. So we’re well positioned to take advantage of that.”
As for adding blockchain into the mix, Healy says that Novatti is not in that space directly at the moment, but believes it will play a big role in the future.
“Distributed ledger technologies can really streamline a whole range of payments use cases in the future to improve transparency and speed,” Healy said.
Other ASX companies on the job
CHANGE FINANCIAL (ASX:CCA)
Change’s technology offers “banking as a service (BaaS)” solutions to businesses and financial institutions, providing infrastructure and tools for building customisable payment solutions.
Last year, the company signed an exclusive six-year direct issuing partnership deal with Mastercard in Australia and New Zealand, enabling Change to issue prepaid and debit cards under the Mastercard logo.
Earlier, Change had launched its payments platform, Vertexon.
Vertexon is a “payments as a service (PaaS)” offering, which provides quick-to-market card and payments solutions to banks and fintechs around the world.
TYRO PAYMENTS (ASX:TYR)
Although its focus is on card payments, the Tyro BYO app lets people to use digital wallets such as Apple Pay, Google Pay, and Samsung Pay.
For example, once you’ve been approved by Tyro as a customer, to use “tap to pay’ on iPhone you simply have to download the Tyro BYO App and start accepting contactless payments on the iPhone.
Tyro was was the subject of a bid from private equity firm Potentia, which has since backed off.
EML PAYMENTS (ASX:EML)
EML provides a global payment solutions platform, and says it powers over 80 billion transactions annually.
The B2B company operates globally across 32 countries including Australia, the UK, Europe, and the US, with clients including major banks in Europe, government and retail brands.
In April this year, EML underwent a strategic review, announcing a new interim CEO and took measures to cut costs.
This content first appeared on unauthorised investment advice
