Ambitious fintech Novatti has closed the Series A funding round for its new banking business after raising A$10.5m from investors. It now needs regulatory approval for the new business before the end of February 2022.
The Series A round will provide Novatti’s dedicated banking subsidiary, Novatti B Holding Company Pty Ltd (NBHC), with funding to accelerate the development of this new business once and if restricted banking licence is allocated by the Australian banking regulator.
The group's managing director Peter Cook said the fresh funding "enables Novatti to plan for the growth of this business post regulatory approval".
Novatti said, via an ASX announcement, that it would also use this opportunity to acquire the $2m equity stake in its dedicated banking subsidiary, held by BC Growth Investments Pty Ltd and first announced to the ASX as part of the seed funding round in May 2021. This will result in the many-layered fintech increasing its interest in this subsidiary to 70 per cent in the wake of the Series A round.
"Our new banking business remains a key pillar of our growth strategy as it will enable Novatti to offer new, value-add services to our customers while also driving increased margins," Cook said.
The ambitious fintech has been parlaying its successful and profitable payments processing business into a series of partnerships and agreements in anticipation of gaining, first, a restricted ADI banking licence from APRA, and then moving to a full banking licence.
In a recent report market analysts at Emerald Financial suggested that Novatti is in a strong position to be granted a RADI, with APRA issuing a new license to Alex Bank in July 2021 and granting a restricted licence to B2B neo-lender Avenue Bank in September 2021.
Emerald Financial's buy recommendation included a comment that the equity partner Novatti has secured for its banking business, BC Invest, already has a strong lending presence in the Australian market with $1.1 billion of mortgage loans and 3,800 customers.
"This know-how to launch and operate a lending business offers Novatti the internal knowledge to quickly launch a lending business as its banking services are rolled out to accelerate revenue-generating [consumer] lending products," the report stated.