Despite doom and gloom heaped upon the tech sector in recent months, digital payments company Novatti Group (ASX: NOV) has emerged as a shining light with major growth witnessed over the past 12 months that has seen their revenue rise 97% to $32.5 million.
Although Novatti may not be a household name yet, the Company has been diligently expanding their fintech capabilities which have now maintained an average of 76% annual revenue growth over the past five years to their new record high.
“It is worth reflecting on this strong performance in the context of the significant volatility seen in global markets over recent months,” said Novatti Managing Director, Peter Cook.
“Despite this volatility, Novatti has continued to produce record results, while the longer term, macro-level shift to digital payments that supports Novatti’s growth, shows no sign of easing.
“After several years of development and investment, Novatti’s global, B2B payments ecosystem is now well-established and we are focused on delivering increasing returns from this investment. Notably, we have already shifted our focus to delivering positive cashflow, with substantial progress already being made in the June quarter as cash use fell 48%.”
Part of Novatti’s growth has been driven by their strategy to leverage in-house payments tech to secure financial service licences that bring scalabilability potential. This was evidenced through the Merchant Services licences granted by Visa and Mastercard to Novatti in 2021, enabling business owners to accept card payments through Novatti portals.
Having acquiring those licences, Novatti has partnered with accounting software Company Reckon (ASX: RKN) to offer these merchant services to Reckon’s 114k cloud-based users under a profit-share agreement. Novatti happens to also own a 19.9% strategic stake in Reckon which is set to deliver Novatti a special dividend in the coming weeks.
“We remain very pleased with the progress being made in our strategic relationship with leading accounting software provider, Reckon Limited,” said Cook.
“Our shareholding in Reckon has produced more than $1.1m in dividends since our investment a year ago, with a special dividend still on the way, which is expected to be more than $8m. Further, the integration of Novatti’s payment solutions into Reckon’s products is now generating revenue, as we seek to add value to Reckon’s 114k cloud-based users.”
Following their acquisition of digital payments company ATX in 2021, Novatti now uses the wholly-owned subsidiary as their Malaysian base for further expansion through South East Asia. The region, in particular, has become significantly more technologically advanced since the onset of COVID-19 where previously cash-only economies are adapting to digital mediums in droves.
Since the start of the pandemic, more than 100 million adults in China made their first digital merchant payment, while India experienced similar growth with 80 million.
Further expanding their global reach, Novatti is progressing with its application for an EMoney Issuing (EMI) licence in Europe which will open the region up to a range of Novatti services. Locally, Novatti continues to work with Australia’s banking regulator for the final approvals of its restricted banking licence.
Unlike other aspiring neobanks in the Australian market that have been starting from scratch, Novatti already has a large portfolio of financial service products that generated $32.5m in sales revenue in FY22 with its services utilised most amongst migrant populations that seek borderless banking services.
As of 30 June 2022, Novatti had $6.1m in cash on hand and expects to receive $8m more from their Reckon Special Dividend to be well capitalised to drive further growth of their global payments ecosystem.
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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