IOUpay looks set to deliver another strong quarter, while the launch of its next generation BNPL platform myIOU is on track for March.

Fintech provider IOUpay (ASX:IOU) has provided a positive first half update for Q3 FY22, including accelerated uptake of its BNPL service with increased volumes of myIOU BNPL transactions completed.

IOUpay has reported ~$9.4 million in total transaction value (TTV), delivering ~$413k in net transaction revenues (NTR).

Effective annualised returns for individual transaction profiles remain within IOUpay’s target range.  The company has reported non-performing loans (NPL) for the first time with the portfolio established at the myIOU BNPL launch in mid-June 2021.

The company said a modest NPL of $2,487 as of February 15, 2022, was a positive sign, indicating modest delinquencies and reflecting the company’s targeted consumer acquisition process.

The process includes sophisticated credit scoring technology to authenticate customers and independently check credit profiles, as well as its continuous assessment and management of merchant relationship performance.

On a financial year-to-date basis, myIOU has now written TTV of ~$22million delivering NTR of ~$1.5m (AUD values for TTV & NTR based upon reported exchange rate assumptions).

The resultant myIOU income margin for FY22 to February 15 is 6.9%, which remains above expectations and within the company’s target range.


Merchant & consumer acquisition growth

The company has continued to build a community of quality merchants and consumers throughout as part of its ‘best-in-class’ brand positioning in Southeast Asia.

The company has seen a boost in merchants in its target market of Malaysia during the first half of the March quarter with 58 operating 166 outlets around the country added to the myIOU platform.

New merchants were added to 13 industry vertical categories including electrical and Electronics, automotive, fashion, health and personal care, home and garden, IT and gadgets.

Notable businesses amongst these new merchant relationships include: Best Point Electrical Chain Store Sdn Bhd from regional Malaysia with 7 outlets, Lazo Diamond from KL/Selangor with 33 outlets, and Weng Kwong Jewellery from KL/Selangor with 7 outlets.

IOUpay’s merchant services teams and operations division continue to conduct ongoing re-assessment and evaluation of merchant relationship performance to ensure alignment with IOUpay brand values, anticipated transaction activity levels and satisfaction of return expectations.

Following review, those merchant relationships not meeting satisfactory levels of performance, and considered unlikely to improve, are terminated and removed from the myIOU platform.


Consumer engagement up as COVID-19 restrictions ease

IOUpay said significant growth trend in consumer engagement has continued into Q3 FY22.

The growth aligns with expansion of shopping choice as new merchants are added and myIOU deepens its coverage of regional Malaysia.

The increased consumer engagement also correlates with easing of COVID-19 restrictions in Malaysia.

The country has moved into Phase 4 of the Malaysia Government’s National Recovery Plan, which includes re-opening of all economic sectors, interstate travel and no gathering limits.

Malaysia’s GDP rose 3.6% in Q2 FY22 and Bank Negara Malaysia expects the recovery to continue through calendar 2022 subject to any future COVID-19 variants.  The country plans to end mandatory quarantine for inbound travellers on March 1.

An ongoing digital marketing strategy and various promotional campaigns are also boosting consumer engagement.  IOUpay signed star Malaysian singer Yuna as the Face of myIOU last year as it aimed to capitalise on rapid growth in the market.


Razer Merchant Services (RMS)

IOUpay partnership with Razer Merchant Services (RMS) announced in mid-2021 continues to develop.  The partnership enables RMS to refer and onboard its extensive network of merchants to take advantage of IOU’s suite of BNPL payment services.

The company has approved more than 140 merchants for onboarding by RMS from their first batch of merchants offered for review.

RMS has now confirmed onboarding to their system.  The final step in the merchant acquisition process is for IOUpay’s business development team to complete with each merchant an offline signup to confirm terms.

RMS is currently compiling a second batch of merchants for review, based upon industry vertical preferences and minimum transaction value expectations.  The Company is conducting monthly training of sales staff to ensure optimal signup rates.


myIOU 2.0 nearing take off

Plans are well progressed for the scheduled live launch of myIOU 2.0 in March in a major metropolitan shopping mall.  myIOU 2.0 involves a complete refresh of the consumer and merchant apps and website.

Various media, advertising and promotional campaigns have been arranged to drive engagement with both merchant and consumer communities.

At the myIOU 2.0 launch, the Company plans to announce two new brand ambassadors, each bringing their own significant influence and followers from Malaysia and across Southeast Asia.


IOUpay settles IDSB investment

IOUpay has confirmed that it has settled the first part of its 42% stake of I-Destinasi, worth a total of 126 million ringgit  (~A$42.1m).

The first tranche payment of RM63 million (~A$21.1 million) was funded from existing cash holdings.  Following satisfaction of all necessary conditions precedent, completion of the first tranche payment and transfer to IOU of shares representing 21% of the issued share capital of IDSB, the transaction’s effective settlement date occurred on December 20.

The second tranche of the investment for the remaining 50% of the purchase price is payable following completion of the audit of IDSB’s FY21 statutory accounts or six months after the December 20 settlement date.

Based upon the unaudited management accounts for FY21, IOUpay expects there to be an adjustment to the purchase price and a reduction in the amount of the second tranche payment.

IDSB recorded record revenues of ~$10.1m and profit before tax of ~$6.6m for its full financial year ended December 31, 2021.  This was achieved despite significant negative impacts of a national interest payment loan moratorium (that ended in January 2022) combined with market setbacks from the COVID-19 pandemic health emergency.

In its Interim Report announced on February 28, the Company reported for the first time on its current 21% investment in IDSB.  The reporting reflects its investment for the month of December, being the period after completion of the first tranche payment.

In relation to the IDSB investment, IOUpay showed a profit from continuing operations of $11k, which was reduced by higher expenses in the month of December due to cyclical timing of tax payments and other operating expenses.

IDSB’s revenues are set to continue a growth trend into calendar 2022 with the loan moratoriums expiring in January and general economic activity continuing to improve with the Malaysia Government’s National Recovery Plan well underway.


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.