Digital financial services company, Raiz Invest Limited (ASX: RZI) reported a substantial positive change of 2.6% in its Funds Under Management (FUM) to $331.18 million as at 31 May 2019. This compares to $322.64 million FUM as at the end of April 2019.
Incorporated in 2016, Raiz Invest Limited is positioned as Australia’s largest, mobile-first financial services platform, designed to boost investment and savings via the Raiz app or its website. The app aids as a micro-investing product that empowers the users to invest either small or large sums of money.
Raiz Invest CEO George Lucas stated that Raiz Invest enjoyed further growth in May and believes the business continues to develop in line with its strategic vision.
The monthly update also pictured the 1.1% growth in active customers of the company, resulting to 192,765 as at 31 May 2019 in comparison to 190,685 as at 31 April 2019. This favourable momentum includes 2.4% growth in Customer Sign Ups and 2.5% growth in Investment Accounts during May.
Mr Lucas added that the company contacted the inactive customers using Raiz’s saving features and were asked to consider the same if it was appropriate for their financial situation. These efforts were in line with the Raiz’s approach to servicing its customers.
The player has brought remarkable innovation in the financial services sector on the backdrop of the digital-driven landscape. Subsequently, the company has achieved overwhelming growth since its inception, encompassing over a million downloads, 689,000 signups, with more than 192,000 active monthly customers and over 331.18 million Funds Under Management as at 31 May 2019.
Recently, the company took a step forward in its push into Southeast Asia as it inked a 70:30 joint venture agreement with Jewel Digital Ventures Sdn Bhd (Jewel), a subsidiary of a leading Malaysian investment institution, Permodalan Nasional Berhad(PNB).
The move outlines the company’s strategy to lay its roots in some of the fastest growing markets of the world where there is substantial demand for fintech products and services. Once the conditions precedent to the agreement are met, Raiz (70%) would provide the technology while Jewel (30%) will offer the required capital for the formation of Raiz Malaysia, which will reportedly be a fully consolidated entity into Raiz Invest Limited.
Jewel is the investment vehicle set up by one of the largest fund management companies in Malaysia, Permodalan Nasional Berhad (PNB), to spearhead its digital business strategy. PNB has assets under management of ~A$103.9 billion across 13.8M accounts.
Raiz Chairman Tony Fay stated that Permodalan Nasional Berhad (PNB) and its strategic holdings have a deep-rooted presence in Southeast Asia which provides a cutting edge to the Raiz’s efforts of entering these markets.
However, granting of a licence in Malaysia and other regulatory approvals remain the key driving factors for the rollout of the platform. The parties are currently in talks with regulator and on the basis of the positive tone of the discussion, Raiz expects the platform to go live by the end of the calendar year 2019 or early in the New Year.
This progress follows the launch of Indonesian business in March 2019 after the company secured approval for a licence to distribute mutual funds in Indonesia by the end of last year. Raiz is expected to launch its App in Indonesia in the September 2019 quarter.
The roadmap of the company’s work plan includes the submission of formal application to the regulator for the license as its next step. It is focusing to capture an excellent opportunity of business in a country like Malaysia, which has a population of 33 million, with the vision to embark expansion into Southeast Asia.
Whether you invest in Raiz or through Raiz, it is interesting to learn about their business model:
Raiz Invest works on the idea that investing even the spare change from everyday purchases could lead to large savings over time.
The company offers three simple ways in which a person can make a contribution to its Raiz Investment Account over a software application or the company site. It includes investing through active roundups, by making a lump sum deposit or by setting automatic recurring deposits. However, the company has set a minimum amount for investment, which stands at $5.00.
Investment Options Offered by Raiz (Source: Company Website)
Raiz then invests that money into a mix of ASX-listed Exchange Traded Fund (ETF) in accordance with one of the six unique portfolios that investor selects, often in consultation with Raiz financial advisors. These six portfolios are designed and constructed by Raiz in order to meet the varied investment requirements of people, subject to considerable degree of risk involved with the performance of ETFs. The portfolios are constructed by the investment committee based on the modern portfolio theory put forth by the Nobel Prize winning economist and founder of the theory, Dr. Harry Markowitz. Icing on the cake, Dr. Harry Markowitz advices the Investment committee.
The investors have also been given the flexibility to withdraw all or some part of their investment from Raiz Investment Account at any time free of cost.
Revenue of the company is mainly driven by the fees that it charges for the specialised financial services provided to its customers and advertising revenue via its investing platform. On the basis of this solid business model, Raiz witnessed a 6.4% growth in its Superannuation FUM and 2.1% growth in Retail FUM during May 2019. Raiz further continues to focus on innovation and improving the user experience.
However, it is important to consider that due to its heavy reliance on information technology system, the business is exposed to inherent IT risks that may come up in the form of software bugs, computer viruses and malware, loss of data, unauthorised access and cyber hacking leading to data theft. To overcome this problem, the company stores everything on a remote server with bank-level security and data encryption, thereby ensuring serious security to investors’ money.
Security System offered by Raiz (Source: Company Website)
The company intends to provide more updates on product developments and enhancements to the App in the coming months.
Stock Performance: RZI is trading at AUD 0.475 (As at 1:58 PM AEST, 12 June 2019). The stock has posted a positive YTD return of 2.27%.