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.
Regulations
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
- ATMs
- POS devices and terminal
- Switches
- 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.
https://www.fintechaustralia.org.au/change-simplifying-payment-experiences-worldwide
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/
The deal with a US-based fintech company today was a major milestone for Change Financial, as it embarks on an expansion strategy in the US.
Just two weeks after signing a partnership deal with Axiom Bank, Change Financial (Change)(ASX:CCA) is already about to onboard a new client to its payments platform.
Change has just won a contract with a US-based fintech, which is set to become the first card program to be launched under Change’s partnership with Axiom Bank.
The client will transition to Change’s platform and leverage its Program Management service offering – a technology that enables clients to focus on value-added activities within their areas of expertise.
Along with processing, card and program management, Change’s payments platform also provides mobile apps, giving customers digital control of their cards.
The contract signed today will generate a minimum of US$0.7 million (A$1 million) in revenue for Change over an initial three-year term following launch, which is anticipated in Q3 FY22.
Revenue from the program will primarily be generated through interchange, transaction fees, cardholder fees, and program management services – with minimum fee commitments adding to Change’s annual recurring revenue.
Although still unknown at this stage, the company expects to earn more than the minimum US$0.7 million over the term of the contract.
Change CEO, Alastair Wilkie, said the signing was an important milestone as it executes on the strategy to grow in the US.
“We are thrilled to be adding a new client on the Change platform in the US, where we are starting to see increased traction with our product and service offerings,” Wilkie said.
“Supporting a benefits card program is confirmation of the versatility of our platform and also leverages our long-standing expertise in card program management and compliance.”
Expansion into the US
The three-year partnership signed with Axiom Bank in late September was a key step towards expanding Change’s reach in the US.
And as today’s deal showed, it’s a key relationship when onboarding fintechs in the country.
Change aims to onboard potential fintech clients with Axiom as the issuing bank, leveraging its Mastercard registered processor and payments platform, Vertexon.
Wilkie has said the US is a key focus of his FY22 strategy, as the company executes on its growth strategy.
Change’s top line revenue surged from US$300,000 in FY20 to US$8.4 million ($11.3 million) in FY21 – a year described by management as being “transformational”.
The company expects its sales pipeline to grow even further in FY22, as it focuses on global business development strategies.
CCA’s payments technology provides the critical infrastructure that connects existing licensed banks with modern API-driven brands, such as fintechs.
The platform currently manages and processes more than 16 million virtual, credit, debit and prepaid cards worldwide, serving 136 clients in 36 countries.
PaySim is Change Financial’s new brand for its payments testing solution, launch of its API is expected to generate additional recurring revenues for the company.
Australian global fintech company, Change Financial (ASX:CCA) continues to solidify its position as a top payment solutions provider.
The company has just launched PaySim, its new payments testing solution brand that helps banks and fintechs accelerate their development and product release cycles.
PaySim can simulate over 60,000 transaction variations across multiple systems, enabling banks and fintechs to complete end-to-end testing of their payment platforms and processes from a desktop.
It also has over 42 different modules to provide coverage across multiple payment technologies and schemes.
The platform has been widely used during the pandemic to facilitate testing without the need for access to physical devices such as automatic teller machines (ATM), or point of sale (POS) terminals.
A beta phase for the PaySim API is also underway, and Change has partnered with a Big Four Australian bank to complete this client testing phase.
“We’re very proud of the successful launch of PaySim, our new testing solution brand, the result of a strategic investment of time and resources into our simulation capabilities over the last year,” said Change CEO, Alastair Wilkie.
Key features of PaySim
In the last 12 months, Change has been investing in new products, features and development, culminating in the release of PaySim.
This new platform is expected to generate new recurring revenue streams, as it will help clients gain testing capability to help scale their businesses.
PaySim can also be used to certify payment participants on schemes, switches and local networks.
In Australia for example, companies that want to join the eftpos network must use PaySim to certify their integration before connecting to the local payments network.
PaySim is also being used by over 130 banks and fintechs across more than 30 countries. Five of the top 10 digital payment companies globally use PaySim for their payments testing.
The PaySim API is currently being developed, and on track for full release prior to the end of 2021.
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.
A successful launch is expected to drive sales for existing and new clients globally, growing Change’s annual recurring revenue stream.
“API capability is the greatest enabler for fintechs and banks to accelerate product development and release timelines,” commented Change CTO, Arnold Lee.
“Our PaySim API enables our clients to simplify their testing functions through automation and integration with their testing and quality assurance toolsets.”
Lee’s development team is currently in the final stages of beta testing with clients prior to its release in Q2 FY22. Part of the testing is to extend its ISO20022 testing capabilities.
The PaySim solution has also been validated for use with schemes such as Visa, Mastercard, UnionPay, Amex, and JCB.
“PaySim will help to solidify our standing as the one of the top payment testing solutions in the world,” CEO Wilkie emphasised.
Today’s development comes after the release of the Vertexon payments platform in October.
Vertexon is Change’s latest Payments as a Service offering, which provides quick-to-market card and payments solutions to banks and fintechs around the world.
The software integrates seamlessly with the clients’ core systems, and is able to deliver both physical and digital card solutions, as well other features such as Buy Now Pay Later.
https://stockhead.com.au/tech/change-financial-to-launch-payments-testing-api/
This article was developed in collaboration with Change Financial, a Stockhead advertiser at the time of publishing.
Experienced Australian based global fintech, Change Financial, welcomes the proactive approach adopted by Senator Andrew Bragg’s Select Committee in its final report on Australia as a Technology and Financial Centre tabled on Wednesday night.
The report’s recommendations for licencing digital currency exchanges and establishing a clear custody or depositary scheme for digital assets in Australia, gives credence to cryptocurrency as a viable currency and payment method. It would also provide cryptocurrency investors with some much-needed consumer protection.
The pandemic has accelerated the digitisation of finance while the global appetite for ease of use and efficiency in payment systems has increased from both the end customer and the provider.
The Bragg report’s recommendation that Treasury should lead a policy review to assess the viability of a retail, central bank-issued, digital currency for Australia would also put the nation on a par with many other countries in the emerging global digital economy.
A Finder survey, released on October 17, found a staggering 18% of Australians already own some form of crypto – one of the highest rates in the world.
Of the nearly 1 in 5 adults in Australia who own some form of crypto, Finder found bitcoin is the most popular coin; Ethereum is the second most popular coin while cardano came third. Two other cryptos Australians currently hold are dogecoin and binance coin.
Bragg’s bipartisan recommendations, if adopted, would bring some welcome regulation to this sector where currently there is hardly any enforceable rules and where local banks have largely avoided the sector.
The lack of regulations has constrained mainstream adoption of crypto, however we have seen countries in Latin America, like El Salvador, embrace cryptocurrencies and support growth.
In Australia, Change is currently working with several start-ups to bridge the gap between crypto exchanges and traditional payment infrastructure and networks using our Payments as a Service platform.
The ability to link a physical or digital card to crypto wallets is essential for driving payment growth and innovation in Australia. It will also open up opportunities for the “un” or “underbanked” as well as faster cross-border payments
Just like our current software as a service (SaaS) model that connects existing licensed banks with modern application programming interface (API) driven businesses and allows the end customer to use eftpos, Mastercard, Visa, and AMEX as well as connect to payment networks via Apple Pay, Google Pay, Samsung Pay.
The ability for businesses to embrace cryptocurrency relies on support for existing payments technology to power seamless transactions.
Change currently manages and processes more than 16 million virtual, credit, debit and prepaid cards worldwide, serving 136 clients in 36 countries.
By Vinnie D’Alessandro, Chief Product Officer of Change Financial
The launch of payments platform Vertexton is a critical milestone as Change Financial looks to grow not only in Oceania, but also in crucial markets like the US.
Global fintech, Change Financial (ASX:CCA), is set to further accelerate its recurring revenue base after launching its payments platform, Vertexon.
Vertexon is Change’s new Payments as a Service (PaaS) offering, which provides quick-to-market card and payments solutions to banks and fintechs around the world.
The software integrates seamlessly with the clients’ core systems, and is able to deliver both physical and digital card solutions, as well other features such as Buy Now Pay Later (BNPL).
The Vertexon SaaS platform is today being launched on Amazon Web Services (AWS) in Sydney, to service banks and fintechs across the Oceania region.
In addition to SaaS, Vertexon offers full support for digital and physical card issuing, and is currently supporting over 16 million cards across the US, Latin America, Southeast Asia and Oceania.
“This market leading technology simplifies the payments experience, helping to lower the barriers of entry for new payment products,” commented Change CEO, Alastair Wilkie.
“It delivers a fast-to-market solution that gets digital and physical cards into consumers’ hands.
“Vertexon will be a key driver as we grow our annual recurring revenue.”
Vertexon SaaS offering
Vertexon is accelerating growth and scalability for banks and fintech clients around the world by providing card and payments solutions.
Through the unifying of cards, payments and processing technologies, the platform effectively delivers a modern digital solution for prepaid, debit and credit cards.
It supports transactions processing by major card schemes including Mastercard and VISA, CB, UnionPay and AMEX.
It also supports core banking interfaces and loyalty programmes, integrated by APIs.
With the launch of Vertexon, Phase 2 of the platform project has now been delivered on schedule and within budget.
BDO Unibank, the largest bank in the Philippines, recently upgraded its card platform to the latest version of Vertexon, which includes new BNPL features.
The BDO’s Credit Card Systems team said the new version added expanded features and carried over bespoke business functions that could potentially give the bank market leadership.
The multi-tenancy design of the platform is indeed highly scalable, with future growth expected in multiple geographic markets.
The platform’s seamless integration also enables it to be easily implemented in any location worldwide in just a matter of days.
Change chief product officer, Vinnie D’Alessandro, said: “We started the build phase of our SaaS platform in April this year, and to have launched our customer ready platform on schedule and within budget has been a huge achievement for our business and clients.”
D’Alessandro added that the cloud architecture can be deployed into new regions in days, showcasing Change’s extensive payments and technical expertise.
The company is now working with existing and new Vertexon clients to establish their PaaS solutions, as Change grows its sales pipeline further into FY22.
CCA is a global fintech company with a technology that provides the critical infrastructure that connects existing licensed banks with modern API-driven brands, such as other fintechs.
Its platform currently manages and processes more than 16 million virtual, credit, debit and prepaid cards worldwide, serving 136 clients in 36 countries.
This article was developed in collaboration with Change Financial, a Stockhead advertiser at the time of publishing.
Change Financial has announced new board appointments* as the Australian-based business continues to grow and intensify its focus on providing tailored payment solutions, card issuing and testing to global banks and fintechs.
Change currently manages and processes more than 16 million virtual, credit, debit and prepaid cards worldwide, serving 136 clients in 36 countries.
Edward (Eddie) Grobler has been appointed an independent Non-Executive Director. He is a highly experienced card and payments specialist and worked at Mastercard for more than 20 years. During that time, he held several senior roles including Senior Vice President Africa, Executive Vice President /Australasia Division and more recently, he was the UK-based Executive Vice President: Realtime Payments. In this role he was responsible for the development and execution of Mastercard’s real time payments strategy.
Grobler holds a Master in Business Leadership and a Master in Psychology, and is a Graduate member of the Australian Institute of Company Directors.
Alastair Wilkie, Change CEO, said, “I have had the pleasure of working with Eddie over a number of years while he was at Mastercard. We’re delighted to have someone of his calibre join the Change Board as an Independent Director. His experience growing and transforming payments businesses worldwide will be vital to our future growth.”
Tom Russell joins the board as an alternate director to Ben Harrison, Change Chairman. Tom has more than 10 years’ experience as an investor and corporate advisor working across a range of industries with a focus on growth companies in the technology, finance, industrial, energy and resource sectors.
As an Investment Director at Altor Capital, a boutique alternative investment manager, Russell provides corporate advisory services for listed and unlisted emerging companies. Tom previously held both operational and corporate advisory roles in the United States and Australia, and was instrumental in raising capital, advising on corporate structure and business strategy, managing operations and development, as well as launching technology platforms.
Russell holds both a Bachelor of Commerce (Finance) and a Bachelor of Economics (Quantitative Methods).
“Tom has been instrumental in the success of Change, to date, both strategically and operationally. His in-depth knowledge of our business has been paramount to our current success, and he brings a great complementary skill set to our team,” Wilkie concluded.
*Subject to shareholder approval at the Company’s AGM on 25 November 2021.
The partnership agreement with US-based Axiom Bank establishes a solid foundation for future growth and upcoming programs for Change Financial in the region.
Global fintech Change Financial (ASX:CCA) has announced a partnership with Axiom, one of the fastest growing community banks in the US.
The three-year partnership is a key step towards expanding Change’s reach in the US, and will be a key relationship when onboarding fintechs in the region.
Change aims to onboard potential clients with Axiom as the issuing bank, leveraging Change’s Mastercard registered processor and payments platform, Vertexon.
CCA’s platform currently manages and processes more than 16 million virtual, credit, debit and prepaid cards worldwide, serving 136 clients in 36 countries.
“Unlocking growth in the US is a key focus of our FY22 strategy, we’re thrilled to announce a strong partnership with Axiom Bank so early in the financial year,” says CCA CEO, Alastair Wilkie.
Partnership underpins Change’s global growth strategy
Headquartered in Florida, Axiom Bank provides a wide range of financial products and services.
These services include retail banking, money market and CD accounts, as well as commercial banking, treasury management services and commercial loans for both real estate and business purposes.
CCA’s payments technology provides the critical infrastructure that connects existing licensed banks with modern API-driven brands, such as fintech platforms.
Under the partnership agreement, Change’s payments platform, Vertexon, will allow onboarded clients to access feature rich products and functionality such as physical and virtual cards, access to ATM networks and Buy Now Pay Later payment options.
The two companies are now working together to onboard potential clients in the US, with the first client expected in the December 2021 quarter.
Axiom Bank’s executive vice president of Banking-as-a-Service, Ron Strand-Sorrell, said: “We are thrilled to be partnering with Change Financial, and are excited about the opportunities that leveraging their innovative payment solutions bring.”
CCA expects that clients in the US will contribute to driving growth in its recurring revenue.
The partnership also highlights CCA’s ability to deliver on its FY22 growth strategy, by engaging with banks and fintechs to drive future growth.
“We’re committed to strengthening and growing the core business and believe the partnership with Axiom effectively highlights how Change delivers tailored and innovative payment solutions to banks and fintechs around the world,” said Wilkie.
Change is currently undergoing a rapid growth trajectory, with top line revenue surging from US$300,000 in FY20 to US$8.4 million ($11.3 million) in FY21 – in a year described by management as being “transformational”.
In FY22, Change expects its sales pipeline to grow as it focuses on global business development strategies.
One of the strategies includes the rollout of its Phase 2 Customer Ready Platform, which will allow it to offer a next-generation integrated payment processing and card management solutions platform.
https://stockhead.com.au/tech/change-financial-partners-with-us-based-axiom-bank/