Australian financial sector has seen major developments in the last decade with a number of new companies as well as existing companies making their way into the Fintech sector. The Fintech sector comprises of the companies that provide services related to banking and finance with the added advantage of technological innovation.
To name some, companies like Afterpay Touch Group Limited, EML Payments Limited and Zip Co Limited have introduced unique and technology-driven solutions and services for meeting various needs of the customers as well as business. These companies have significantly expanded over a considerable period in terms of their business operations, acquisitions, equity raising or customer base across multiple countries.
Afterpay Touch Group Limited (ASX: APT)
The global technology-driven payments company, Afterpay Touch Group Limited was formed by coming together of the Afterpay and Pay Now (Touch) services and businesses driving retail innovation by allowing leading retailers to offer a ‘buy now, receive now, pay later’ service.
Enlarging the uniqueness of the Buy Now Pay Later (BNPL) service by Afterpay as an added service that its customers need not enter into a credit agreement or pay any interest or upfront fees for availing its services.
Numerically stating; global active customers for Afterpay Touch Group were recorded at 6.1 million (137% increase on pcp) at the end of October, which means Afterpay onboarded over 15,000 new customers per day in October on an average basis. The increase in the number of Active Merchants was 96% at 31 October 2019 to reach 39,450 on pcp.
Figure 1 Source: ASX
On 2 December 2019, APT stock is trading at $30.940, down by 2.089% (AEST 01:33 pm), with a market capitalisation of $7.99 billion. In the last six months APT delivered a return 26.15%.
EML Payments Limited (ASX: EML)
Information Technology-driven company, EML Payments Limited strives to empower its customers and businesses by providing them more control, transparency and flexibility over their payment processes and by increasing its efficiency in a secure manner from start to finish while also helping them to improve customer service and intensify brand loyalty.
EML’s business spans to manage more than 1,300 programs across 21 countries in North America, Europe and Australia by providing mobile, virtual and physical card solutions to some of the largest corporate brands globally and processing billions of dollars in payments each year.
In another instance; EML Payments announced on 11 November 2019 that it has entered into a binding agreement for the acquisition of Prepaid Financial Services (Ireland) Limited (a multi-award-winning European provider of white-label payments and banking-as-a-service technology) for an upfront enterprise value of $423 million-plus an earn-out component of up to $103 million.
EML stock is trading at $4.655 (AEST: 01:42 pm) on 2 December 2019, down by 1.586%, with a market capitalisation of $1.42 billion. In the last six months EML stock has delivered 86.32% return.
Zip Co Limited (ASX: Z1P)
Being a leading player in the digital retail finance and payments industry, Zip Co Limited offers multiple finance related services to the retail, education, health and travel industries through its Zip Pay, Zip Money and Pocketbook brands.
Zip has a focused approach to deliver transparent, responsible and fairly priced consumer products, while also leveraging big data in its proprietary fraud and credit decisioning technology to deliver real-time consumer responses through its entirely digital platform.
Figure 2 KEY OPERATIONAL METRICS (Source: Company's Report)
Talking about further expansions; Zip Co Limited proposed a $60 million capital raising comprising of $50 million non-underwritten Placement to professional and sophisticated investors and the residual $10 million in a Share Purchase Plan to all existing eligible shareholders. Z1P is prospecting to
- increase investment in product and technology,
- enlarge the company product range- including the launch of Zip Biz,
- fund Zip’s global expansion into the UK market, and
- strengthen Zip’s balance sheet
through the funds raised under the Placement and SPP.
Z1P stock is trading at $3.780 (AEST 01:51 pm) on 2 December 2019 down by 3.571%, with a market capitalisation of $ 1.46 billion. In the last six months, Z1P stock has delivered 35.71% return.
Let us find out what defines growth and value for these companies?
Afterpay’s CEO and Managing Director believes:
“To be successful we must do three things: we must continue to GROW; we must continue to PERFORM, and we must continue to INNOVATE”;
“And we need to continue doing all of this with our mindset of aspiring to do the right thing”;
“If we achieve this, I believe we will deliver value to our people, our customers, our merchant partners, our communities and, of course, our shareholders”;
“I am confident that we have the right business model, the right people and the right culture to succeed in our mission of becoming ‘the world’s most-loved way to pay”.
Zip hopes to ensure that everyone’s focus is firmly fixed on the future, and the priority in FY20 is accelerating the growth strategy in the following focus areas:
- FINANCIAL TARGETS: More people, more places, more often. Targeting 2.5 million customers, delivering $2.2 billion in annualised transaction volumes;
- LOCAL EXPANSION: Launch Zip Biz an instalment product for SMEs, grow Spotcap, secure more strategic deals with partners and enter everyday spend categories;
- GLOBAL EXPANSION: Integrate PartPay, grow market share in New Zealand and fast track our launch in the UK;
- TECHNOLOGY AND MARKETING: Accelerate our investment in core IP, maximise the instore opportunity, increase investment in brand awareness, customer acquisition and partner marketing;
- POCKETBOOK: Expand capability to make it the number one choice for personal finance management, with a view to monetise;
Moving further; EML believes that its technology empowers the quick rollout of fresh products and expansion into new markets.
Figure 3 Source: Company's Report
Moreover, with strict dedication towards fostering a business that creates value for our customers, employees, stakeholders and communities will be pursuing a multi-faceted growth strategy by:
- Accelerating existing product suites;
- Funding necessary research and development for product ranges;
- Negotiating strategic alliances with key clients and industry participants;
- Pursuing acquisitions of complementary businesses to increase our global footprint;
Taking advantage of the already expanding market that is rapidly growing with changing consumer and behavioural preferences, EML expects to innovate to knock out the boring way of payments continuously and know that simplicity is eternally genius and ultimately drive its success and shareholder value.
With high returns in less time and favourable outlook for future growth, Fintech stocks have become a must have for the investors these days. However, there are increasing compliances in the fintech sector from the regulatory authorities that these fintech companies need to adhere to.
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