• Digital payments are rapidly growing, but the segment is often confusing
  • Novatti says it is capitalising on the global mega trend 
  • Stockhead reached out to Novatti’s new CEO, Mark Healy


Experts have long predicted that physical cash and credit cards would die a slow death due to the gradual mass adoption of digital wallets.

Today, that prediction has almost come true. Around 55 million payments worth about $650 billion are being made in Australia every day, most of which are facilitated digitally via smartphones.

Not only are these digital payments quicker, they’re also becoming more secure, accessible and convenient compared to cash-based payments.

The sheer size and potential of this market has attracted companies to launch their own products, including global players like Apple, Google, Block, and China’s WeChat Pay.

Mark Healy, the CEO of payments fintech company Novatti (ASX:NOV), says the digital payments space is a complex and confusing one for consumers to understand – with legacy players, global tech and small fintechs all jostling each other for market share.

“You’ve got these fintechs that are innovative and have features-rich products, and you’ve also got big-tech players that are muscling their way in,” Healy told Stockhead.

Apple Pay, for example, is one big player that’s been rapidly grabbing more of the pie, with some analysts calling it the biggest fintech disruptor right now.

Healy explained that Apple is simply leveraging its exisiting customer base and technology to jump into the payments space.

“Instead of the consumer taking the card out of their wallet and tapping on to the terminal, Apple embedded that process in the phone.

“Who would have thought that putting that card in the phone and using the phone instead of the card would be so adopted at scale?” said Healy.


Big Brother is watching

In Australia, the pace at which the digital payments industry is moving has forced the government to swiftly step in.

In June, Treasurer Jim Chalmers said he will give the Reserve Bank more powers to regulate fintech companies that provide payments services.

Ex-RBA governor Phil Lowe has also called out Apple Pay, saying the company’s policies are anticompetitive.

“If we [RBA] get these powers, this will be one issue we will be looking at very carefully because more of us are using our mobile phones to make payments,” Dr Lowe told the AFR. “Apple is on our radar, definitely.”

Treasurer Chalmers meanwhile said that while our regulatory frameworks have not kept up with the big trends happening in finance, especially when it comes to payments, innovation is necessary.

“A more modern payments system means more innovation, more productivity and more growth,” he said.


‘Global mega trend towards digital commerce’

Meanwhile, the B2B (business-to-business) digital payment companies like Novatti have been reporting stellar growth.

In the latest quarter update, Novatti reported $10.3m in Q4 sales revenue, up from $8.9m in the previous quarter.

The company’s processing volumes were up 15% quarter-on-quarter to $1.19 billion, while gross margin was at 51%, up from 35%.

Healy, who was promoted to CEO in June this year, says that he wants Novatti to break away from its entrepreneurial past that focused solely on on top-line revenue and growth.

“The real target for us now is to move the business into a self sustaining state, and actually achieve profitability.”

According to Healy, the best way to understand Novatti’s business is that it revolves around four pillars – local payments, international payments, technology solutions, and investments.

“We believe that a strong differentiator for us is that very few providers outside of banking can provide a full end-to-end payments ecosystem like we do.”

Healy also says that Novatti is capitalising on the global mega trend towards digital commerce, which is being reflected in the company’s payment-processing volumes.

“Payments as a theme still has many years to play out, despite the current uncertainty constraints in the economy. So we’re well positioned to take advantage of that.”

As for adding blockchain into the mix, Healy says that Novatti is not in that space directly at the moment, but believes it will play a big role in the future.

“Distributed ledger technologies can really streamline a whole range of payments use cases in the future to improve transparency and speed,” Healy said.


Other ASX companies in the digital payments space

Change Financial (ASX:CCA)

Change’s technology offers Payments as a Service (PaaS) solutions to businesses and financial institutions,  providing infrastructure and tools for building customisable payment solutions.

Last year, the company signed an exclusive six-year direct issuing partnership deal with Mastercard in Australia and New Zealand, enabling Change to issue prepaid and debit cards under the Mastercard logo.

Earlier, Change had launched its payments platform, Vertexon. Vertexon is a Payments as a Service (PaaS) offering, which provides quick-to-market card and payments solutions to banks and fintechs around the world.


Tyro Payments (ASX:TYR)

Although its focus is on card payments, the Tyro BYO App lets people to use digital wallets like Apple Pay, Google Pay, and Samsung Pay.

For example, once you’ve been approved by Tyro as a customer, to use Tap to Pay on iPhone you simply have to download the Tyro BYO App and start accepting contactless payments on the iPhone.

Tyro was was the subject of a bid from private equity firm Potentia, which has since backed off.


EML Payments (ASX:EML)

EML provides a global payment solutions platform, and says it powers over 80 billion transactions annually.

The B2B company operates globally across 32 countries including Australia, the UK, Europe, and the US, with clients including major banks in Europe, government and retail brands.

In April this year, EML underwent a strategic review, announcing a new interim CEO and took measures to cut costs.


The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.