George Lucas

Raiz Invest Limited (‘Raiz’ or ‘the Company’) (ASX: RZI), a multi-award-winning micro-investing and fintech platform with operations in Australia and Southeast Asia, is pleased to provide an overview of its financial results for the fiscal year ended 30 June 2022 (FY22). This overview should be read in conjunction with the financial report for the year ended 30 June 2022.

Financial and investment highlights

All comparisons are for Year on Year (YoY) movements as at 30 June 2022.

• Total revenue for the Raiz Group up 39.5% YOY to $18.7 million
• Consolidated loss of $5,902,000 (FY21: $258,000) attributed to shareholders after adding back the cost of the employee share option and amortisation & depreciation expenses
• Normalised consolidated loss of $3,927,000 (FY21: $258,000) attributed to shareholders after adding back the cost of the employee share option, amortisation & depreciation, and contra advertising non-cash expense
• The Raiz Micro Investing Platform revenue up 52.2% YOY to $17.4 million
• Raiz’s Annual Recurring Revenue (run rate) up 21.5% YOY to $14.7 million
• Revenue per Customer (run rate, Australia) was up by 8.2% YOY to $55.90
• Global Active Customers up 42.8% YOY to 652,702
• Australian Active Customer up 6.1% YOY to 289,500
• Indonesian Active customers up 114.9% YOY to 253,420
• Malaysian Active customers up 66.3% YOY to 109,782
• Global Cost of Acquisition per customer was $13.1 for the year
• Global Funds under Management (FUM) up 18.1% YOY to $954.4 million
• Superannuation FUM up 74.6% YOY to $186.1 million (including Superestate acquisition)

Operational highlights

• Completed the acquisition of Superestate, boosting FUM and providing Raiz with the capability to offer residential property as an asset class inside and outside of superannuation.
• Invested $2.15m in the Malaysian operation alongside joint venture partner Permodalan Nasional Berhad. Raiz retains 70% of JV.
• Diversified media group Seven West Media (ASX:SWM) made a strategic investment in Raiz with a 6.6% stake for $10m, which was made up of $8m in advertising credits and $2m in cash.
• Raiz Rewards platform updated in Australia to offer more in-store rewards. Raiz Rewards is being rolled out in Indonesia and Malaysia.
• Raiz Kids product relaunched after a period of beta testing with select customers. Raiz Kids is being rolled out to Indonesia and Malaysia.
• Raiz won the Excellence in Wealth Management (including Personal Financial Management and Robo) Award at the FinTech Australia Awards.
• Australia Micro Investing Platform Gross Profit margin was 64%.
• Overall Group operating cash utilised was $2.8 million, with the Australian business remaining operating cashflow positive for the full year.
• Employee benefits expense increased 50% YoY with most of the increase due to a combination of new Superestate staff acquired, new hires, internal promotions and short-term bonuses paid in respect of the FY21 year.
• As of 30 June 2022, Raiz had cash, cash equivalents, and term deposits totalling $15.7m.

Strategy

Raiz has performed strongly in the FY2022 despite volatile markets, especially in the final quarter, as the pandemic, geopolitical tensions, rising interest rates and inflationary pressures took their toll on investor sentiment. All these factors were evident in the three regions where Raiz operates, Australia, Indonesia, and Malaysia, yet all three showed significant gains.

These challenging market conditions persist today, accordingly, and consistent with continual consideration of Raiz’s strategy, the Raiz board, has begun a formal process of reviewing the Company’s strategy. At the AGM the board expects to be able to present an updated company strategy to the market.

We continue to be a market leader, and this was illustrated in June at the FinTech Australia Awards that saw Raiz walk away with the Excellence in Wealth Management (including Personal Financial Management and Robo) Award. Raiz continues to be recognised for providing innovative, cost-effective and high-quality Investment and Wealth/Asset Management solutions.

Joint Group CEOs George Lucas and Brendan Malone said: “FY2022 saw Raiz encounter some challenging trading conditions. Despite these challenges and weaker investor sentiment, the business continued to grow in Australia and Southeast Asia as the Active Customer and FUM numbers attest.

“What it shows is that our strategy of customer first allows us to retain and attract new customers to Raiz even during challenging times. In Australia, we were particularly pleased by the increase in Superannuation FUM. Although this included the Superestate acquisition, we are encouraged that more Australians are entrusting us with their retirement savings.

“We are also proud of the Cost of Acquisition (CAC) we saw throughout the FY22. But in recent months we have not seen revenues increase as strongly as we have seen in the past. To combat this, we continue to closely monitor our expense base and make the appropriate decisions for the business.

“We need to thank the Raiz team globally for their commitment to the Company. They ensure we deliver the products and customer experiences that provides our customers with the best possible experience.

“Finally, to our shareholders, it has been a difficult year, especially the second half, so thank you for your ongoing support in our journey. We are committed to review the long-term strategy for Australia and Southeast Asia to ensure the company is focused on delivering value to its shareholders and stakeholders in the long term.”

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Ms Taylor will bring to the position two decades of board experience, including as Chair of remuneration and nomination committees, as well as a varied executive career at customer-centric industries, including CEO at Deakin Health and Sports Centre (since acquired by Fitness First) and Global Director, People and Culture for SMS Management and Technology (now part of NRI).

As a BA (business) graduate from the University of Canberra, with an MBA from the University of New England, a Graduate Diploma in Adult Education and as a graduate of the Australian Institute of Company Directors, her board experience spans ASX listed, commercial and government organisations, and not-for-profits.

Currently, Ms Taylor is a director of Western Leisure Services – it manages major recreational facilities – Apollo League (it assists SMEs find capital and leaders), and We Make A Difference (a subscription member benefits platform) and is a mentor with Leadership Victoria.  She was previously on the board of the International Women’s Development Agency.

Raiz Chairman, Harvey Kalman, says: “We welcome the appointment of Philippa who brings with her a wealth of experience in workforce and executive governance, organisational culture and engagement with fast-growing companies with global operations.

“Having also held senior roles in financial and professional services organisations overseeing corporate growth, including restructuring, refinancing, rapid expansion and contraction, and merger opportunities, she will certainly add to Raiz’s skill set at a board level during a period when we are aiming to rapidly grow the Australian and Southeast Asian operations.”

Ms Taylor says: “It’s a privilege to be asked to join the board of a fintech that has achieved so many milestones in its seven-year history. Funds under Management (FUM) exceeding $1 billion, acquisitions, expansion into Southeast Asia, are all notable achievements for an organisation that has a clear strategic direction and is implementing it.

“I am confident my skill set and experiences, including overseeing significant and varied COVID-19 impacts to operations, cash flow and profitability and strong financial literacy, will enable me to make an important contribution to Raiz at this period in its growth.”

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Mr. Grimshaw, who has a 35-year career in financial services, will also be expected to be the Chair of the Audit and Risk Committee.

His most recent position was CEO and Director of EZCORP Inc, a Nasdaq-listed company that he joined in November 2014 as Executive Chair. Before joining EZCORP, he was Managing Director and Chief Executive Officer of the Bank of Queensland.

Over his career, Mr. Grimshaw, who graduated with a Bachelor of Commerce and Administration from Victoria University in Wellington, New Zealand, and has an MBA from Melbourne University, has held senior executive roles at several international banking and finance companies.

A former Olympian who represented New Zealand in hockey at the 1984 Games, he has also served as non-Executive Chair of Cash Converters International Ltd and as a Director on Suncorp Ltd.

Raiz Chair Harvey Kalman says: “Stuart brings a wide array of capital market and financial services experience, both as a senior executive and director, to the Board. The fact that EZCORP’s operations had a significant presence in Latin America brings an added skill set at a time we are consolidating our Indonesian and Malaysia operations and are poised to enter the Thai market”.

Mr. Grimshaw says: “Raiz is a great success story among the wealth management fintech start-ups in Australia. Not only has it established a firm foothold in the Australian market but has had the vision to take its micro saving and investing model to the growth markets of Southeast Asia.

“I believe my experience accrued through many varied positions in financial services entities, and geographies, over the past 35 years equip me to make an important contribution to the company.”

Mr Grimshaw will replace David Gordon on the board of Raiz Invest Limited on 1 December 2021.  David was instrumental in founding and guiding Instreet Investment Limited with George Lucas in 2007, which in 2018 was restructured into Raiz Invest Limited.

“We cannot thank David enough for his service to the Company over the last 14 years”,  Mr Kalman added.

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Alex Gao is an experienced financial executive. He has more than 15 years’ experience in accounting, finance and operations. As CFO, Alex will oversee the financial planning and board reporting, management accounting and other accounting functions.  He will also have oversight over Raiz’s  pre and post compliance of all trading functions.

Alex is a member of CPA Australia and holds a Master of Commerce from the University of Sydney, majoring in accounting and finance.

Alex joined Instreet Investment in 2012 as the finance and operations manager and has worked closely with Managing Director/Group CEO George Lucas since then.

He has also been a valuable member of the team, including Australian CEO & Group COO Brendan Malone and James Poon, Chief Product Officer & International, to grow Raiz since it began operations in 2016 under the Acorns banner.

Lucas says: “Raiz is delighted to announce Alex’s promotion to CFO. Alex joined Instreet before it was part of Raiz, and has contributed strongly to Raiz’s growth having been involved in all stages of the business from the beginning of an idea to where we are now.  We are confident Alex will continue to add value to Raiz and look forward to his success in the role.”

Gao says: “I am honoured to be appointed CFO of a company that is enjoying such strong growth not only in Australia, but also Malaysia and Indonesia. COVID tested the business but we have emerged a stronger and more competitive company, with a proven business model through the most difficult of times.  I am confident we have the right strategies and team for this growth to continue apace.”

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George Lucas

Raiz Invest, Australia’s largest mobile-first financial services platform, has opened a new investment channel – residential property – for its customers, with an agreement to acquire the holding company of the Superestate business via the issue of 5.3 million Raiz shares. Using a share price for Raiz of $1.7845 (sourced from a 10 day VWAP to 26 April 2021 inclusive), it values Superestate at $9.5 million.

Superestate, founded and majority owned by former Olympic swimmer Grant Brits who won a bronze medal at the 2008 Beijing Olympics, is a niche integrated superannuation and Australian residential property investment platform.

Brits and Superestate staff will join Raiz. The two businesses will continue to operate separately until an integration strategy that ensures the best outcome for all customers is implemented.

Raiz Invest Managing Director/Group CEO George Lucas says: “This acquisition, the first in our five-year history, marks an important milestone for the group by demonstrating organic growth is not our only option to increase funds under management (FUM) and Active Customers. Other acquisitions are on our radar as we actively look for opportunities in the Asia Pacific region.

“The acquisition provides tangible benefits to the customers of both financial services groups. Raiz secures the capability to offer residential property as an asset class in and outside superannuation in much the same way that we successfully introduced Bitcoin to our customers, giving them a means of investing in cryptocurrency.

“It also means $70 million of FUM in superannuation, 6,000 customers signed up and a residential property fund with eight houses under management can eventually be moved on to the Raiz platform.

“The acquisition also includes Vali, a property data & technology platform, which has a database of more than 13.5 million property valuations and is integral to the investment strategy of the residential property fund.  It will complement Raiz’s current data analytics capabilities as well as other products such as Raiz Home Ownership.”

Brits says: “For Superestate customers, they will benefit from the Raiz App investor reporting capabilities and other features that Raiz offers, such as Raiz Rewards, where cash backs from shopping online can be invested into superannuation.

“There are also mutual benefits with the acquisition allowing Raiz and Superestate to increase scale, further asset diversification, and operational and growth synergies, all of which will allow the combined group to grow at a faster pace.”

Raiz enjoyed a good performance in the March 2021 quarter with organic growth in Australia increasing by nearly 26,000 Active Customers in that quarter – about double the growth enjoyed in the first two quarters of the 2020-21 financial year. Australia was also operating cash flow positive in the quarter. At this run rate Raiz is on target to have $1 billion in FUM by the end of calendar year 2021.

Completion of the acquisition is subject to conditions including satisfactory completion of Raiz’s due diligence, the continuation of certain material contracts, escrow agreements in place, transfer of key employees, and Superestate being debt free. Completion is expected to occur in late May 2021. Raiz shares issued to the vendors of Superestate Pty Ltd will be subject to voluntary escrow of between 3 and 24 months and will be issued under Raiz’s placement capacity in Listing Rule 7.1.

This announcement was authorised by the Board of Directors.

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CEO Australia & Group COO Brendan Malone says: “We have established the process to allow SMSFs to invest in any of our investment products on the Raiz Invest Platform, confident of their appeal because of the wide choice offered and the very competitive platform fee that includes all brokerage for unlimited trades, no switching fees and automatic rebalancing.

“To date only individuals could invest with Raiz – it has more than 400,000 Active customers – but by making our platform available to SMSFs we are tapping into a very dynamic part of the financial services market.”

Raiz has traditionally appealed to the Millennial market, but with SMSFs it has an opportunity to grow with its customers and provide financial services to clients who are well on the way on their investment journey.

Raiz already has a diverse client base that includes more than 30,000 clients aged 50 or over.

Raiz recently launched a Custom Portfolio offering in Australia, allowing clients to personalise their portfolios by selecting their own ETF and Bitcoin target weightings. The uptake has been very encouraging with more than 7,000 clients representing more than $28 million in FUM using this option since the late January launch.”

Malone says: “Offering a Custom Portfolio gives our growing client base greater choice. As we discovered after offering the Sapphire portfolio with Bitcoin as part of the investment strategy, clients continued to ask us for more control over their portfolios.  We believe Custom Portfolio will help meet this need.”

At 28 February, Raiz had total FUM of $665 million and Active Customers over 405,000.

“Based on the growth rate in FUM in the last three months of 2020 and the momentum in 2021, we are quietly confident of reaching $1 billion by the end of calendar 2021 and believe the offering of a Custom Portfolio and targeting SMSFs will help achieve this goal,” Malone says.

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Moore, a digital marketing specialist who brings multinational board and governance experience to the role, focuses on growth companies with turnovers of between $10 million and $100 million.

Moore has a corporate career with director level marketing and general management experience across 30 countries, having successfully launched and grown Australian and global brands.

His non-executive responsibilities included the chairmanship of CROSSMARK Asia Pacific, owned by the private equity firm Warburg Pincus, and Chairman of the digital marketing company, The Now Communications Group, based in Singapore, and is an independent, non-executive director of the listed company, InvestSMART Group (ASX:INV).

Raiz Managing Director & Group CEO George Lucas said: “The appointment of Kevin, with significant marketing and general management experience in growth companies across Australia and Southeast Asia, comes at an important juncture for Raiz with the business expanding into Malaysia and Indonesia and the growth and consolidation of the Australian business.

“Management and the board are well positioned to take Raiz to the next level in Australia and Southeast Asia with the recent appointments of Brendan Malone as CEO of the Australian business, Kelly Humphreys as a non-executive director, and my increasing focus on the global business as MD/Group CEO.”

Moore’s appointment coincides with the resignation of Peter Anthony (Tony) Fay as a non-executive director and Chairman of Raiz effective 1 December 2020.  Tony joined the Board in October 2016  and played a key role in the Company’s early growth and IPO in 2018.  After four years, he has decided to resign from the board and to focus on other interests.

Lucas says: “Tony has made a significant contribution to the business through his experience of financial markets, management, product development, compliance and risk management. On behalf of the Board and management, I would like to thank him for his board leadership and wise counsel, and I wish him all the best in his future endeavours.”

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George Lucas

Raiz Invest, Australia’s largest mobile-first financial services platform, has welcomed the findings of a parliamentary committee that has rejected calls for an outright ban on screen-scrapping,  acknowledging that it found no evidence of consumer harm due to this practice.

The Select Committee on Financial Technology and Regulatory Technology, which handed down its report into the  FinTech and RegTech sectors today, said: “it is pertinent that ASIC has found no evidence of consumer harm as a result of these practices (screen-scarping).

“(We) consider that an outright ban on screen scraping is not prudent at the present time, and that, in many cases, these practices are enabling companies to innovate and provide competition in the financial services sector.”

Raiz Invest CEO George Lucas said: “This recommendation by the committee is an important step forward in allowing genuine competition in the Australian financial services sector.

“Although the committee acknowledged that it would take time for the Open Banking regime to provide a level of data quality and ubiquity that is available using digital data capture services, it also rightly pointed out that the correct place to address the issues associated with screen-scaping is within the ePayment’s code, which is currently under consideration by ASIC, due to its potential to significantly reduce fraud associated with online payments.”

In Raiz’s submission to the committee early this year, it strongly argued that the political and regulatory environment continued to favour a “Big Four” bank policy, a reality confirmed by the passing of the CDRs legislation.

“This means the playing field remains significantly skewed in favour of the ‘Big Four’ and the Apples and Googles of this world.  This position is only re-enforced by the CDR legislation.

“Today, the reality is that this bias is still the regulatory norm for our industry. But hopefully this report will be another catalyst for change that will encourage FinTech innovation in Australia that puts consumers first.”

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George Lucas

Raiz Invest CEO George Lucas says, “It is pleasing to report continued growth during May, with a 1.2% increase in active customers to 220,955 and a 6.9% increase in total funds under management to $433 million.

“This resumption of growth, in the past 2 months, is particularly pleasing as it follows dramatic market falls and significant volatility and economic uncertainty associated with COVID-19. There are now more active customers than at 29 February 2020.

“Net inflows into the Raiz Invest Super product have slowed as withdrawals continued due to the COVID-19 early release of superannuation.  In May 2020, $2 million in superannuation was withdrawn, following the $4 million that was withdrawn in April 2020.

The suspension of SuperMatch that was announced on 19 May 2020, by APRA and the ATO to address fraud, may impact the growth of Raiz Invest Super going forward. SuperMatch is part of the Company’s infrastructure enabling members to easily consolidate their superannuation online.

“The Southeast Asia expansion strategy continued to gather momentum with the granting of a licence for our Malaysian operation, as announced on 1 June 2020. This licence allows Raiz to immediately start marketing its product to this significant target market with a population of 33 million people.”

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George Lucas

Raiz Invest Limited, the largest, mobile-first financial services platform with more than 700,000 sign-ups, is urging an overhaul of the ePayments Code as one critical measure to increasing competition and level the playing field between the established financial players and the emerging Fintech sector.

In its detailed submission to the Select Committee on Financial Technology and Regulatory Technology that is inquiring into the FinTech and RegTech sectors, Raiz argues that the Consumer Data Rights (CDRs) legislation creates an unfair advantage for incumbents and that the ePayment Code needs to be amended to ensure the system does not disadvantage any market player.

RAIZ CEO George Lucas says: “The political and regulatory environment continues to favour a ‘Big Four’ bank policy, a reality confirmed by the passing of the CDRs legislation. This means the playing field is anything but level, remaining significantly skewed in favour of the ‘Big Four’ and the Apples and Googles of this world.

“Comparing the Australian Open Banking regime to the European Open Banking regime, as some submissions have done, is ludicrous. In Europe, the same privacy rules apply to the incumbent’s data as they do to the data recipient using Open Banking so there is no double standard favouring the incumbent.

“In Australia, this is definitely not the case, where the Privacy Safeguards mean significantly tougher privacy rules apply to FinTechs that are the recipients of Open Banking data compared with the incumbent banks, with the four major banks holding 90% of the data.”

Lucas says that despite public announcements by Government about support and encouragement for FinTech innovation in Australia, this Government-mandated banking oligopoly still has the active support of legislators, regulators and Treasury (the findings of the Financial Services Royal Commission notwithstanding).

“This double standard created by the Privacy Safeguard is a powerful disincentive to financial innovation and FinTech investment, and Raiz is firmly of the view that significant changes to the legislative framework must be made to allow Fintechs to compete and flourish.

“Modification to the ePayment Code is a solution to this and the government should have addressed this when the recommended changes were made in the Financial System Inquiry that was handed down in late 2014.”

Raiz recommends three ways to reassure customers providing Fintechs with their Pass Code that their data is secure. They are:

• They are not breaching the Pass Code requirements in the Code;
• They are not breaching their terms and conditions with their incumbent bank; and
• They remain protected by their incumbent bank against unauthorised transactions.

Aside from changes to the ePayments Code, Raiz also wants the unfair streamlined accreditation process for ADIs abolished.  FinTechs will need to prove that they are “fit and proper” to be accredited.  “But a CBA or Westpac, which have been investigated or fined by Austrac for abuse of the Anti-Money Laundering rules, or have pleaded guilty to criminal charges, are still automatically considered ‘fit and proper’ despite the damning findings of the Royal Commission.”

Lucas concludes: “Amending the Code will significantly contribute to a more positive regulatory environment for FinTechs, as well as removing competitive barriers to FinTech innovation, thereby increasing investment and competition in the Australia financial services market. Otherwise Open Banking will simply be a compliance tool for lenders to meet their responsible lending obligations.“What also has to be understood is that by reducing the ability of the ‘Big Four’ to stifle competition in financial services will ultimately benefit all Australian consumers. Surely this should be the key goal of the Government.”

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