This ASX fintech just got a banking license and its share price jumped 54%

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The Novatti Group SA (ASX: NOV) The stock price is lighting up today after ASX fintech stock revealed it had been granted a restricted banking licence.

Novatti stock price came out of a trading stop to climb 54% this morning. As of this writing, Novatti shares are trading at 28 cents each, up 49%, giving the company a market capitalization of $94.2 million.

Novatti grants its banking wish

Fintech stock ASX has been trying to get its hands on a banking license for some time. He first submitted an application to the Australian Prudential Regulation Authority (APRA) in November 2019.

This morning, Novatti revealed that this license has finally been granted after years of waiting.

Specifically, Novatti’s dedicated banking subsidiary, International Bank of Australia, has been granted a Restricted Authorized Depository Institution (RADI) license. This license allows holders to engage in limited commercial banking activities in Australia before meeting the requirements of the full prudential framework.

Part of this restriction phase comes with the expectation that a RADI will evolve into an Authorized Depository Institution (ADI) license. Accordingly, the restricted phase is of a maximum duration of two years. After that, the RADI will evolve to an ADI license or the holder will leave the bank.

Other ASX stocks currently holding an ADI license include Commonwealth Bank of Australia (ASX:ABC), Macquarie Group Ltd. (ASX: MQG), AMP Ltd (ASX:AMP), and Tyro Payments Ltd (ASX:TYR).

Novatti owns a 91% stake in International Bank of Australia and will contribute an additional $5 million in a Series A funding round to launch the banking business.

What has Novatti planned for the bank?

Novatti chief executive Peter Cook sees banking services as important for card issuance, merchant acquiring, billing and cross-border payments.

It underpins the infrastructure and capability of Novatti’s core payments business. So, in turn, this provides the opportunity to increase margins.

Additionally, Cook noted that International Bank of Australia has the advantage of leveraging Novatti’s existing payments ecosystem and global footprint to help win customers quickly.

The International Bank of Australia is targeting fintech customers, saying this market segment has been underserved by traditional banks.

Guy Carvalho, CEO of the International Bank of Australia, said:

We have long known that traditional banks have been unable to meet the demands of fintech’s disruptive business models, especially those offering alternative ways to make or accept payments, domestically or internationally. IBOA will overcome this challenge by leveraging technology to enable the seamless end-to-end movement of money.

The International Bank of Australia also sees significant potential in the underserved migrant sector. Commenting on the opportunity, Carvalho said:

The bank will have the advantage of being able to leverage Novatti’s existing payment ecosystem and global operating base to reach potential customers overseas and enable them to open bank accounts and make transactions even before setting foot in Australia.

In its presentation to investors, the company said it would be the first bank in Australia to offer such a service.

As an example, with a borderless bank account, it says customers could pay their university fees and apartment bond instantly before arriving in Australia, avoiding costly currency exchange fees and international transaction fees. .

Novatti Share Price Overview

While ultra-competitive, payments and banking are big business, so it’s no surprise to see Novatti’s stock price soar today.

Today’s surge has nearly erased all of Novatti’s share price losses this year. At 28 cents, Novatti shares are now just 5% below their end-2021 level. But they are still a far cry from the lofty highs reached in mid-2021 when shares catapulted to around 80 cents.

In FY22, Novatti doubled its revenue to $32.5 million, but extended its net loss to $16.6 million.