9Spokes puts ‘foundations in place’ for profitability in the wake of landmark Visa announcement

Special Report: CEO Adrian Grant says the Visa deal is one of a number of tailwinds for growth.

B2B fintech company 9Spokes (ASX:9SP) has had a busy few months as it continues laying the groundwork for a scale-up of its data management solution.

Recent highlights on the deal-making front include a five-year partnership with global payments giant Visa, which saw 9SP shares jump more than 40 per cent when it was announced on July 21.

9Spokes (ASX:9SP) share price chart

And speaking with Stockhead, CEO Adrian Grant said the company’s growth plans were also leveraged to other key industry developments, including the new Open Banking reforms in Australia.

It means FY21 is shaping up as an exciting year for the business as the management team looks to convert those opportunities into positive topline revenue growth.

Visa partnership is ‘genuine’

The partnership includes an exclusivity clause, which in broad terms means that 9Spokes supplies the services outlined in the agreement to only one payment services provider globally – Visa.

It’s not hard to see why investors approved of the announcement in July. But Grant also provided some useful context for the strategic rationale underpinning the agreement.

“One of the key aspects of the Visa agreement is that the negotiation period took almost 12 months,” Grant said. “And during that time, they did due diligence on everything from the efficacy of the product through to security policies and operational procedures.

“You don’t allocate those kinds of resources if you’re not genuinely interested in building something. That gives me a lot of comfort around their intent – knowing that the effort they’ve gone to is sincere and that they’re serious about this market.”

Grant said the interest from larger organisations such as Visa had also been aided by policy makers’ increased focus on supporting small business – 9SP’s primary target market.

“The consensus is that SMEs are a major part of the economy, and anything that governments or corporations can do to support that sector will be highly prized,” he said.

“So there’s really strong alignment in that regard. And from our perspective, we’ve done the hard work to develop the contract and get the agreement in place with go-to-market capability. We used the negotiation period to get ‘match fit’ if you like so that now the process is there for the Visa sales team to start rolling out our solution.”

Access to working capital

Grant also said 9SP is well-positioned to benefit from broader industry changes.

And as a B2B platform operating a data-driven dashboard solution, he’s particularly excited about the tailwinds from recently enacted Open Banking reforms.

“I think Open Banking in the next 5+ years will result in some really innovative financial solutions that we can’t even conceive of right now,” he said.

“Our role as a company is to make sure we have the right connections to present that data in a structured way so that SME clients have control of it.”

Doing so could provide a critical value-add for small businesses – organising that data to present a clear picture of their company operations brings greater transparency to the relationship between them and their working capital providers, facilitating holistic conversations.

“There’s clear anecdotal evidence that businesses’ success or failure is often based on their ability to access working capital in the form of short-term loans,” he said.

“There’s been a lot of cases where very good businesses with good ideas have failed because they can’t access funding. And that’s partly because the lending party can’t get access to real-time data to give them a sense of how a business is performing.

“Our goal is to provide a solution that allows clients to give that information to the parties they want it to go to, to help them get access to working capital.”

Break-even in focus

With new deals in place, Grant said the next key metric for 9Spokes that investors are focused on is the acquisition of new customers as 9Spokes strides towards achieving break-even.

And the best way of doing that is by focusing on topline revenue growth, where deals such as the Visa agreement are expected to have a material impact.

“Our distribution partnerships — whether it’s with Microsoft or Visa — are all designed to grow topline revenue as fast as we can. And that’s how we see a clear pathway through to profitability,” Grant said.

“I believe we have the foundations in place for that now — going through cycles of winning new business and keeping tight control of expenditure to get to break-even. So that’s certainly what the business and the board are very focused on.”

This article was developed in collaboration with 9Spokes, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.