Change Financial Chief Product Office, Vinnie D’Alessandro wrote an opinion piece for Dynamic Business about how Australian fintechs can lead the way in the US payments space.
The US is a key player in the global financial system. Yet it appears to be lagging behind the global frontier when it comes to adopting modern payment solutions.Vinnie D’Alessandro
Change Financial (CCA) has announced it has been granted a Mastercard Principal Issuer licence for Prepaid and Debit cards in New Zealand.
Being a Mastercard Principal Issuer allows Change to deliver card programs to banks, credit unions, fintechs and other businesses, looking to offer digital and physical card payments to their customers.
In March 2022, Change announced an exclusive agreement to partner with Mastercard to issue prepaid and debit card products in Australia and New Zealand.
Change CEO, Alastair Wilkie commented, “We are excited to be a Mastercard Principal Issuer in New Zealand for Prepaid and Debit cards. To be granted our licence less than 6 months after our Mastercard partnership announcement is a wonderful result for both parties.”
Wilkie continued, “Our business has a long New Zealand heritage and it’s a proud moment for our business, especially our Auckland based team members. Our new capability will allow us to lower the barrier of entry for New Zealand banks, credit unions, fintechs and business to deliver innovative card solutions to their customers.”
Change also recently announced they would be issuing Mastercard debit cards for First Credit Union, Nelson Building Society, Police and Families Credit Union and Westforce Credit Union.
Change Financial Limited (ASX: CCA) released the company’s full year results for the year ended 30 June 2022 (FY22).
Change CEO and Managing Director, Alastair Wilkie commented, “This was a transformational year for Change, with the Company in a position to scale our technology offering globally. During the period, we expanded our client base from 136 across 36 countries to 156 in 41 countries, whilst also delivering key building blocks that set us up for continued success. The Change team globally has operated in challenging circumstances and they should be proud of what they have achieved in FY22.”
- FY22 revenue of US$8.3m (A$12.0m), up 32% on prior corresponding period
- Launched new Vertexon Payments as a Service (PaaS) platform
- Signed seven new Vertexon PaaS clients with total contract value anticipated to be in excess of US$12.9m (A$18.7m) over the initial terms
- Includes milestone Vertexon PaaS contracts with four New Zealand financial institutions with TCV anticipated to be in excess of US$10.5m (A$15.2m) over the initial five-year terms
- 1st US Vertexon PaaS client now live and transacting generating recurring revenues
- Signed a six-year agreement with Mastercard to enable direct issuing in Australia & New Zealand
- Received regulatory approval to enable direct issuing in New Zealand, regulatory approval in Australia is expected in coming months
To access an overview of the FY22 results and outlook for FY23, please see our Results Presentation
Change Financial (ASX:CCA) is pleased to share the MST Access Initiation Report published today.
You can download the research here or read the content below
Change Financial (ASX:CCA) partners with fintechs and banks, to provide tailored payment, card issuing, and testing solutions. The global fintech has over 146 clients across 41 countries, managing and processing over 16 million credit, debit, and prepaid cards, delivering flexible and fast-to-market payment solutions. Change’s Vertexon provides leading digital and physical card solutions for banks and fintechs. Vertexon makes it simple for clients to launch full featured digital payment experiences to their end consumers fast.
Five of the top ten global payment companies trust Change’s PaySim for payment simulation and testing solution, helping them meet the reliability and performance expectations.
After onboarding multiple new clients to its global platform, Change Financial (ASX: CCA) is set to convert its recent product launches into new sales opportunities via Stockhead
Fintech payments leader Change Financial confirmed achievement of key platform milestones and new sales in an exciting quarter update this morning.
Among a number of operational highlights, CEO Alastair Wilkie flagged the successful launch of the company’s Vertexon platform, with additional products under development and a strong pipeline of new work opportunities – both in Australia and globally heading into 2022.
“We continued to grow our sales pipeline and see these opportunities progress through the sales funnel. During the quarter, we converted a significant number of opportunities into contracted revenue which will be realised in future quarters,” Wilkie said.
Importantly, Change commenced onboarding its first payments-as-a-service (PaaS) client in the lucrative US market during the quarter and is now pursuing multiple new clients leads across the US, Australasia and Latin America.
Accompanying that strong momentum, Wilkie and the CCA executive team have a clear strategic vision and key performance metrics to drive further growth in the year ahead.
Across the company’s operational objectives, CCA achieved a priority target in Q4 with the successful launch of Vertexon – a modern digital solution for banking clients to unify back-end process for prepaid, debit and credit cards.
During the December quarter, Change launched the Vertexon SaaS platform on Amazon Web Services (AWS) in Sydney, to service banks and fintechs in the Oceania region.
Delivered on schedule and on budget, the platform is highly scalable with the functionality for rapid global rollouts in response to client demand.
Along with that in-market launch, CCA also completed the beta phase of testing on the new Application Programming Interface (API) for PaySim – its SaaS-based automated payment testing solution that allows banks and fintechs to accelerate their development and product release cycles, the company said.
“The API enables clients to automate load, stress and regression testing to produce comprehensive results reporting and is the foundational component of PaySim’s software as a service offering,” CCA said.
As a measure of its product market-fit, PaySim is already in use by five of the top 10 digital payments companies globally, and marks a particularly exciting growth channel for Change.
In line with those key successes in product development, CCA was also able to convert its momentum into a number of new client wins.
Among them was the addition of a new fintech Mastercard prepaid card program in the US, which will deliver a minimum contract value of US$700,000 (~$1.0m) over an initial three-year term.
Client on-boarding is “well-progressed” and is expected to go live in the March quarter 2022, CCA said.
In addition, the company has secured US$1.3m (~$1.8m) of sales across its new product platform, with “US$1.1 million of Vertexon projects and US$200,000 of PaySim projects for existing clients”.
“Change expects further significant client wins to close in the third and fourth quarters of FY22 as opportunities progress through the sales funnel,” the company said.
The net outcome is that investors can look forward to a steady pipeline of growth for new revenue and cash-flow channels, as CCA continues to build its client base.
Importantly, around 55% of CCA’s revenue has been generated from recurring revenue streams.
Contracted ARR increased to US$4.7m, led by the successful onboarding of Change’s new PaaS client in the US market.
And as evidence of its strong momentum, Change highlighted that its sales pipeline grew by a net-24 opportunities in the December quarter to 158, while 23 new client opportunities were won and closed out.
“There was a significant increase in customer invoicing in Q2, particularly in December, which is expected to drive cash collections in Q3,” Change said.
With a scalable platform that services more than 16 million payment cards and 147 clients in 41 countries, CCA continues to carve out a profitable niche in the multi-billion dollar global payments market.
And following a transformative period in the second half of 2021, the company is set for a big year of growth in 2022.
Our Chief Product Officer, Vinnie D’Alessandro, published an opinion piece for Fintech Business about what 2022 holds for BNPL and the fintech industry.
Globally, non-cash transactions, including BNPL, are increasing at a compound annual growth rate (CAGR) of 18.6 per cent between 2020 and 2025, Capgemini’s World Payments Report 2021 estimates.
Annual reports of the Australian Securities Exchange-listed BNPL providers show the value of BNPL transactions increased by around 55 per cent in the 2020 financial year and tripled over the previous two financial years.
Profit and debt
Burgeoning transaction volumes have not translated into higher profits for the major players, with many facing financial losses and debt issues.
Afterpay reported a $159.4 million loss for the 2021 financial year, significantly worse than its loss of $22.9 million for the prior year. Zip reported a $658.8 million loss for 2021, a 3,204 per cent increase on the $20 million loss it reported in the 2020 financial year.
Bad debts for Australian BNPL companies reportedly totalled $220 million on $11.4 billion of sales during 2021, compared with bad debts in the charge cards sector, which includes Amex and Diners Club, of $15.4 million on $56.8 billion of sales.
Tightening regulations present another challenge for the sector. Regulators in Australia and worldwide are working to toughen rules on back-office payments processing, know your customer requirements, due diligence and anti-money laundering provisions for BNPL providers.
Locally, concerns about lending practices in the sector and consumer debt levels are behind a push for BNPL services to be regulated as credit products.
Financial Counselling Australia’s annual survey of members found 61 per cent of clients who had BNPL debt were struggling to pay off other living expenses, with many of these people failing to recognise BNPL as a form of debt. In the latest survey, 84 per cent of financial counsellors said that half, most or all clients had BNPL debt, compared with 31 per cent the previous year.
Competition and consolidation
As fee-free credit offered by BNPL providers becomes increasingly attractive to consumers, traditional banks and financial services companies have started to fight back by offering competing products to retain customers. Commonwealth Bank of Australia launched StepPay, while NAB has introduced a fee-free credit card as a way to head off customers switching to use BNPL providers, for example.
Competition, increasing regulation and weaker financial performance are combining to trigger consolidation in the BNPL market. Block (formerly Square) acquired AfterPay this January, while Latitude moved to acquire Humm. PayPal bought Japanese BNPL provider Paidy in 2021, and Zip scooped up QuadPay in 2020.
We expect consolidation to continue, but consolidation is just one part of a wider narrative on the evolution of BNPL as a feature, rather than a standalone product.
A long history
BNPL may seem new, but the concept is much older than people might expect. The first instalment plans as financial products were created in the 1800s in the United States to help customers buy furniture. Australians may have experienced similar products under retail lay-buy solutions as early as the mid-1900s.
Change Financial’s BNPL technology was created in the 1990s, driven by demand for instalment payment plans for cards in the South America market, before taking off in south-east Asian countries in the 2000s.
Feature not product
The latest BNPL solutions have the same fundamental attributes to their predecessors: you get access to products or services and pay it off in smaller amounts.
What’s new is the way businesses are using fee-free BNPL offerings as part of a broader customer-value proposition – applying it as a feature rather than a standalone offering.
Except for Zip’s acquisition of QuadPay, the major acquirers have been non-BNPL players. This suggests businesses are looking to add BNPL to their portfolios.
BNPL players have themselves been expanding their offerings. Afterpay, prior to its acquisition by Block, had released Money App, a money management application focused on budgeting and saving. Zip, which already had a business lending arm through the acquisitions of SpotCap in 2019, released Zip Business Trade Plus, a line of credit product, and Tap to Pay, which provides business-to-business payments for small- to medium-sized businesses.
In South American and south-east Asian markets, BNPL is already being incorporated with traditional card products such as BDO Unibank Installment card, which leverages Change’s Vertexon platform. We expect Australia’s market and others to take their lead. This might include bundling fee-free BNPL cards with a home loan or charge no fees on BNPL for certain purchases or with certain merchants.
There is significant uncertainty in the BNPL market, but there are also numerous opportunities for enhancing the value proposition for consumers and businesses as BNPL moves into the next stage of its evolution.
Vinnie D’Alessandro, Chief Product Officer, Change Financial
Mastercard and Visa are moving from 6-digit BINs to 8-digit BINs for prepaid, debit and credit cards in the coming months. Both Visa and Mastercard have confirmed that from April 2022, they will no longer be issuing 6-digit BINs.
With the timing running out, have you tested your cards and payments system are compatible?
What happens if it goes wrong?
- Incorrect routing and authorisation failures
- Unexpected BIN fees / monthly management fees
- Settlement and clearing failures
- Host card management system, affiliate bank processing, reporting failures
- Incorrectly split portfolios across consumer and commercial
The impact of 8-digit BINs
The change to BIN will impact acquirers, issuers and processors. Affected systems may include
- POS devices and terminal
- Authorisation and settlement systems
- Data analytics and reporting systems
Payment companies and services providers should be testing their systems to ensure they can acquire, issue and process transactions from cards with 8-digit BINs.
PaySim make testing your payment systems simple
Our payment testing and simulation solution, PaySim helps banks and fintechs ensure their systems are compliant and robust. We have a long history helping companies get ready for changes like the transition to 8-digit BINs.
For our own payments platform, Vertexon, we leverage PaySim internally to ensure we can support any mandated changes from the schemes.
Using PaySim to test 8 digit BINs and more
Payment testing is usually a time consuming and manual process. PaySim makes it simple for you to simulate the full transaction lifecycle and automate your testing processes.
PaySim product is easy to install and a cost-effective tool for accelerating your testing regime.
8 Digit BIN support could be a major internal change for any institution.
PaySim allows you to:
- generate transactions from different sources with different card prefixes.
- Transaction generation
- Transactions with different card prefixes from ATM, POS or Interchange
- Route Testing
- Any updated routing rules are correctly followed
- End to End verification of card prefixes.
- Messages for different card prefixes get processed by the correct processes.
Use PaySim to generate the transactions and authorise replies if required. Then do internal checks that all transactions have been processed as expected with the new 8 Digit BIN rules
If you want to find out more about PaySim or if you’re an existing customer looking for more information about 8-digit BINs, contact us we’re here to help.
Today, FinTech Australia has shone their Member Spotlight on Change Financial, showcasing our history and products that support the fintech market.
FinTech Australia is a member-driven organisation that is building an ecosystem of Australian fintechs to advance the global economy and culture. Change became a member of Fintech Australian in 2021 in order to support the local market.
Change Financial (ASX:CCA) CEO Alastair Wilkie joined as host of ASX company leaders to share their highlights for 2021 via Stockhead.
It’s been another year of lockdown and supply challenges for all companies dealing with the COVID-19 variants as they pop up. But with challenges, comes opportunities to learn and grow. So as the end of the year approaches, we took the chance to tap our client list and ask CEOs of ASX-listed small caps – from sand miners to cannabis growers to fintechs – what they learnt in 2021, their highlights, and what they hope for in 2022.
Today, we ask: What was your company highlight for 2021?
Alastair explained “We had three really important events”
- Completing our core card management and processing platform in the US and launching it that into market;
- Following that, we made a strategic and transformative acquisition that expanded our US operations into a global payments solutions business. This, in turn, sped up our three-year strategic roadmap by 18 months; and
- We launched our customer ready integrated payments as a service solution “Vertexon.” This was an exceptional performance by the team to achieve that within a year
To hear the experiences from Alastair and the rest of the leader, check out the full article https://stockhead.com.au/news/ceos-look-back-and-share-their-company-highlights-from-2021-2/