IOUpay had a solid quarter, with the launch of its flagship BNPL platform myIOU showing early uptake success.

Following the successful launch of myIOU BNPL platform in June, fintech provider IOUpay (ASX:IOU) continues to accelerate its BNPL transaction volumes throughout the September quarter.

More than $6.57m of total BNPL volume was transacted during the quarter, delivering $492k in net transaction revenues.

The last quarter has been a good one all-round for IOU, with a 182% increase in new merchant sign-ups, taking the total number of merchants onboarded to 2,311.

There have now been around 17,000 new consumer downloads of its myIOU app, up a staggering 914% since the end of June.

Numerous key partnerships were secured with big name product sector leaders and a highly strategic acquisition was announced, capping off a very productive September quarter for IOU.

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.


Rapid progress in BNPL platform, myIOU

The uptake of newly launched BNPL platform myIOU during the first full quarter of operation has been strong, despite lockdown conditions keeping households at home and the vast majority of Malaysia’s merchant storefronts closed.

IOU’s business development team was able to sign, onboard and activate record numbers of new merchants during this period.

There are now in excess of 1,000 merchants active on the myIOU platform across 20 industry verticals, with more than 1,500 signed as at September 30 yet to be activated.

The Net Transaction Revenue of $492k generated from a volume of $6.57m reflects a stronger than anticipated margin of 7.5%.

The company has teamed up with the award-winning international singer-songwriter, Yuna, to become the ‘Face of myIOU’.

With over a million followers on social media, Malaysian-born Yuna is one of Southeast Asia’s biggest success stories, and will promote the myIOU brand through her online and offline media platforms.

IOU has so far been able to successfully leverage its digital marketing strategy, targeting key cultural demographic groups throughout Malaysia through social media influencers.


Key merchant relationships

Key merchants were on-boarded to the myIOU ecosystem during the quarter, which include household names such as Senheng, Gintell and Hewlett Packard.

Founded by the iconic Lim brothers in 1989,  Senheng is one of the leading consumer electronics chain stores in Malaysia.

All Senheng stores, including the larger flagship premium senQ stores, went live on the myIOU platform on October 1.

Also during September, IOU signed up Gintell as a merchant. Gintell operates 101 health and wellness outlets across Malaysia, with a product range encompassing fitness equipment, massage chairs and appliances, and beauty products.

A collaboration arrangement with Hewlett Packard was also established in August, which saw 17 of HP’s largest principal dealers in Malaysia signing up as myIOU merchants covering 59 separate HP outlets.


Key partnerships

The agreement with Razer Merchant Services (RMS) announced earlier this year enabled RMS to refer and onboard its network of more than 50,000 merchants to utilise IOU’s BNPL payment services.

Integration testing between RMS and IOUpay systems was expected to be completed by early August, but due to lockdowns in Malaysia, the timetable was extended.

The RMS Quality Control and Implementation team has now completed integration testing, with training of RMS internal and sales staff scheduled for early November.

RMS merchants are expected to go live on the myIOU platform commencing from November.  A pilot group of merchants will initially be activated followed by many more RMS merchants selected by IOU.

The integration with ipay88 is also undergoing a delay due to COVID-19 imposed restrictions, but commercial activities are expected to be finalised in the next quarter after successful system testing.

iPay88 is a leading domestic online payments platform in the Malaysian market, where it provides payment gateway services to a large network of banks and merchants.

The agreement signed will see iPay88 on-board IOUpay’s BNPL solution across its 45,000 online merchants and 20,000 in-store merchants network.


IDSB Investment

In September, IOU proposed to acquire 42% of Malaysian company I.Destinasi Sdn Bhd (IDSB), in a deal worth 126 million ringgit (or around A$41.3m at today’s exchange rate).

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

Under bilateral collaboration agreements with its Malaysian bank partners, IDSB acts as a specialist contracted service provider for the banks providing in-field execution, credit processing, and ongoing account management services that generate upfront transaction fees and recurring account servicing revenues.

With the acquisition agreement, both IOU and IDSB are expected to generate significant latent value through leveraging respective bank relationships to develop opportunities for each other.

In particular, the partnership 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.

Both businesses could also leverage each others’ network of merchants across Malaysia, and cross-pollinate business opportunities by offering customers each other’s finance products.

There is also the prospect of IOU benefiting from potential dividends that IDSB pays.  Given IDSB has a 31 December financial year end, any dividend should be known in the first quarter of 2022.


Looking ahead

IOU is well funded, with $39.5m in cash and call deposits as at the end of the quarter, which already includes future receivables from merchants and the 10% refundable holding deposit for the IDSB transaction.

The company says that looking ahead, it will continue to focus on achieving growth through building its big brand merchant networks on its platform.

With the distribution networks of the aforementioned merchants Senheng, Gintelland Hewlett Packard, as well as the vast merchant networks of Razer Merchant Services (RMS) and iPay88, IOU expects its BNPL business volumes to further strengthen.

The imminent release of myIOU 2.0 will also further streamline merchant and customer experience, which is designed to deliver better operating efficiencies and BNPL activity levels for new and existing customers.

The outlook for its mobile banking division continues to remain strong with transaction levels rising from both new and existing customers.  The latest figures reported show mobile banking transactions per month in excess of 28 million for the September quarter, up nearly 50% since midyear 2020.

IOU will also continue to expand its business development and account management teams, with the recent appointment of Susan Ng to the role of regional commercial officer expected to bring a lot of depth and experience to the management team.

Ms Ng’s background in merchant acquisition and management with leading financial institutions in Malaysia emphasises IOU’s strategy of building relationships with partners who manage large communities of merchants and consumers.

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.