Although some pandemic trends have lost momentum by returning to their pre-Covid status, one that shows no signs of slowing is digital payments, evidenced by revenue growth from Novatti Group (ASX: NOV) which has invested heavily in their ecosystem and is now eyeing positive cash flow.
Operating a global ecosystem that facilitates digital payments, including a large footprint in high-growth South East Asia region, Novatti reported $32.5 million revenue for FY22. This represented a 97% increase on the previous year, and took their annualised growth rate to 76% over the past five years.
“After several years of investment and development, FY22 saw our focus shift to seeking increased leverage and returns from our leading global, B2B payments ecosystem,” said Novatti Managing Director, Peter Cook.
“This also resulted in a shift in focus towards delivering positive cashflow. Substantial progress has already been made here as cash used in the June quarter fell 48% and we expect Novatti’s cash usage rate to continue to fall in the quarters ahead.”
The overarching theme to Novatti’s growth as an established fintech player has been their focus on top-line revenue where more financial licences they secure, enable them to upscale their digital payment processing capabilities. As billions of dollars move through Novatti’s global ecosystem between financial institutions, businesses and customers, Novatti takes a small clip along the way, contributing to their $32.5 million revenue.
In many cases, Novatti’s different divisions can control the entire digital payments chain where they issue the cards used by customers (card issuing division), accept payment for merchants (merchant acquiring), and then process the payments through to overseas accounts (cross border payments).
As part of their acquisition of leading South East Asian fintech ATX in 2021, Novatti used the opportunity to establish operations in the fastest growing region for digital payments adoption as these countries convert from being cash economies. By way of example, since the start of the pandemic, more than 100 million adults in China and 80 million adults in India made a digital merchant payment for the first time.
Globally, the share of adults in developing countries using digital payments has risen from 44% in 2017 to 57% in 2021 according to WorldBank.
Critical to Novatti’s ongoing success is their strong cash position where the Company has $23 million in new cash hitting their balance sheet shortly between a non-dilutive bond issue and dividends from their 19.9% stake in Reckon (ASX: RKN).
“We continue to see strong demand for Novatti’s services globally, as the macro-level shift to digital payments shows no sign of easing,” added Cook.
“We remain confident that this strong global demand will continue to support Novatti’s growth going forward. In FY23, we will seek to maintain our track record of delivering strong, long term growth, while shifting our focus towards delivering positive cashflow.”
In the months ahead, Novatti is set to launch their AUDD stable coin as their newest foray into digital currencies. Well advanced in this space as early-stage adopters of digital currencies where they utilise RippleNet and XRP in their ecosystem, Novatti was recently invited to appoint a representative to the Reserve Bank of Australia’s Digital Payments System Board.
“We believe there is enormous growth opportunities in the use of stablecoins as a payment solution going forward, which is why we want our own product in market,” said Cook.
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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