It hasn’t been all smooth sailing for listed fintechs in the wake of the federal election
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It’s been almost a month now since the federal election; an unexpected result which saw the incumbent coalition government return to power as 7-to-1 underdogs.
So we thought we’d check the pulse of Australia’s fintech sector — a still-relatively nascent space which is more susceptible than most to changes in the regulatory environment.
Running the numbers, listed fintechs tracks haven’t exactly set the world on fire since the election result.
The 16 companies that Stockhead tracks have returned an average loss of 5.4 per cent since Friday May 17 — the day before voters headed to the polls:
Evidently, markets were pricing in a discount after the Labor party pledged to reverse housing-linked tax concessions and implement the recommendations of last year’s Royal Commission in full.
When the coalition was returned, that discount was reversed; the big four have posted average returns of more than 10 per cent over the same time frame:
Clearly, the outlook for fintech was less closely linked with which party came to power.
But while there’s been no post-election rally across the sector, the year-to-date gains make for more rosy viewing with the stocks on our list posting an average gain of 53.6 per cent.
That increase has been helped by some outsized gains for listed payments companies, which make up the largest weighting.
Of the 16 companies on our list, 10 were payments platforms, with three lending companies, one fund manager and two B2B SaaS providers.
Most notable in the payments world are the buy now, pay later (BNPL) platforms; Afterpay (ASX: APT), Zip Co (ASX: Z1P) and Splitit (ASX: SPT).
That sector has still had its fair share of dealings with the government in 2019, including a key victory when a Senate committee ruled BNPLs wouldn’t be subject to the same credit standards as a bank.
It’s been a busy month for APT post-election, which has engaged with AUSTRAC about compliance with money laundering laws and raised another $300m in equity finance.
Amid all that, the stock price has held up pretty well as investors monitor its US expansion, while Z1P and SPT have been two of the worse performers on the list — down 14.5 per cent and 19.6 per cent respectively.
Speaking with Stockhead, Raiz Invest (ASX: RZI) CEO George Lucas said he’s optimistic the Morrison government will remain supportive of the fintech sector.
Raiz shares have risen by 3.6 per cent since the election to 50 cents, but remain well below last year’s listing price of $1.80.
The company’s app allows users to collate the change amounts on purchases, pool the funds and invest the difference in ETF vehicles which give exposure to domestic and global stocks.
“The election result was a surprise but provides more certainty for the next few years on the direction of regulation, tax and business climate,” he said.
“Falling interest rates will also assist us as banks begin to pay less on term deposits and savers/investors seek products like Raiz portfolios for higher returns.”
Raiz’s latest trading update showed active customers — each of which generate an annual subscription fee of $15 — continued to edge higher in May. To boost growth, Lucas is currently trying to execute an expansion strategy focused on south-east Asian markets, starting with Indonesia and Malaysia.
“The Free Trade Agreement with Indonesia and collaboration on technology sectors between the recently elected Australian government and the Indonesian government has also assisted us,” Lucas added.
While activity in listed fintechs is geared towards payments platforms, the ASX got a new addition this week with the arrival of fintech lender Prospa (ASX: PGL).
After a much-anticipated listing, the small-business lending platform climbed almost 19 per cent on day one before giving back 8 per cent in its first full day of trade.
The success of Prospa is seen is something of a bellwether in the space, with a number of new tech lending platforms — for both businesses (SME lending) and consumers (neobanks) jockeying for position in private markets.
Speaking with Stockhead last week, Andrew Smith from funds management firm Perennial said the company was currently assessing a number of investment opportunities in the area, with new competitors all looking for capital.
With that in mind, it might not be long before another wave of fintech companies join the ASX boards.