With today’s all-clear, IOUPay will now seek to complete the I.Destinasi investment as it sets eyes on serving BNPL to Malaysia’s civil servants.

Fintech provider, IOUpay (ASX:IOU), has confirmed that the one remaining condition relating to its acquisition of I-Destinasi has now been met, paving the way for the transaction to go through.

Settlement of the first tranche of the investment, which represents 50% of the acquisition value, can now be effected following the payment by IOU of RM63 million (~A$20.7 million).

Last September, IOU announced it was acquiring 42% of Malaysian company I.Destinasi Sdn Bhd (IDSB), in a deal worth 126 million ringgit (or around A$41.3m).

IDSB is a specialised finance company focusing on providing instalment-based consumer credit services to civil servants for and on behalf of Malaysian banks.

Following completion of the first tranche (which represents a 21% stake in IDSB), a second tranche payment for the remaining balance of the investment is due within six months, with IOUpay having the option to bring that forward.

IOU says it will be funding the first tranche from existing cash, and will assess the funding mechanism for the second tranche closer to the due date.

The company says it hasn’t ruled out a capital raise through the issuance of new shares to fund the second tranche payment.  It may use cash, new equity capital or a combination of both, and will make a determination over coming months.

 

Rationale for the IDSB acquisition

Under agreements with its Malaysian bank partners, IDSB acts as a specialist contracted service provider for the banks.

The company provides banks with credit processing, account set up and ongoing account management services which generate upfront transaction fees and recurring account servicing revenues.

This business complements IOUPay’s own offering, and opens the door to collaboration and cross-selling opportunities between the two companies.

There are also synergies that could be created through the investment relationship to generate further value.

Both IOUpay and IDSB have a well-established history in servicing Malaysia’s largest banks, which means they could now leverage on each other’s expertise and relationships to provide transaction services to bank customers.

The partnership also presents a strategic opportunity for IOUpay to secure IDSB bank customers for its own BNPL service offering, which could add significant new revenue streams for the company.

In 2013, IDSB was granted an Accountant General Salary Deduction Code (AG code), allowing it to deduct salaries of Malaysian civil servants directly at the source, prior to payment to the employee.

This AG code is only one of two licences given out by the Malaysian government (with the other being held by the co-op financial entity, ANGKASA).

Both IOUPay and IDSB are now looking at ways to collaborate on how to maximise the AG code facility for the more than 50,000 civil servants’ accounts that IDSB currently serves.

IOUPay is a rapidly growing company that has just been awarded the “Fastest Growing Buy Now Pay Later Platform – Malaysia 2021” by the UK based Global Business Outlook magazine.

In the last quarter, more than $6.57m of total BNPL volume was transacted by the company, delivering $492k in net transaction revenues.

And with its target market of Malaysia now opening up from the COVID-19 lockdowns, IOU expects merchant onboarding and customer acquisition to further speed up over the next quarter.

This article was developed in collaboration with IOUpay, 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.

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