Business expansion takes the shine from BPAY bottom line

Heavy investment in the Osko instant payments platform and two other business startups pushed BPAY Group to a small loss last year.

The country's largest bill payments business posted a net loss of A$1.5 million for the 12 months to the end of June compared to the 2017 profit of $8.1 million.

The group's core bill payments business grew steadily throughout the 2018 financial year but the deep spend on new businesses tipped the bottom line into the red.

Revenue from the traditional bill payments service grew 3 per cent to almost $50 million but was nullified by a threefold increase in special project costs associated with the tool-up of new operations.

Project expenses ballooned to $14.1 million from $4.5 million in 2017.

Chief executive John Banfield said the company was pleased with the operating performance of the business.

"We are investing for the future," he said.

"Our core business is in a truly solid position and we are confident that the new ventures we are bringing to market will generate higher returns on capital than the BPAY-branded business."

Banfield said that growth in BPAY transaction volumes had accelerated in the first few months of the current financial year, partly because some national billers had recently shifted from quarterly to monthly billing cycles.

He said the launch of Osko in the second half made only a slight contribution to full year revenue, with the earnings impact set to kick in during 2019.

Since the New Payments Platform was launched in February more than 50 million transactions worth $39 billion have been processed through Osko.

The service has swiftly emerged as the dominant provider of real time money transfers and payments in Australia, beating out an early challenge from another major bank-owned startup, BeamIt.

Banfield attributed Osko's early success to the fact that it was offered as an "in-bank" service.

"BPAY and Osko are unique because they are in-bank solutions whereas most of our competitors are marketing in-app solutions," he said.

"I think it's tougher for in-app propositions to get to critical mass."

Banfield said the brand-build campaigns for Osko had been carefully coordinated with the marketing arms of the banks and credit unions that had begun offering PayID services to customers this year.

When asked whether he felt uncomfortable or piqued by the decision of three of BPAY's major shareholders to fund the rival BeemIt payments business, Banfield insisted it had not been an issue.

"No, I'm not uncomfortable about it," he said.

"They chose to make the right decision for a customer set.

"We're delighted with how Osko is performing - the response of customers has exceeded our expectations."

BPAY Group is continuing to develop two data-driven businesses that will extend the company's activities beyond the payments sector.

The first of the businesses set for launch is known as Lodge - an online property management service aimed at self-managed investors.

Diversification of the group's operations has resulted in a reorganisation of the business, with a new holding company established to facilitate the operational separation of the different arms.

The new structure will enable prospective strategic partners to invest in the new subsidiaries as stand-alone entities.