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What does Visa’s Australian Principal Membership mean for iSignthis?

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

iSignthis (ASX: ISX) sells an identity verification solution to businesses, simplifying the 100-point ID check required by law in order to open an account of a financial nature. CFD brokers and cryptocurrency traders typically lose over half the clients who said they would sign up, when they get tired or annoyed of the paperwork required to open an account. The company’s signature Paydentity solution allows prospects to verify their identity by making a payment of $100 from their bank account, which iSignthis randomly splits into two payments that sum to the total amount. The only way a user can identify what the two amounts are is logging onto online banking and seeing them.

iSignthis-ISX-share-price-1

The genius of iSignthis’ technology is that by logging onto a bank account and reporting the two amounts to iSignthis, a consumer proves that they have done a 100-point ID check. This is because they had to do a 100-point ID check by law to open the bank account in the first place. The new financial institution can rely on the previous ID check to open an account for a new client. This makes it much easier for people to open accounts, and the conversion rate from prospects to clients shoots through the roof. The solution quickly became hugely popular for businesses. iSignthis has seen its revenue jump as firms rush to sign up. The technology has full regulatory approval and is AML/ CFT compliant.

iSignthis monthly transaction growth outpaces the stellar share price rise

Figure 1: iSignthis monthly transaction growth outpaces the stellar share price rise (Source: iSignthis)

What’s new?

The high-flying Aussie fintech giant has recently entered a licensing agreement with Visa, giving them access to Visa’s 3.3bn clients worldwide. The company has rallied over 600% this year, as they continue to execute on their strategy and become EBIT positive. The contract with Visa complements their existing agreement with Mastercard and allows them access to the immense majority of consumers around the world. Being able to access the customer bases of both Visa and Mastercard makes iSignthis much more appealing because they can work effectively with almost all cards of a client’s prospects.

How to they make money out of this?

iSignthis makes money by charging clients a fee, expressed as a certain number of basis points of the money a new customer of their client transfers into an account. They currently make a gross profit above 125bps, very comfortable for a company operating a transaction processing business. Since the technology is patented and they have virtually no competition, iSignthis can easily increase this profit margin.

The main question investors have about the business is its multiples. At over 100x revenue, it’s certainly not cheap and could sell off sharply if it doesn’t deliver a flawless execution record.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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