It’s been just three months since digital payments company Novatti Group (ASX: NOV) was granted merchant acquiring licenses but since then, those licences have created new business opportunities to drive Novatti’s sales revenue up 53%.
Reporting $5.8 million in sales revenue for the December quarter, a 53% year-on-year increase, Novatti set a new record for its quarterly revenue which is primarily generated from its digital payments services. While a bulk of this revenue had previously been generated via international remittance services, sales have been boosted by the recently secured acquiring licences that enable Novatti to partner with business operators seeking to accept payments from Visa and Mastercard.
“The December quarter saw Novatti continue to deliver record results, with quarterly sales revenue increasing 53% year-on-year to $5.8m. This means we have now reached the halfway point of FY22 with two straight quarters of record revenue, as we continue to build on the momentum set across FY21,” said Novatti CEO, Peter Cook.
“These strong results highlight that Novatti’s long term strategy is delivering. Following many years of investment, Novatti has now established a business that has global scale. This scale is underpinned by a payments ecosystem that can be leveraged by businesses big and small to pay and be paid.”
“Having started in Australia, we now have operations in Asia, North America, and Europe with more regions to come. Within this, we see the opening of new markets and expansion of our presence in existing markets as being key to our growth strategy.”
With a business model that is driven by payment processing volume, Novatti’s acquiring division operates similarly to its cross border payments division which takes a small clip of every dollar processed. This has been one of the reasons the Company has had a strong focus on increasing its revenue, a reflection of the payment volumes processed.
Capitialising on the merchant acquiring division’s increased capacity, $4.9 million of their December quarter revenue was generated from payment processing services, a 122% increase on the previous corresponding period.
As a byproduct of its new licences, Novatti was able to bring its merchant services in-house where they had previously outsourced the capabilities. This has enabled Novatti to substantially improve its margins on the payment processing, while also being able to target larger clients such as those that have international operations and can move money seamlessly across borders through the Novatti ecosystem.
Being granted those licences, Novatti became just one of 20 financial service institutions in Australia to hold both those licenses which includes the major banks.
Further growth in the Novatti ecosystem is underway via their recent $8.4m acquisition of Malaysia-based payments company, ATX. With that acquisition, Novatti gains full control over the gateway to SouthEast Asia where ATX already has more than 31,000 touchpoints for digital payments. While ATX generates $3 million in annualised revenue on their own, none of that was included in Novatti’s December quarter based on the acquisition only settling earlier this month.
Novatti has voiced its intentions to leverage ATX and advance their presence in South East Asia where they have actively engaged RippleNet for on-demand-liquidity services in and out of the Philippines and Thailand.
Unlike their traditional banking counterparts, Novatti has been ahead of the curve in terms of utilsising cryptocurrency for digital payments. This included a partnership with Cryptospend in 2021 where Novatti utilised its Visa Principal Issuer status to issue Visa cards that facilitate payment via Bitcoin.
Continuously adapting to consumer demand for alternative payment methods, Novatti is well positioned to capitalise on major growth in South East Asia over the next 10 years as populations as technology has become substantially more accessible.
As per Google’s 2021 e-Conomy report, data insights show the huge growth potential in Malaysia, Singapore, Thailand, Philippines, Vietnam and Indonesia – collectively South East Asia – where the majority of the population is un-banked and transacting via cash economies.
Highlighting how rapidly these populations are ‘coming online’, 40 million people in SouthEast Asia became new internet users in 2021, bringing the internet penetration in SE Asia to 75%.
The overarching theme of the Google report is that SE Asia is becoming so technologically advanced, that the internet economy in the region will reach USD $1 Trillion by 2030. Once this is achieved, approximately 50% of all retail spending will be online (vs. ~10% today) and, 70-80% of transaction value will be fully digital (vs. ~40% today).
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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[…] integrations. It comes off the back of their December quarter results where Novatti reported a 53% increase in sales revenue as more of the world continues transitioning towards cash […]
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