Network International is optimistic on region’s digital shift

As anticipated, Network reported a drop of 15.1 per cent in revenue from $335.379 million in 2019 to $284 million in 2020 and 90.2 per cent drop in net profit from $57.31 million to 5.59 million in 2020.

While COVID-19 disruptions have caused sharp declines in revenue and profit, Mer sees these as temporary blips and the company is poised for strong turnaround as regional economies recover and digital payment solutions gain traction.

“We are fortunate to be operating in high growth and fragmented digital payments markets, where we are seeing signs of an acceleration in underlying trends and the long-term opportunity remains significant,” said Mer.

Volumes on the rise

Lockdowns, travel and movement restrictions caused a sharp decline in the total volumes processed (TPV) by the company in the first half of 2020 with encouraging signs of improvement in towards the year-end.

In 2020, the TPV declined 23.4 per cent year on year but on the brighter side the company recorded strong growth of 53 per cent in directly acquired TPV from online merchants.

“Although the pandemic clearly impacted our volumes [TPV] last year, the recovery trend we are witnessing is very encouraging, especially the acceleration in the move of customers away from cash to digital. This is a clear sign of future growth,” said Mer.

Mer said the changes happening in the payments behaviour, especially the massive shift away from cash to digital modes of transactions are a game changer for the payments business in the region.

“What we are seeing is a structural shift that will support our business, which gives us confidence in the long-term outlook,” said Mer.

The shift in consumer behaviour is supported by trends in the card data the company host on behalf of bank customers.

“If we look at a cohort of consumers who used their cards almost exclusively at ATMs in January 2020, one year later, those consumers are now only using their card at the ATM for less than half of their transactions, with the remainder taking place at a POS [point of sales] terminal or online,” he said.

2021 outlook

Network sees some temporary headwinds to trading to linger until COVID cases subside and consumer confidence returns fully. However, for the year as a whole, the volumes are expected to return to 2019 levels.

“We are optimistic but are not closing our eyes to the uncertainties around. Whilst the fluidity of the pandemic creates some uncertainty, we expect 2021 total revenues to return approximately to those recorded in 2019,” said Mer.

In merchant solutions, Network expects to see a sharp turnaround this year in the directly acquired domestic TPV. However, the company sees the international TPV to be about 50 per cent lower than 2019 as travel restrictions are expected to be in place for the good part of the year.

In issuer solutions the company expects to see increased new card issuance, transaction volumes and new business activity, leading to revenue exceeding 2019 levels.

Long term outlook

Just about a month into the top job, Mer is clear on the strategic direction of Network, which over the years transformed itself from a captive payment processing unit of Emirates NBD to become a global payments solutions provider.

“Primarily as a payment processor our job is to facilitate business solutions for our customers both on the acquiring side and payments side want. Going forward, we will be focused on innovation and agility to meet the expectations of our customers,” said Mer.

Mer believes the company has huge opportunities to innovate on solutions for its customers in the region.

“Value addition will be the key to our long-term growth strategy. The banks in the region, especially those in the UAE and the GCC are world class in their customer experience focus. The merchants too are truly global in their outlook. We believe, going forward our focus should be on how to add value to our direct customers and facilitate value addition for their consumers,” said Mer.

He said there are huge unexplored areas in business to business (B to B) payment solutions in the region. There are large volume players in the region who are not yet in the ambit of Network’s business. Intra-industrial sector payment solutions remain hugely unexplored in the region. Additionally P2P is key to financial inclusion in Africa and there is room to innovate and build new payment rails.

“Creation of payment ecosystems in these sectors will be a huge growth opportunity. Going forward we will work with these sectors to create innovative and practical solutions,” he said.

Market expansion

In 2020, the company signed four new payment processing contracts for banks across Africa; saw significant growth in online payments with over 1,600 UAE merchants signing up to its N-Genius payment gateway.

The immediate focus of market expansion in the GCC is Saudi Arabia, the largest economy in the region.

“We intend to move forward with expansion in Saudi Arabia, and on-soil data centre deployment, as soon as practical to do so. Saudi Arabia remains an important future growth accelerator for the business and we are committed to entering this market when more normal circumstances resume,” said Mer.

In Africa, Network will be entering Sudan as a new market this year. The company’s Africa plans got a big boost last year with the acquisition of DPO Group (DPO), an online commerce platform.

The proposed acquisition is progressing towards final regulatory approvals, which are now expected in the second quarter. DPO saw strong performance in 2020 with TPV growth of over 30 per cent year.

“DPO’s business is supported by highly attractive fundamentals, including e-commerce and mobile money exposure, and 100 per cent presence in the fastest growing payments market in the world, making it a clear growth accelerator for us,” said Mer.