Baltic banking: Isignthis is making deals in the fintech hub of... Lithuania

Digital bank Isignthis (ASX: ISX) has expanded into eastern Europe with the purchase of a Lithuanian payments platform.

The company told the ASX this morning that it’s bought 100% of the issued shares in UAB Baltic Banking Services (BBS).

Isignthis has operations in Europe and Australia, and describes itself as a payments provider and identity technology company.

Last September, the company issued a profit warning after its European clearing house was placed into administration.

Since then, shares in Isignthis have climbed from around 16 cents to 20 cents a share.

The deal

To buy BBS, Isignthis will shell out 150,000 euros up front (around $240,000); 75,000 in cash, and 75,000 in issued shares based on the volume weighted average price in February.

Isignthis will also pay an earn-out fee based on a multiple of BBS’ 2019 earnings, less the initial payment. The total earn-out fee will be capped at 1.5 million euros.

ISX has some extra money in the bank after a $10 million capital raising in the December quarter, when $936,000 in customer receipts were offset by $3.5 million in operating cash outflows.

It’s all happening in Europe

Isignthis has a dual-listing structure in both Australia and on the Frankfurt Stock Exchange.

The company’s European operations are slightly more advanced, where it’s authorised under European Economic Area rules.

That means it can accept deposits and operate transactional banking services across the euro area.

Via its BBS acquisition, Isignthis says it will gain improved capabilities to facilitate transactions on the Single Euro Payment Area (SEPA) network — an initiative to help simplify bank transfers denominated in euros.

Not so much in Australia (yet)

Currently, Isignthis is one of many neobanks looking to gain a foothold in the Australian market.

Also like many new players hoping to get market share in digital banking, it’s yet to get the key regulatory authorisation here — but it’s optimistic about the year ahead.

The company has applied for licensing as an authorised deposit-taking institution (ADI) with bank regulaor APRA, and said it anticipates approval as early as the June quarter.

It’s also lodged an application with ASIC to obtain an Australian Financial Services License (AFSL), and hopes to set up an exchange settlement account at the RBA by the middle of the year.