Strong trading in the UAE combined with the launch of a wide range of new capabilities; remain confident in achieving full year expectations and longer-term growth aspirations
Dubai, United Arab Emirates Issuer Solutions business update:
- Saw 2% revenue growth compared with Q3 2019, where the 2019 period was a reasonably strong comparator due to the presence of some non-recurring revenue streams
- Six new financial institution customer wins for outsourced processing services
- Launching expanded risk and credit decision analysis solutions for financial institutions
- Partnered with Visa in Sudan to enable Visa card issuing and processing for financial institutions
- Saudi Arabia market entry on track, with our technology platform on schedule to be successfully deployed and live services launched in Q1 2022; and a healthy pipeline of customers
Merchant Solutions business update:
- UAE trading strongly and total direct TPV fully recovered to 2019 levels as we exited the quarter. In September, directly acquired domestic TPV was 9% ahead of 2019. International TPV improved, as compared to 2019, from (48)% at the start of the quarter to (31)% by the end of the quarter
- Continued strong growth in online direct TPV at 38% y/y and 124% compared with Q3 2019 (excluding Government and airline online TPV)
- Launched several new capabilities for UAE merchants, including new types of payment acceptance and low-cost acceptance solutions
- Record levels of new merchant signups during the quarter
- Acquiring ticketing partner for Dubai EXPO 2020 providing integrated POS solutions for ticketing retail and food and beverage outlets.
Nandan Mer, Chief Executive Officer, commented:
“We have set out our new strategy to accelerate, innovate and drive faster long-term growth. We are making progress already, giving the business strong foundations from which to deliver our medium-term target of 20%+ revenue growth.
I am pleased to see the strength of trading in our UAE merchant business. This is a reflection of our enhanced sales strategies, faster merchant onboarding and new capability launches; as well as improving underlying market dynamics. Consumer spending in the region has continued to improve, supported by the ongoing return of tourism and growing domestic consumer confidence.
Our market entry to Saudi Arabia is on-track. We have made significant progress in the build of our technology platform, a pipeline of customer commitments and expect to launch services in early 2022.
We also successfully completed the acquisition of DPO during the quarter. DPO continues to trade strongly as a standalone business; and we are excited to have already entered into cross-selling agreements for DPO’s online payments services with two of our existing bank customers.
Our efforts are laying the foundations for future growth and we remain confident in our outlook.”
Further strategic execution:
- DPO acquisition completed and strong trading continues: Q3 TPV growth of 51% y/y or 33% in constant FX; revenue growth of 50% y/y or 32% in constant FX
- Mastercard partnership continues to deliver solutions through our new agreement to enable 3D-Secure 2.0 enhanced fraud solutions for merchant and financial institution customers
Confident in achieving full year expectations:
·Given the ongoing recovery, pace of strategic execution and expected recognition of Mastercard partnership revenue in Q4, we continue to expect the core Network business (excl. DPO) to deliver revenues slightly higher than those recorded in 2019, in line with previous guidance
·DPO consolidation in Q4 is expected to provide an incremental mid-high single digit million revenue contribution to the Group.
Strategic and business update
New services and solutions for financial institution customers
We are progressing our partnership with FICO, working towards the launch of an expanded range of risk and credit analysis solutions. The implementation of the new FICO platform will allow financial institutions to carry out faster and more accurate credit-based analysis for their consumers, enabling banks to more efficiently manage their customer relationships and the sale of credit-based products.
We will also be working in partnership with Infobip to begin providing WhatsApp enabled banking solutions for our financial institution customers. This solution will enable our customers to provide services such as account and transaction enquiries, real-time customer service chat and push notifications to their consumers.
New capability launches for merchant customers
Further strengthening our competitive position in the UAE direct-to-merchant business remains a key strategic focus. We believe that a wide range of capabilities and value-added-services will continue to strengthen our customer offering and deliver market share growth. We have delivered a number of innovative launches during the quarter, with a healthy pipeline to come, some of which include:
- New types of payment acceptance including Rupay (the Indian card scheme), MIR (the Russian card scheme) and upcoming mobile money wallets through our partnership with TerraPay. Buy Now Pay Later (BNPL) will be launching in the coming weeks in partnership with Tabby, the first and largest BNPL provider in the Middle East.
- Low-cost payment acceptance through our new N-GeniusTM App, which allows merchants to enable card payment acceptance on their own android smartphone, with no need for a separate Point-Of-Sale (POS) terminal.
- Faster merchant digital onboarding in 60 minutes.
- Queue-busting payment solutions through our partnership with Ezetap. Using a pocket-sized mobile card payment acceptance machine, which can scan products and accept payments both in-store or by delivery, without an integrated till system or need for customers to wait in-line.
- Currently launching new data and spending analytics dashboards, which will provide merchants with value-added insights into consumer purchasing trends
New business wins continue apace
In the Issuer Solutions business line, the Levant region saw the signing of two new customers and a number of additional card portfolios from existing institutions. In Africa, we signed four new financial institution customers and have partnered with Visa in Sudan, to enable the issuance and processing of Visa scheme cards for both existing and potential new customers. We have also formed a new business division to target outsourcing across pan-regional financial institutions and Mobile Network Operators.
In our Merchant Solutions business line we continue to see record levels of new signings, particularly in the SME space. Notable point-of-sale merchant wins include Hugo Boss (Alfuttaim UAE Trading Llc) and Mercedes (Gargash Enterprises); whilst online signups were strong across the food and beverage and entertainment sectors, including Madame Tussauds Dubai and Ain Dubai (the world’s highest observation wheel). We are also the acquiring ticketing partner for Dubai EXPO, providing integrated POS solutions for ticketing, retail and food and beverage outlets across the event; whilst online, we are supporting delivery of quick Click2Pay ticketing checkout.
Kingdom of Saudi Arabia market entry on-track
We expect to launch Issuer processing payment services to financial institutions in Q1 2022. Our technology platform is on track to be successfully deployed to the cloud environment in Jeddah and is in testing stage. We are closely engaged with the Saudi regulator (SAMA) and domestic payment schemes and are progressing with scheme certifications. Following a number of visits to the region, we have a healthy pipeline and indicative commitments from potential customers.
DPO acquisition completed and synergy cross-sells already underway
As previously announced on 29th September, we successfully completed the acquisition of DPO Group. The financial performance of DPO is therefore not included in this Q3 trading update but will be consolidated as part of the Group’s financial performance for the final quarter of the year.
DPO continues to trade strongly as a standalone business, delivering Q3 TPV growth of 51% y/y or 33% in constant FX; and revenue growth of 50% y/y or 32% in constant FX. We have already started to build the foundations for future revenue synergy delivery, having seen the successful cross-sell of DPO’s services to two of our existing financial institution customers, Tyme Bank in South Africa, and Bank Kigali in Rwanda. We will also shortly launch “DPO Pay” to merchant customers in the UAE, a cost effective and convenient online payment solution for SMEs, which will include the setup of an online store and payment checkout, along with mobile money wallet payment acceptance.
Mastercard partnership delivering new solutions
In partnership with Mastercard, we will be launching the latest state of the art authentication solutions for merchants and financial institutions, using 3-D Secure 2.0. Advanced authentication and fraud solutions are increasingly important to our customers in an environment where more transactions are taking place online through phones, tablets and wearables. 3-DS 2.0 provides enhanced insights and fraud checking capabilities that can analyse ten times more data compared to 3-DS 1.0. It is also compatible with biometric and alternative authentication methods, which provides a smoother consumer experience and leads to high transaction approval rates.
We have also seen the cross-sell of services from the Mastercard Digital Product Platform to another of our bank customers, NBS Malawi.
Third quarter trading
|Q3 2021 growth compared with Q3 2020||Q3 2021 growth compared with Q3 2019|
|Merchant Solutions revenue||38%||(3)%|
| Direct Total Processed Volume (TPV)||22%||(3)%|
| Of which domestic TPV||12%||7%|
| Of which international TPV||171%||(40)%|
|Issuer Solutions revenue||9%||2%|
Note: Trading results do not include DPO.
Merchant Solutions revenue grew 38% y/y, within which directly acquired TPV was up 22% y/y.
Compared with Q3 2019, revenue was (3)% and directly acquired TPV was (3)%. Take rates in Q3 2019 were unusually high due to some merchant pricing adjustments and non-recurring project revenues, whilst take rates for Q3 2021 were broadly similar to those seen in Q2 2021. Domestic spending has improved significantly, moving into positive growth versus 2019 in both August and September. International spending continues to improve, reflective of the recovery of international tourism into Dubai. (It should be noted that Dubai EXPO opened at the start of October 2021 and therefore did not contribute to TPV in the Q3 period).
Issuer Solutions saw 9% revenue growth y/y, where the prior year saw less impact from COVID-19 compared with the Merchant Solutions business.
In comparison to Q3 2019, revenue growth was 2%, where the 2019 period was a reasonably strong comparator due to the presence of some non-recurring revenue streams. We also saw positive progress in both the number of cards hosted and transactions processed.