Archa founder says business model is sustainable

George Lekakis

The founder of startup corporate credit card issuer, Archa Limited, believes the company is now on a sustainable growth trajectory after it recorded a surge in cardholder numbers throughout 2022.

Oliver Kidd, the founder and CEO of the Melbourne-based fintech, said the company  generated “materially higher” revenue last year and that profitability was “achievable”.

Kidd was approached for comment on the company’s financial performance after accounts lodged with ASIC showed the company made a loss of A$1.7 million for the six months to the end of December 2021.

The most striking feature of the six-month result was a sharp fall in top-line revenue, which came in at only $18,760.

The weak revenue performance was dwarfed by total operating costs of $1.68 million.

Kidd said that revenue had grown at a monthly rate of 17 per cent throughout most of 2022.

“Pure revenue is materially much higher… and there has been a material reduction in our growth spending,” he said.

“We’re very happy with the business – it’s obviously a tough market for startups now because it’s not the champagne days of 24 months ago.

“We’re very happy with the growth in customers, receivables and revenue.”

Kidd did not give a specific number for revenue generated in 2022.

Archa was conceived five years ago as a consumer-focused banking operation, but has since reworked its business model to become a specialist provider of credit cards to small and medium enterprises.

According to the 2021 December half accounts, the company had only 105 credit lines outstanding with 66 business customers at the end of 2021.

Kidd said that the customer base now ran into the “deep hundreds” and that cardholder growth was driving higher revenue.

Data published on the Google Play platform indicate there have been more than 5000 downloads of Archa mobile wallet.

The wallet has attracted mixed reviews from customers on the Google Play platform. 
While some customers champion the mobile platform for managing business expenses, others say it is prone to crashes when attaching files for transaction receipts.

The credit card offer is marketed as an expense management tool that is integratable with Xero accounting software.

Kidd says that Archa has no plans to diversify its product offering.

“We’re not really interested in doing that,” he said.

“We haven’t found a burning need to diversify because we’re solving a really important expense management problem for mid-sized businesses.

“We’re focused on scaling our solution for those types of customers.”

Archa’s decision to exit the consumer market is unlikely to be reversed in the near future given that the company returned its credit licence to ASIC towards the end of last year.

Archa was first granted a credit licence, which is required for consumer credit card issuance, in October 2020.

“The credit licence was a relic of our previous ambitions in consumer credit,” said Kidd.

“Since shifting to focus on corporate cards we decided to hand it back.”

Archa funds its credit card lending through a $20 million facility provided by Melbourne-based alternative funding outfit, Roadnight Capital.

The facility was opened in May last year and is due to expire in May 2024.

Kidd said he expected the funding arrangement would be renewed.

“I’d expect it would be upsized and rolled over,” he said.

“We’ll know more at the end of the year.”

Archa is continuing to grow its capital base, which now exceeds $10 million.

The company’s investors include Wisr CEO Anthony Nantes and former Macquarie Capital executives, Michael Carapiet and John Prendiville.