Novatti Group (ASX:NOV) - payment acquiring licences with Visa and Mastercard, November 2021


by Melissa Darmawan

Novatti Group Limited (ASX:NOV) CEO Peter Cook talks about the company's acquiring business and recent licences with Visa and Mastercard.

Melissa Darmawan: Hello. Melissa Darmawan for the Finance News Network. Joining me from Novatti Group (ASX:NOV) is Chief Executive Officer Peter Cook. Peter, nice to see you in person.

Peter Cook: Melissa, good afternoon, and hello to Fin News Network.

Melissa Darmawan: It's great to have you back at the network.

Melissa Darmawan: There's been a couple of announcements from you recently around payments acquiring. Talk us through that.

Peter Cook: So, payments acquiring is the industry term for, typically, a consumer buying something online at an e-commerce store or in store. And it really talks to the fees that cover the entire payments world between the consumer and settling to that merchant. It can also indicate when one business pays another business, and that might be transactions such as direct debit or funds transfer.

Melissa Darmawan: And what role does Novatti have in this?

Peter Cook: So, right at the moment, Novatti has a significant payments acquiring business. We are seen as an aggregator, and our biggest focus is on e-commerce stores and other business-to-business type payments, which really goes to our mantra of enabling businesses to pay and be paid. The recent announcements, though, go to us gaining merchant acquiring licences from Visa and Mastercard, which enables us to be a deeper participant in the ecosystem. We are essentially a direct participant to the Visa and Mastercard schemes. And, in the longer term, allows us to gain deeper margins and to bring on as clients of ours other fintechs and payment companies where they're acting as an aggregator and we're their underlying acquirers.

Melissa Darmawan: Talk us through the why. Why is Novatti playing in this role?

Peter Cook: We're playing in this space or taking this role because it enables us to actually fulfil our strategy of being able to provide an ecosystem that, going to the mantra of pay and be paid, we can support other fintechs and payment companies, or we can support direct merchants. So, we've got an issuing licence in Australia and New Zealand with Visa. We've now got acquiring licences. We are deeply integrated with Alipay and WeChat Pay and China UnionPay. We do cross-border payments and we've got integrations to multiple global companies there. We're working also with Ripple and other partners. So the acquiring licences are, I'll say, difficult to get, but they go to the quality of your technology and business operations, your balance sheet, your capability in the area. But they really in the long term set us up as being one of actually reasonably few in Australia -- only about, including the big banks and Tyro and Cuscal and others, probably 20 participants. So, we're in somewhat rarefied atmosphere, and we can bring on more business at deeper margins over the long period.

Melissa Darmawan: You've mentioned the licences with Visa and Mastercard. Talk us through the direct impact it's going to have on Novatti.

Peter Cook: So, in the modelling for the business, our budgeting and long-term planning, having the licences has two effects. One is it allows us to bring on significantly more business, and in particular, wholesale industry business over time, so we can address a market of other fintechs and payments companies. And it allows us to get much deeper margins. So, typically, it'll significantly increase the number of basis points we can take out of a transaction. And, I think in terms of future financials, it will allow us to increase our rate of growth over the next couple of years, and it will enable us to bring forward our break even and profit points.

Melissa Darmawan: Final question, Peter. So, how does this tie in with your recent announcement?

Peter Cook: Just over the last few months, you've seen a very strong quarterly announcement from us with regards to growth. So, at a strategic level, we want to build out our ecosystem and we want to drive strong revenue growth at the same time. So, acquiring announcement helps build out the ecosystem. We've recently announced the acquisition of ATX in Malaysia, extends our footprint. Also, for instance, gives us the capability to deploy acquiring licences into Malaysia. We've also seen the launch of a new service in Europe, our Verv banking service. So, really, what we're seeing here with the acquiring licence is continuation of development of the ecosystem, another support rung in building our revenue growth, and, in particular, to bring forward the long-term profit inflection point.

Melissa Darmawan: Peter Cook, always great to speak with you. I look forward to your next update.

Peter Cook: Thank you, Melissa.


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