- Fintech industry grew significantly in the previous year, and now with COVID-19 led impacts, there is a surge in demand for fintech services.
- Ongoing evolution in blockchain, cryptocurrency, artificial intelligence and other technologies is expected to push the fintech industry towards another significant year.
- Industry players like Zip Co, EML Payments, Tyro Payments, Sezzle and Splitit are registering strong growth in merchant and customer base.
- With shifting consumer preferences, fintech services like BNPL are here to stay.
Fintech or financial technology is the use of software to support or enable financial and banking services. The global fintech industry evolved much in 2019 and is still growing with significant developments expected in the future.
With disruptions caused by COVID-19, there has been a surge in demand for fintech services, including contactless payments and online commerce. As per several market experts, the shift in consumer behaviour and preferences are likely to remain even once all restrictions are lifted. Despite economies reopening in a phased manner while gradually easing lockdown and travel restrictions, things are unlikely to be as they were before for a long time, as social distancing is here to stay.
Fintech companies are expected to benefit from the work from home culture, which is likely to continue in some form or the other, as the work can be done remotely, thereby saving companies' cost. Given the fact that these are expense-heavy information-based businesses, this new wave is beneficial to fintech companies. Moreover, the financial and productivity benefits of this trend are becoming apparent.
The global fintech ecosystem is expected to focus more on open data opportunities. There would be more involvement of significant players in fintech, while advancements in technologies such as blockchain, cryptocurrency and AI are most likely to shape another big year for the fintech industry.
In this backdrop, let us discuss few ASX-listed fintech players.
Zip Co Limited (ASX: Z1P)
Zip Co Limited (ASX: Z1P) is a prominent company in the fintech industry, offering digital payment and point-of-sale credit services to various industries such as automotive, health, retail and travel across Australia, New Zealand and the UK. The Company, which also has associates in the US and South Africa, has three products under its umbrella- Zip Money, Zip Pay, and Pocketbook.
Zip Co has announced to have entered an agreement for the acquisition of remaining shares in US-based BNPL player QuadPay Inc., thereby getting access to the world's largest retail market (USD 5+ trillion and >15x size of Australia).
For Quadpay, the takeover means approximately USD 269 million or AUD 403 million in business value. Its stockholders can get approximately 119 million fully paid ordinary shares of Zip, a 23.3 per cent of the allotted share capital of Zip.
With operations in five countries - AU, NZ, SA, UK and the US, the combined group will have annualised revenue of AUD 250 million with a total of 3.5 million customers and more than 26k merchants.
Zip has also reached a deal with an affiliate of Heights Capital Management, CVI Investments, Inc. for raising a maximum capital of AUD 200 million, via exercising warrants and issuing convertible notes.
Z1P closed the day’s trade at AUD 5.64 on 5 June 2020, down by 5.64 per cent from its previous close, with a market cap of AUD 2.31 billion.
EML Payments Limited (ASX: EML)
EML Payments Limited (ASX: EML) offers more transparency, control and flexibility over your payment processes, providing a more efficient and secure payment system for both B2B and B2C businesses. As per the Company, takeover of Prepaid Financial Services (PFS), multiple awards winning European company that provides banking-as-a-service technology and white label payments will help EML Payments to become one of the biggest global prepaid fintech service providers.
EML's report highlights for nine months to 31 March 2020:
- Gross Debit Volume (GDV) of AUD 9.83 billion, up by 55 per cent over the previous year corresponding period (PCP).
- Gross Profit margin of 75.9 per cent as compared to 73.7 per cent in the PCP
- Revenue of AUD 87.1 million, up by 20 per cent over PCP
- EBITDA of AUD 27.0 million, up by 24 per cent over PCP with a further AUD 2.2 million of breakage on December 2019 activations recognised in April 2020.
- Operating cash flow of AUD 27.3 million, an increase of AUD 18.2 million over 1HFY20, representing an EBITDA conversion rate of 101 per cent
- At the end of April 2020, EML held more than AUD 125 million in cash.
At the time of market closure, EML stock was up by 0.76 per cent at AUD 3.99 on 5 June 2020, with a market cap of AUD 1.3 billion.
Tyro Payments Limited (ASX:TYR)
Tyro Payments Limited (ASX:TYR) is a tech-based company, offering Aussies with fintech payment solutions. It provides flexible, reliable and straightforward payment solutions. In 2005, the Company received an Australian specialist credit card institution licence, which was replaced in 2015 by the award of an Australian banking licence.
Over 32,000 Australian merchants partnered with the Company in H1 FY20, when its revenue stood at AUD 117.3 million.
As part of its efforts towards providing transparency to the impact of COVID-19 on the business, TYR has been releasing transaction value updates on a weekly basis.
Transaction value data up to and including 29 May 2020 is given in the table below:
TYR settled at AUD 4.020 on 5 June 2020, down 1.95% from its previous close, with a market cap of AUD 2 billion.
Sezzle Inc. (ASX: SZL)
Sezzle Inc. (ASX: SZL) is a fintech company offering buy now pay later solution, with a mission to financially empower the next generation. It has 1.3 million active consumers and 14.9k active merchants.
According to the Company’s stockholder meeting presentation released to the market recently, SZL is expanding and uptiering merchant relationships in the United States and Canada. Moreover, it is building momentum in all key verticals, such as health & fitness, home & electronics, beauty & cosmetics, leisure and hobbies, and apparel & accessories.
The Company maintains a strong balance sheet and at 31 March 2020, SZL had USD 36.6 million of cash and USD 100.0 million funding facility, which is due to mature in May 2022 with only USD 25.7 million drawn. The April 2020 trends show UMS of AUD 57.9 million with 114.4k active customers and addition of over 1,100 active merchants.
On 5 June 2020, SZL settled the day’s trade at AUD 2.950, moving upward by 1.03%, with a market cap of AUD 247.90 million.
Splitit Payments Ltd (ASX: SPT)
Splitit Payments Ltd (ASX: SPT) enables retailers to provide their customers with a secure method to pay in monthly instalments for their purchases.
SPT reported record monthly Merchant Sales Volume (MSV) of USD 25.8 million in May 2020 (USD 310 million annualised), reflecting 321 per cent growth compared to May 2019, and up 39 per cent in April 2020. Total unique shoppers surpassed 290,000 in May, up 18% from the end of Q1 FY20, while total merchant base grew by 12% to 964 from the end of Q1 FY20. AOV (Average Order Value) in May 2020 grew to USD 939 from USD 737 in Q1 FY20.
The Company joined hands with global eCommerce retailers like Canyon Bicycles, Nectar Sleep, and Purple.
Strong performance of the Company is the result of addition of large merchants in 2020 and growing adoption of Splitit’s solution by consumers for better managing their cash flow. Moreover, its growth is being driven by increasing shift to eCommerce.
With a market cap of AUD 290.7 million, SPT traded at AUD 0.800 on 5 June 2020, down by 3.03 per cent at the time of market closure.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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