Market Update Regarding Supply Chain Issues
A> Kobenhavns Andelkasse Bank (http://kbh-andelskasse.dk)
As of the 13th September 2018, the Kobenhavns Andelkasse Bank ("KAB") was placed under the control of the Danish State administration company for banks, known as "Finansiel Stabilitet" ("FS")(see Note below). The Company is continuing to seek clarification but has received information from FS in the last 24 hours, that where a resolution was previously thought possible, means the Company's clearing and settlement of its partner card networks via KAB is no longer possible.
The KAB matter has already impacted processing, clearing and settlement intermittently during July and August, and most of the September month. The Company's merchants have in the meantime made arrangements to continue to utilise their existing card processing facilities outside of the Company's present network.
The Company had used KAB as part of its card and APM clearing and settlement network, including for holding Company's own, settlement and client funds in EMA's. The direct exposure to KAB is circa EUR255k, which is likely to be returned under the Danish 'Guarantee Scheme for Depositors and Investors', with the Company awaiting details as to timing of release of funds.
The matter with KAB however demonstrates that execution of the previously communicated core strategy is paramount, and the main priority is for the Company to conclude the implementation of its Tier 1 (direct) connections to central banks and card schemes as soon as possible, in order to not be impacted by third party issues.
B> Revenue Impact
The Company's revenues and cash flow will be impacted this quarter as a consequence of settlement funds being returned back up the supply chain, and settlement being deferred or via alternate (non company) channels. The resulting deferred cash flows and corresponding revenues will be recognised once settled, with a further USD$500k identified in third party (non KAB) suspense accounts. Consequently, the Company advises September quarter receipts will be down significantly from last quarter, with resultant cash receipts possibly as low as $1.2m. The Company is working to manually clear funds on a priority basis.
C> Central Banking
The Company has been advised by the Single Euro Payment Area (SEPA) scheme operator, the European Payments Council, that its facilities are on track to go live for processing Euro settlement and clearing via its central banking facilities on the 8th October 2018. The Company will configure its clearing and settlement supply chain directly into its central banking facilities with focus on concluding our EU Tier 1 connections for Visa, Mastercard and JCB at the same time.
The Company had previously planned to use KAB to conduct an orderly transition to its own banking facilities. The KAB matter mean that the company will not be processing EU card transactions (with corresponding impact on revenues) until our own central bank facilities are commissioned. The Company's core banking and Tier 1 card processing systems will be going live progressively through October into early December as previously announced, with EMA's going live before end of October.
D> Forward Looking FY 2019 - Emoney Accounts (EMA's), JCB, VISA, Mastercard
The Company's forecasts announced yesterday for FY19 commencing January to December are restated, with a typographical error amended:
- Card processing/ Acquiring = $13.2m
- EMA = $3m
- Other Services = $1.5m
- Gross Profit Total = $17.7m (was stated as $17.5m in announcement dated 25/9/18)
Annual Operating cost base ~ ($7m)
Anticipated FY2019 EBIT: AUD $10.7m (was stated as $10.5m in announcement dated 25/9/18))
E> Australian Opportunity
The Company is optimistic that the short term challenges it is facing in its European operation will not in any way impact its upcoming Australian operations. The Company continues to put arrangements in place to allow for card settlement and clearing in Australia to take advantage of the opportunities created by the 'evolving' Australian regulatory landscape and the NAB's revised risk appetite, into FY2019.
Whilst the KAB matter has significant impact on short term revenues, the Company's Tier 1 facilities are being progressively completed and commissioned over the coming weeks in any case. The Company's principal focus is now on delivery of its EU network, and planning for its Australian network, in order to deliver against its contracted forecasts and maximise its opportunities. The Company's overall view remains optimistic and positive with regards to execution of its overarching strategy.
About iSignthis Ltd
Australian Securities and Frankfurt Stock Exchange listed iSignthis Ltd (ASX:ISX) (FRA:TA8) is the global RegTech leader in remote identity verification, payment authentication with deposit taking, transactional banking and payment processing capability. iSignthis provides an end-to-end on-boarding service for merchants, with a unified payment and identity service via our Paydentity(TM) and ISXPay(R) solutions.
By converging payments and identity, iSignthis delivers regulatory compliance to an enhanced customer due diligence standard, offering global reach to any of the world's 4.2Bn 'bank verified' card or account holders, that can be remotely on-boarded to meet the Customer Due Diligence requirements of AML regulated merchants in as little as 3 to 5 minutes. Paydentity(TM) has now onboarded and verified more than 1.5m persons to an AML KYC standard.
iSignthis Paydentity(TM) service is the trusted back office solution for regulated entities, allowing merchants to stay ahead of the regulatory curve, and focus on growing their core business. iSignthis' subsidiary, iSignthis eMoney Ltd, trades as ISXPay(R), and is an EEA authorised eMoney Monetary Financial Institution, offering card acquiring in the EEA, and Australia.
ISXPay(R) is a principal member of Visa Inc, Mastercard Inc, Diners, Discover, (China) Union Pay International and JCB International, an American Express aggregator, and provides merchants with access to payments via alternative methods including SEPA, Poli Payments, Sofort, Trustly, WeChat, AliPay and others.
UAB Baltic Banking Service, a wholly owned subsidiary of iSignthis Ltd, provides API based access to SEPA Core, SEPA Instant and SEPA business scheme, for neobanks, banks, credit unions and emoney institutions, and provides a bridge to the Central Bank of Lithuania's CENTROLink service.
Probanx Information Systems Ltd (Probanx(R)), a wholly owned subsidiary of iSignthis Ltd, is an international banking software company which has been serving the banking industry since the year 2000 by developing comprehensive banking software solutions to financial institutions around the globe. Probanx offers web-based banking solutions using the latest technology and international standard business rules. Our customers are located on five continents and supported from our technical centres in Europe and Australia.
iSignthis' Probanx delivers core banking software, including a fully comprehensive and versatile banking solution for retail, corporate and private banks, emoney and payment institutions, offering capabilities that up until now were affordable only by large commercial banks.
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