Change Financial Ends June Quarter Prepared for New Phase of Growth
- Appointed fintech veteran in the payments industry Eric Bachman as new CEO
- Acquired the option to purchase the remaining equity interests in Ivy Entities for US$10 million in scrip and cash, subject to shareholder approval
- Raised US$2.62 million in a heavily oversubscribed placement to fund acquisition of the Ivy call-option and deployment of enterprise solution
- Finalised connectivity testing with Mastercard of innovative Software-as-a-Service enterprise solution and progressing closer to commercial launch
- Achieved total transaction volume of US$35 million, deposits of US$11.9 million and record efficiency of cost of acquiring customers in the company’s consumer product
- Total transaction volume growth of 40% from prior comparable period
31 July 2018: U.S-based fintech company Change Financial Limited (ASX: CCA) (“Change Financial” or “the Company”) is pleased to present its quarterly report for the three months ending 30 June 2018.
Restructured leadership for a new phase of growth
Operationally, a significant portion of the June quarter was devoted to Change Financial’s restructure of its leadership and capital raising for a strategic acquisition of the Ivy Entities (‘Ivy’), as the Company embarks on a new phase of growth.
On July 4, Change Financial announced that had appointed Eric Bachman as CEO effective 1 August 2018, with Managing Director Ash Shilkin remaining on the Board and moving to an Executive Director. Mr Bachman is an institutional payments veteran with over 30 years’ experience in banking, payments, and building new companies. Mr Bachman’s experience reaches across key brands, such as Wells Fargo, US Bank, Visa, BankServ and NextCard. He was part of the team that built and launched Marqeta’s leading payment card issuing and processing services and analytics platform. With the support of key leadership which includes alumni of Westpac, PayPal and Goldman Sachs, Mr Bachman is ideally placed to lead Change Financial to execute its monetisation strategy and bring its enterprise solution to market.
Capital raising and acquisition of Ivy
To support its evolution, in early July Change Financial raised approximately US$2.62 million in a heavily oversubscribed placement. Net proceeds from the placement are being used to fund working capital, the deployment and marketing of its enterprise solution and for the purchase of the option to acquire Ivy (US$250,000).
Ivy is developing a platform which aims to solve one of cryptocurrency’s biggest challenges, the issue of anonymity associated with payments recorded on a blockchain and how they interact with the existing financial ecosystem. Ivy’s platform will embed comprehensive Know-your-Customer (KYC) and Know-your-Transaction (KYT) information into the Ivy token to assist in the satisfaction of anti-money laundering (AML) requirements. The aim of Ivy’s technology is to bridge the gap between the significant volume of blockchain-based payments (up to US$92 million in the US alone in 2017 according to Bloomberg) and financial institutions. Furthermore, the vision for Ivy is to ultimately be an alternative to the global incumbent payment networks which transfer more than US$5 trillion per day1.
Change Financial intends to integrate the Ivy platform into its enterprise solution and award-winning consumer product as it continues to evolve its unified payments platform. Further to this, Ivy announced during the quarter a partnership with HiveEx, a leading cryptocurrency trading platform, to launch IvyPay, a platform which will turn cryptocurrency into AUD instantly and allow it to be used to make payments.
Finalised testing of the enterprise solution
Change Financial made further progress towards the launch of its enterprise solution which will provide turn-key services targeting 7,000 Federal Deposit Insurance Corporation (FDIC) banks in the US with innovative, cost-effective mobile banking services. Incoming CEO Mr Bachman has six years of experience with Marqeta successfully rolling out similar product offerings; Marqeta recently achieved a valuation of US$545 million.
The Company has been working with its partners Mastercard (NYSE: MA), Discovery Financial Services’ (NYSE: DFS) subsidiary Pulse and the Central Bank of Kansas City to become one of the small number of processors that is fully integrated with Mastercard globally. Change Financial completed interconnection testing during the quarter and, post the quarter end, began testing programs for registration as a Mastercard third party processor, including system messaging, key exchange and transactional testing.
Change Financial is on track to begin testing customer accounts and is targeting a full launch in 2H FY19. Change Financial expects the appointment of Mr Bachman, who has extensive experience and connections in the payments industry, will greatly expedite the progress of the enterprise solution as it moves through development into full launch.
The size of the addressable market for the enterprise solution is extremely large, with the global payments industry projected to grow its revenues to $2.2 trillion annually by 2021, driven by global GDP growth and the increasing transactional needs of businesses and consumers worldwide2.
Industry veteran appointed CEO, US$2.62M raised via placement and option to acquire Ivy Entities
- Change Financial has appointed a new CEO, Eric Bachman; Mr. Bachman is a fintech veteran in the payments’ industry and will support Change Financial’s efforts to bring the Company’s enterprise-facing payments’ processing platform to market.
- Ash Shilkin will transition to Executive Director.
- Change Financial has acquired an option to purchase the remaining equity interests that it does not currently own in the Ivy Entities for US$10 million in scrip and cash, subject to shareholder approval.
- The Ivy Entities are developing the Ivy Platform, which aims to de-anonymise blockchain-based payments to address the anti-money laundering concerns that currently prevent those funds from entering the traditional banking sector.
- Change Financial has raised approximately US$2.62M million in a heavily oversubscribed placement to strengthen its working capital, fund the deployment and marketing of the payments’ processing platform and, if it receives shareholder approval and the Board believes it is in shareholders’ best interests, fund the purchase of the option over the Ivy Entities.
4 July 2018: US-based, Change Financial Limited (ASX: CCA, OTCQX: CNGFF) (Change Financial or the Company) is pleased to announce the appointment of a new CEO, that it has received commitments to raise US$2.62M and that it has acquired a call option from Elmoson Pty Ltd (Elmoson) to purchase the remaining 67% interests in Ivy Koin LLC (Delaware registered) and Ivy Blockchain Pty Ltd (the Ivy Entities) that it does not currently own (the Ivy Option).
Appointment of New CEO
Eric Bachman will take on the CEO role on 1 August 2018, reporting to the Board of Directors, to accelerate Change Financial’s enterprise and monetisation strategy. Mr. Shilkin will step aside as Managing Director on 1 August 2018 but will remain on the Board as an Executive Director. He will assist Mr. Bachman transition to the role of CEO and will focus on business development and the assessment of new strategic initiatives. All other terms of Mr. Shilkin’s employment will remain the same.
With the support of key management and the board who bring relevant experience from senior positions at previous employers such as Westpac, PayPal, Goldman Sachs, Yahoo, and Deloitte, Mr. Shilkin has carefully positioned Change Financial to enter this new phase of growth. The Company believes that it is now an opportune time for an experienced fin-tech veteran with a proven track record of success to lead Change Financial into the execution phase of its monetisation strategy and to enter the broader market.
Eric Bachman is an institutional payments veteran with over 30 years in banking, payments, and building new companies. He has operated businesses in the payment card issuing and acquiring spaces, transaction processing business, and the mortgage lending and insurance spaces. In each of these areas, he’s consistently delivered strong growth and profitability, and has built and managed exceptional teams.
Mr. Bachman’s experience reaches across key brands, such as Wells Fargo, US Bank, Visa, BankServ and NextCard. He was part of the team that built and launched Marqeta’s leading payment card issuing and processing services and analytics platform.
Marqeta, whose platform powers prepaid debit and credit cards, has been able to ride the wave of growth in the multi-trillion dollar payments market. The company has racked up clients including Square Inc., Affirm Inc., Kabbage Inc. and Alipay since its founding in 2010. Marqeta also has partnerships with large networks like Visa Inc., MasterCard Inc. and Discover Financial Services. The company’s platform allows users to build cards and payment systems for themselves, which can mean creating customized virtual cards for suppliers and employees, and completing online point-of-sale transactions. For example, Instacart can give contractors a debit card issued by Marqeta to pay for goods purchased in store. And Alipay can use the company to let Chinese consumers instantly pay with their Alipay accounts when shopping in the U.S
As COO at Marqeta, his focus was on creating the infrastructure, partnerships, and processes that allowed the company to commercialise its processing technology and turn the innovative fintech into a $545 million company that serves multiple financial institutions and many of the most recognised service, technology, and financial technology companies. Most recently, Mr. Bachman was an Entrepreneur in Residence at BBVA, a global leader in fintech innovation and investments, helping the bank develop new businesses and investments in a number of blockchain opportunities for the New Digital Businesses group.
Mr. Bachman has also managed numerous corporate transactions, including more than a dozen company or portfolio acquisitions and integrations, along with helping to raise over $250 million in funding from private investors, VCs, and private equity. Moreover, his experience working closely with regulators to steer companies in different industries through regulatory hurdles will be crucial for Change Financial.
Mr. Bachman’s interest in joining Change Financial centers on the opportunity he sees within the company. “By leveraging Change’s strong team and its unique combination of technologies, we’ll bring totally new capabilities to the payments industry.” Eric Bachman stated that: “I’m excited to have the chance to define the path to growth and take the company to profitability. I look forward to taking each of the company’s technologies to market and to leveraging the company’s strengths in order to deliver unique and much needed products.”
The key terms of Mr. Bachman’s employment as Chief Executive Officer are set out in the Appendix.
About Change Financial
Change Financial Limited (ASX:CCA, OTCQX: CNGFF) is a U.S-based award-winning fintech, banking software, and blockchain investment company consisting of three core business units: Consumer, Enterprise and Blockchain.
The Consumer unit is underpinned by ChimpChange, the Company’s award-winning digital bank account and mobile app. ChimpChange makes free retail banking available to Americans who typically pay fees in order to have a bank account and provides money management tools to help its customers – the majority of which are millennials – make better financial decisions.
The Enterprise unit provides a turn-key, MasterCard certified Software-as-a-Service solution for U.S banks which is PCI compliant and capable of authenticating transactions.
The Blockchain unit pursues value-accretive investments in the burgeoning blockchain space. Change Financial has invested in Ivy, a blockchain-based cryptocurrency that comes embedded with significant Know Your Transaction (KYT) and Know Your Customer (KYC) information to encourage the use of cryptocurrency in traditional banks and financial institutions.
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