Amid the collapse of neobank Xinja, fintech and digital payments company Novatti Group (ASX: NOV) still has its sights on the launch of their own having quietly set their foundations with revenue-generating products while awaiting a banking license.
Originally submitting their banking licence application to the Australian Prudential Regulation Authority (APRA) in November 2019, Novatti was informed in May 2020 that APRA would not be issuing any new licenses during the pandemic, pushing the approval process back a further 12 months.
During this time, Xinja which had already secured its licence undertook a monumental marketing campaign of its neobank savings accounts that offered interest rates of 2.25% on deposits. Without loan products or other means of revenues and as an entirely new business, the neobank received a $433 million cash injection via foreign investment in March 2020 but this still wasn’t enough to prevent the Company’s collapse announced on Tuesday as Xinja commenced the process of returning all deposited funds under the watchful eyes of APRA.
Despite the collapse of Xinja, neobanks in Australia are still expected to be popular in Australia with it reported earlier in the week that neobank Judo is expected to finalise a funding round valuing it at $1.65 billion. These reports also suggest Judo became profitable in August this year.
While awaiting the issuing of their own license, Novatti has been putting together a serious network of Tier One partners in the fintech industry which have supported the $11.86m revenue generated by Novatti in FY20. This has been driven by their licence to issue Visa cards as a Visa Principal Issuer where they were selected by international payments company Marqeta as their Australian partners earlier in the year. Marqeta themselves have since been speculated to be eyeing a $10 billion IPO with their Australian operations to be assisted by Novatti.
Other major partnerships confirmed by Novatti over the past 12 months include Google Pay, Samsung Pay, Alipay, Decta and blockchain payments network facilitator Ripple.
“Following Novatti’s substantial achievements in 2020, we head into 2021 in a very strong position, with$11m in cash available, strong and growing macro-level demand for digital services, and the existing platforms to service this demand,” said Novatti Managing Director, Peter Cook.
“With the support of these strong foundations, we will use 2021 to continue to accelerate Novatti’s growth by securing new strategic partnerships, driving revenue from newly deployed payment networks, and furthering our international expansion, starting with Emersion entering the US.”
While a neobank service is still firmly in Novatti’s sights as an add-on product to their existing payment services, their initial focus in the new year will be launching their business software Emersion in the United States.
Since acquiring Emersion in April 2020, a business automation and subscription billing platform. Novatti has grown the Emersion’s annualised revenues from $1.7m to $2.2m and continues to acquire new SME clients rapidly.
While APRA has flagged April 2021 as the date to re-visit licensing, Novatti has been launching new products and services while expanding their international payments infrastructure. Building on their network of partners and revenues, Novatti appears to have been making excellent use of their time building the foundations that fell others.
*Owners of this website are shareholders in a company mentioned in this article and have been engaged by them to assist in investor communications
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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