Novatti Group secures license to set up International Bank of Australia

7th November, 2022

Shares in Novatti Group (ASX: NOV) jumped more than 77 per cent this morning after the payment services company announced its subsidiary had been granted the relevant licence to launch the International Bank of Australia, with hopes of opening its first live account in six months.

Novatti managing director Peter Cook told an investor briefing the granting of a Restricted Authorised Deposit-taking Institution (RADI) licence by the Australian Prudential Regulation Authority (APRA) was four years in the making, giving the group “real infrastructure and real licensing within the world of payments”.

“It allows us to be largely in control of our own future and to drive the deepest margins with a lot of our payment services,” Cook said.

“We are absolutely delighted to be able to now move ahead and launch the International Bank of Australia, with a name that speaks to Novatti’s truly global ambitions.”

Novatti – which before trading opened this morning had a market capitalisation of $62.3 million – has used an additional $5 million of its own cash to invest further into the International Bank of Australia (IBOA), giving it a 91 per cent stake in the entity.

The new bank will be led by Guy Carvalho, who said there would be a strong focus on attracting the largely underserved migrant market for customers, while partnering with fintechs such as Novatti that need an innovative and nimble banking partner.

“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. This is an incredibly unique service which will provide significant value to potential customers who want to get their lives sorted before reaching Australia,” said Carvalho, IBOA’s CEO.

“For a long time, we have known that traditional banks have not been able to keep up with the requirements of the disruptive business models of fintechs, particularly those offering alternative ways to make or accept payments, domestically or internationally.

“IBOA will overcome this challenge, leveraging technology to enable the seamless end-to-end movement of money.”

Carvalho estimated that international students coming into Australia on average bring $5,000 cash with them, culminating in around $1 billion in total.

“Right now there is no bank that’s actively seeking to win that business. Those students, 50 per cent of them will get a job within the first year, earn around $24,000 a year,” he said.

He added that professionals moving to Australia tended to bring between $20,000 and $40,000 in cash – also a “significant value pool for us that no one at the moment is targeting”.

“The size of the market, we believe, is significant, and we believe we will play a significant role in that market as a payments bank.”

Cook said that following today’s milestone, Novatti had “over time delivered” on its strategy to secure several licences.

“It now absolutely completes our set of licences and really brings through a lot of the capabilities of the group. We have a unique ASX-listed group – within the group we have acquiring licenses, issuing licenses, cross border licenses and capabilities,” he said.

“We also have applications in for licenses in other jurisdictions, as well as holding licenses in New Zealand and Canada.

“We have very strong yet diversified revenue streams that in fact work with each other in the payments world, and having the bank license and the infrastructure of the bank will further that.”

Cook noted Novatti currently needed to buy services from other banks such as underlying settlement or cross border-payment services.

“Even when IBA is fully deployed we’ll still use services from other banks, but a number of services that we currently consume will come down in price because we’re buying from ourselves,” he said.

Guy clarified the bank currently had a restricted banking licence.

“We are at the moment restricted from offering any services to the general public,” he said.

“Our first step is to build out the banking component of the infrastructure and get that approved by the regulator – we hope to be launching our first live account in six months’ time.

“We hope to then achieve full ADI (Australian deposit-taking institution) status within 12 months…marketing will slowly ramp up in the next few months ahead to start positioning ourselves,” he explained.

When asked about marketing plans, Carvalho added the bank would leverage Novatti’s partnerships in markets such as India, China, Singapore and Malaysia to start establishing distribution points to find customers.

Following the lifting of a trading halt, Novatti shares surged from their previous closing price of $0.18 to $0.32 this morning, before dipping slightly to $0.28 – still a 54 per cent rise for the morning – at the time of publication. This is still well below the $0.79 level reached in mid-2021 but still above pre-COVID rates.

Read the article:

What's a
Restricted ADI?

International Bank of Australia is authorised by the Australian Prudential Regulation Authority (APRA) to operate under a Restricted Authorised Deposit-taking Institution licence until 2nd November 2024. Under this authority International Bank of Australia has restrictions on the amount of deposits it can take. Under this restricted licence International Bank of Australia is not required to meet the full ADI prudential framework and will not be offering banking products to the general public.

International Bank of Australia has put in place arrangements to protect customers in the event it is required by APRA to discontinue banking business and exits the banking industry. This includes:

- International Bank of Australia being required by APRA to contact customers to advise how they are impacted, e.g. deposits may be returned or transferred to another bank;
- the Banking Act 1959 provisions for the protection of depositors apply to International Bank of Australia; and
- International Bank of Australia is covered by the Australian Government Financial Claims Scheme (FCS). The FCS applies only to protected accounts. It is important customers check the terms and conditions of their specific product to determine if it is protected under the FCS.

You can read more about how banks are licensed on this page on the APRA website:
Licensing guidelines for authorised deposit-taking institutions | APRA
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