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

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

The Novatti share price came from a trading halt to rocket 54% higher this morning. At the time of writing, Novatti shares are trading at 28 cents apiece, up 49%, giving the company a market value of $94.2 million.

Novatti fulfilled his banking wish

The ASX fintech stock has been trying to get its hands on a banking license for some time now. It 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 many years of waiting.

More specifically, Novatti’s dedicated banking subsidiary, International Bank of Australia, has been granted a RADI licence. This license allows holders to conduct limited commercial banking activities in Australia prior to meeting the requirements of the full supervisory framework.

Part of this restriction phase comes with the expectation that a RADI will progress to an authorized deposit-taking institution (ADI) licence. As a result, the restricted phase is for a maximum of two years. After that, the RADI will either progress to an ADI license or the holder will cease banking.

Other ASX stocks that currently hold an ADI license include Commonwealth Bank of Australia (ASX: CBA), Macquarie Group Ltd (ASX: MQG), AMP Ltd (ASX: AMP), and Tyro Payments Ltd (ASX: BULL).

Novatti has a 91% stake in International Bank of Australia and will chip in an additional $5 million as part of a Series A funding round to start the banking business.

What has Novatti planned for banking?

Novatti’s CEO, Peter Cook, sees banking services as important across card issuing, merchant acquisition, invoicing and cross-border payments.

It underpins the infrastructure and capacity of Novatti’s core payment business. So, in turn, it provides the opportunity to increase margins.

Also, 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.

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

Guy Carvalho, CEO of International Bank of Australia, commented:

For a long time, we have known that traditional banks have not been able to keep up with the demands of fintech’s disruptive business models, especially those that offer alternative ways of making or accepting payments, domestically or internationally. IBOA will overcome this challenge by leveraging technology to enable 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 payments ecosystem and global operating base to reach potential customers overseas and enable them to set up bank accounts and transact before they even set foot in Australia.

In its investor presentation, the company noted that it would be the first bank in Australia to offer a service of this type.

As an example, with a borderless bank account, it says customers will be able to pay for their university fees and apartment bond immediately before arriving in Australia, avoiding costly foreign exchange and international transaction fees.

snapshot of the Novatti share

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

Today’s rise has almost erased all of Novatti’s share price losses this year. At 28 cents, Novatti shares are now just 5% below where they ended 2021. But they are still far from the lofty heights reached in mid-2021 when shares soared to around 80 cents.

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