Cleaning Out, page-3

Hardly a dog Daz , just need more time
FROM LIVEWIREMARKETS :29/08/2018
Four Pillars, beware: the low-key payments services house is applying for a banking licence under a new restricted ‘P plate’ category aimed at supporting the growth of the fintech sector.If Novatti Group (NOV) 25c, gets the green light it will join the unlisted Volt, which made history in May by being awarded the first such restricted licence. A handful of other fintechs have also applied.The company hopes to lodge its paperwork with the regulator, the Australian Prudential Regulation Authority, in the current quarter.Inevitably, the so-called neo banks (most of which are not banks) target Millennials, the swelling tech savvy but slightly irritating cohort that is comfortable with app banking and think a cheque book is something out of a Prague library.Novatti is tackling a different niche market: new migrants and overseas students, especially from Asia. Given Novatti’s core business covers remittances and pre-paid card services to that market, the strategy plays to an existing audience.According to CEO Peter Cook, this business goes elsewhere after the customers have graduated from pre-paid cards to transaction accounts and loans. “Most are actually well educated and in $80,000-a-year jobs and are very aspirational,” he says. “This is a really good client base if you can get it right.”Even though Australia’s migrant intake has been curtailed, we still accept around 220,000 migrants a year, with an additional 800,000 foreign students (200,000 from China).An APRA restricted licence limits cumulative deposits to $2m and total assets cannot exceed $100m. But as with those P platers, the idea is that holders graduate to a full licence (requiring at least $50m in regulatory capital).Despite the slimmed-down requirements, a restricted licence still involves a sizeable financial commitment (and existing infrastructure) beyond the limit of most fintechs.Cook estimates the cost for Novatti around $7m, including $3m for tier-one capital. That’s no small beer for an entity that turned over $9.1m in the June quarter and held $4.5m of cash.“Still, we’re a good candidate for a bank because we have an AFSL (Australian Financial Services Licence) and a remittance network,” he says.“We have our own compliance team and do a lot of financial processing.”Cook admits that if he had announced the plan two years ago he would have been “marched off to a special hospital for checking”.To smooth the path, the company hired two former bankers: Guy Cavallo, who headed payments at Australia Post and Geoff Bloom, a former ANZ operations executive.With a current market valuation of $40m, Novatti listed in January 2016 after raising $7m at 20c apiece. “We had a very rugged first year,” Cook said. “A major tech project went a bit feral and it was a big distraction that burnt through a lot of money.”Since then, Novatti has jettisoned some troublesome tech business and acquired more suitable ones in payments and remittances.Novatti stock found favour in mid June this year after the company announced Chinapayment.com, a platform that allows the payment of Australian bills via Alipay with China-based e-wallets. WeChat Pay and China UnionPay are also expected to join the platform.The company’s current product suite includes utility billing platforms, a cash voucher service (Flexepin) and a reloadable Visa card (Vasco Pay). “The beauty of payments is that $1 of revenue 98c flows through to the bottom line,” Cook says.