The Fintech Era: Prospa and Identitii Under Spotlight Against Players Like Afterpay

  • Nov 19, 2019 AEDT
  • Team Kalkine
The Fintech Era: Prospa and Identitii Under Spotlight Against Players Like Afterpay

Technology has made a fleet-footed entry into almost every aspect of business and human life. Moreover, technology has furthered the penetration of financial services in the lives of consumers as well as transforming and streamlining the business operations and business models.

According to the Australian Government:

Technological Revolution in Financial Sector

Following are some prominent outcomes from the consolidation of technology in the financial sector:

  • Boost in payments like digital wallets through innovations in devices and connectivity for consumers;
  • Marketplace lenders and crowdfunding platforms are turning out to be an alternate source of lending and a valuable source of funding for many seed-stage businesses;
  • Emerging new streams of granular, real-time data, and the innovators using the data to support financial decision-making;
  • Widening access to capital raising activities and providing funding to a greater number of companies and projects through alternative funding platforms;
  • Automation of a full suite of wealth management services (asset allocation, investment advice) through robo-advisers, all offered to customers at an affordable and more personalised level;
  • FinTech steered disaggregation carries the potential to transform the insurance industry, and greater personalisation of policies would improve insurance products and policies;

In today’s competitive world, fintech companies continue to flourish, and the profitability of the Australian financial services industry is gaining the attention of global players.

Moreover, the Australian Government believes that:

Virtual channels are expected to evolve and provide wider functionality to target and meet the needs of each segment or community, moving away from a one-size-fits-all mass-market approach.

Several fintech companies have gained investors’ attention due to their unique offerings and business through the alluring combination of technology in the financial sector.

Companies like Afterpay, Prospa and Identitii are among the leading players in the Australian fintech market, which are constantly bringing innovative financial products and services.

Afterpay Touch Group Limited (ASX: APT), an established player in the Australian fintech ecosystem, made headlines in recent times after it was under the AUSTRAC scrutiny regarding its Anti-Money Laundering and Counter-Terrorism Financing Act matters.

(Read More at Why Share Price of Afterpay Touch Group is on Investors’ Watchlist)

However, during the 4-months period (ended 31 October 2019), Afterpay witnessed continuous growth and performance across all geographies and channels with global underlying sales of $2.7 billion, with an increase of 137% on pcp in globally active customers reaching 6.1 million.

Some of the recent onboardings as well as on going onboardings with major brands includes eBay, David Jones, and Myer in Australia, Ulta and Finish Line in the US, Marks & Spencer in the UK.

Afterpay’s business has made a striking performance in New Zealand, the US and the UK, further strengthening APT’s hold in the market. APT looks forward to entering into several partnerships with major brands and targets continued global platform expansion opportunities.

To support the vision of international expansion, APT entered into a subscription agreement with leading US based technology investor, Coatue Management for a $200 million private placement.

The APT stock closed the day’s trade at a price of $31.340 as on 19 November 2019 and has a market capitalisation of $8.15 billion. In the last month, APT has provided 8.77% return as on 18 November 2019.

Fuelled by the acceptance of technology among customers, convenience, luring innovations and many more characteristics, fintech companies are ready to make their mark in the industry.

Let us look at two other emerging players in the Australian fintech market.

Prospa Group Limited (ASX: PGL)

Australia’s number one online lender to small businesses, Prospa Group Limited as a fintech company has witnessed growth from starting its offerings with few customers in 2012, to catering to more than 20,000 small businesses throughout Australia and New Zealand.

Headquartered in Sydney, Australia, PGL offers amortising term loans, B2B payments and line of credit facilities to small businesses through its cloud-based, data-rich and API-enabled technologies.

24,000 Since Inception

Prospa’s recent trading performance was fuelled by the achievement of customer numbers to 24,000 since inception. Moreover, at 31 October 2019, PGL’s originations stood at $181.2 million for the first four months of the financial year 2020, up 40% on the pcp.

Originations Expected to Increase by 32%

PGL’s guidance for the calendar year (CY19) and financial year (FY20) are summed up below:

  • Expected CY19 originations to be above prospectus forecast at $574.5 million, up 32% on pcp;
  • Expected Revenue to be at $143.8 million, up 16% on pcp;
  • Reductions in loan impairment expense and funding costs; CY19 net interest margin after losses expected to reduce by $2.3 million on Prospectus levels;
  • Expected EBITDA at $4 million for CY19;

There have been continuous improving trends in Prospa’s early loss indicators as a result of the premiumisation and also the Credit Decision Engine’s ability to better predict customer credit quality across the business’s entire portfolio.

Considering the business continues growth and evolution, PGL’s co-founder and joint CEO, Greg Moshal, said:

Since 2012, PGL has originated $1.35 billion in small business loans, while witnessing continuous growth in lending to all credit grades, increased appetite for its solutions from premium credit quality customers paying lower interest rates over longer terms.

Strong growth in originations across PGL was fuelled by the introduction of its new rate card for its flagship small business loan product, continued growth in the New Zealand market and support from new products.

At market close on 19 November 2019, the PGL stock settled at a price of $ 2.700 with a market capitalisation of $451.78 million.

Identitii Limited (ASX: ID8)

Founded in 2014, Identitii Limited focuses on Intelligent Information Exchange? applying blockchain and tokenisation to establish a connection between banks and businesses with the required data for processing, reconciling and reporting on payments. This further decreases the last mile hold-ups.

Headquartered in Sydney, Australia, Identitii was founded with a view to tackling the challenge of money laundering and educating customers about their real-time transactions and making a contribution to a safer, faster payment system while building innovative technology.

As a part of its strategy to grow and thrive, Identitii recently partnered with Symphony to add auditable information sharing to Symphony’s collaboration platform. Following are the expected gains from the partnership:

  • Integration of Overlay+ (Identitii’s tokenisation based Open Banking platform) with Symphony’s leading global financial markets collaboration platform tool;
  • Enabling Identitii to expand its customer reach across Symphony’s existing 400+ clients and its 450,000 users and providing them with an automated and secure digital document storage and collection solution;
  • Opportunity to jointly offer an enhanced digital end-to-end document and data management user experience driven by demand from financial institutions, that doesn’t rely on costly manual inputs.

Identitii’s CEO, Nick Armstrong, believes the partnership to last for a longer term with a view to removing manual processes for customers, establishing enhanced user experience and introducing information as needed, in real-time. He further added:

“Users will be able to conveniently request documents and information via the Symphony chatbot and the information will be retrieved via our tokenisation technology. We see enormous potential for this combined functionality.”

ID8 closed the day’s trade on 19 November 2019 at a price of $0.260 with a market capitalisation of $13.9 million.

Bottomline

APT, PGL and ID8 look promising by seeking to partner with new businesses for expansion and focusing on achieving significant operational numbers. Moreover, the companies are focused on maintaining uniqueness in their offerings and capitalising on the same to capture more and more customers. With such robust performances and expansion-aimed anticipated plans, these fintech players are on the watch list.


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