New Novatti CEO Mark Healy
Novatti could clean up, big time - or they could blow it all away.
APRA is currently preparing for the latter in the event that the board of Novatti find themselves cornered, short on capital with goodwill declining, and probably fast. The next step is to voluntarily return the IBA banking licence and speedily pay out all depositors.
IBA is International Bank of Australia, which is 91 per cent owned and deeply entwined with everything else Novatti.
This has happened before and the three precedents may have forever sullied the neobank sector in Australia.
Xinja Bank predictably crashed out first, followed in short order by 86 400 after its owner, Cuscal, engineered a highly profitable sale to NAB.
It was the exit of Volt Bank, a year ago, that leaves a cautionary tale for Novatti. And in1bank and Alex Bank and Avenue Bank.
Volt rounded up a shade more than A$200 million in capital and more than a year after their shock exit they are yet to liquidate the business and be in a position to return all capital – or what’s left of it – to the owners.
So the prudent attitude at APRA is to expect most if not all neobanks to give up the ghost some time.
Novatti thus needs a few points of difference and a motherload of drive and determination if they are to succeed.
It is beginning to sound like they have many of these attributes and yesterday the newly-minted CEO Mark Healy appeared at a stockbroker forum and webcast it to the world.
Healy and Novatti are now committed; they talked a big game.
Healy’s been in the job one week only and while his elevation was a surprise to most, it is evident that a well-planned CEO rotation is bearing fruit for the company.
Healy selected his talking points well and above all had a story to tell, beginning with his not so humble origins as a toady for a large Canadian bank, supplemented by a technocrat’s journey through the senior echelons of specialised payments business. Global Payments Inc and Optimal Payments UK were two of these.
Landing back in Australia in 2012 to work on (and sell) Ezidebit, Healy a year or so ago found himself drawn to the Novatti vision, the bank’s people and its story.
Healy promised margin growth would be growing, whirring, in 2024.
Top line growth will be in excess of the 20 per cent that it’s been in 2022/2023.
The profit and loss … well, there will be “a deeper focus on full P&L performance rather than revenue growth,” Healy said.
Cash flow will need to be positive by December, he said.
“This is a very exciting business to take over as new CEO,” Healy concluded his presentation.
“There are accelerating tailwind for our points of difference. We can help clients build payments into their own business.”
Those points of difference include developing payments advantages by aiding clients understanding payments as an input into their activities, and lowering payments costs for these businesses, he implied.
Novatti’s target market is practically everybody.
Healy singled out SMEs first.
Next are “large independent nationwide businesses, often with multiple online points of presence,” Healy said.
Then there’s “software platforms and marketplaces that can bring hundreds of businesses”.
Fintechs are a key target.
Top tier names may even be on the Novatti wish list.
“Large clients with special needs ... they will derive more value from the entire Novatti ecosystem,” Healy said.
Novatti hasn’t been generating too much value – by the ASX measure – since it began to outline its program of work for International Bank of Australia late last year.
It is generating value by the key metrics it promoted yesterday – attractive numbers on gross volumes, revenue and margins.
Gross volume is pushing A$3.5 billion, revenue in FY2023 will be reported as $39 million and top line growth will exceed 20 per cent (which is down from much higher rates in recent years).
Novatti is betting big that it knows best on a wide and wise range of interconnected banking and payments topics, and tasks.
The company’s ‘know how’ on payments matches its thorough analysis of which niches are prospective in many target market verticals.
“We’re here to help businesses pay and be paid,” Healy reminded investors.
“Novatti is built for digital, both the making of payments and the acceptance of payments.”
Australia and New Zealand is the focus of the business and recently the supplier of radiant revenue growth.
This was up 113 per cent year on year. But total ANZ payments revenue at $12 million a year is small beer.
The division termed Payments International is, or has been, the revenue core of Novatti over the last two years. It looks like this will diminish, or that might change if International Bank of Australia takes off.
Healy was able to inform investors that home grown kit was working to plan.
“The last 18 months we’ve invested into our own acquiring platform,” he said.
“We’ve started to migrate customers to the Novatti solution; it’s totally cloud-based.
“We believe we can continue to outgrow the market, tailoring solutions to particular vertical markets to drive penetration and market share over time.
“We see FY23 as a breakout year for acquiring.
“We expect margin growth to continue to grow in FY24,” Healy said.
Finally, Healy did not really mention his banking arm IBA at all – because at Novatti it’s all about payments.