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Midpoint Holdings Ltd: DEEP DIVE

Midpoint's transactional volumes jump 44% in Q3

Midpoint Holdings, the P2P forex payments platform, reported a 44% increase in transactional volumes in the three months to March 31
Midpoint's transactional volumes jump 44% in Q3
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Volumes jump 44% after management change

Midpoint Holdings Ltd (CVE:MPT), the foreign exchange payments platform, is gaining traction and reported a 44% increase in transactional volumes in the three months to March 31, 2016.

Revenue increased 8% in the period and the gross margin was 43%, the company revealed in its third quarter earnings report.

Since the appointment of Corbin Comishin and David Wong as chief financial officer and chief executive respectively in November last year, over C$50mln has been transacted, contributing to the 44% quarter-on-quarter transactional volume growth, the company said.

At this point, more than C$125 million has been matched on the Midpoint platform, while the average transaction size is C$31,000.

Meanwhile, repeat users has grown from over 50% at the end of the first year to 61.1% by the end of the second to around 88% now.

The net loss in the third quarter shrank to C$150,035 from C$276,763 in the same period in 2015.

Current liabilities decreased to C$174,292 at March 31, 2016, compared to $460,934 in June 30 last year due to a reduction in accounts payable, and the firm has enough cash to pay these liabilities, it said.

What does the company do?

Midpoint Holdings operates a peer-to-peer (P2P) foreign exchange and international payments platform, which eliminates the bid-offer spread and other, often excessive, service fees that are normally incurred by the client when using other traditional competitors.

The online marketplace, for a fee, matches buyers and sellers of foreign currency at the midpoint of the relevant currency pair interbank rate.

Interest in the P2P space is growing across a wide range of financial instruments including the FX space but Midpoint differentiates itself from competitors is several ways.

It provides both the regulated marketplace and the software to match multiple buyers and sellers across multiple currencies via its patented netting engine.

Midpoint  holds  a US computerised business method patent from 2007, which allows buyers and sellers to be efficiently matched.

The system is able to identify complex chains of multi-party, multi-currency matches enabling Midpoint to offset multiple counterparties transacting in multiple currencies, thereby dramatically increasing the efficiency of the matching process. The patent is valid until March 2020.

The firm targets individuals as clients and both small and medium sized enterprises (SMEs). These two client segments traditionally find it difficult to access competitive foreign exchange services.

Midpoint targets industry sectors which engage in frequent foreign exchange, transactions, such as leisure  and tourism, accounting firms and IFAs (Independent Financial Advisors), software and tech companies, migrant workers and expats.

Extends partnership with on-line accounting software group  Xero

In March this year, Midpoint also announced it was extending its partnership with on-line accounting software group Xero, with the release of a pay now app.

It was the latest development in the partnership between Midpoint and Xero, which was announced in July, 2015.

The integration of the Midpoint platform will enable Xero's 600,000-plus subscribers to save money on their foreign invoices through buying currency at the midpoint of the buy-and-sell rate.

"This development paints a picture of the future of e-invoice FX payments,” Midpoint chief operating officer Brad Lemkus said, on March 3.

“The process is easy and seamless, delivers unbeatable value and simultaneously updates a user's Xero software, whether a vendor or customer.

Looking ahead

The company’s objective is to continue to build sales across multiple markets and jurisdictions while continuing to offer exceptional customer service and improving the platform for customers.

The firm's online and largely virtual nature allows the business to be driven through multiple channels thereby amortizing its operational costs as it scales.

There are five different models that Midpoint is currently seeking to exploit: (1) organic (2) referrals; (3) co-branded white-label solution; (4) a pure white-label solution; and (5) licensing.

The firm is also upgrading its payments engine and in the final phases of testing to launch five new currencies and opening up registration for five new countries.

It is also working on multi-currency prepaid debit cards which will expand the number of possible clients.

The cards would allow users to fund in and transfer between currencies on their card at the Midpoint rate, unlike with other competitive travel cards in the market.

Midpoint has identified program managers and issuer banks that have expressed interest in working with it on this initiative

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