Recent FinTech Partnerships Bode Well for GH Capital

GH Capital Inc. (OTCBB: GHHC)

Technology; FinTech; Buy - Risky

VMoney exposes the company to online money transfer market. Allied Wallet partnership will increase the company’s visibility in Germany and Austria. Downside is already priced in as evident from current stock price.

FinTech is an evolving space with new and innovative methods of financial services endlessly coming to the market. Growth of online businesses is fueling the need for additional and efficient financial transaction solutions. Consumers are always looking for convenience when it comes to shopping and related payments. This changing dynamic is what’s driving FinTech’s innovation and growth.

Aggregation is the new norm

We have seen services like PayPal (PYPL) emerge during the last decade. Now, it’s more about aggregation of payment solutions that makes it convenient for merchants to integrate those solutions in their platforms.

Using aggregators also allow retailers to instantly offer multiple payment methods to the customers leading to a higher conversion rate. That’s why we see digital payment processing companies like Wirecard AG (WRCDF) expanding at a quick rate. The company registered a transaction volume growth of ~34% during the first quarter of 2017. The point is that aggregation of payment methods is on the rise, and companies in this arena are set to benefit from this growth trend.

Growth of digital payment processors, or aggregators, will also positively impact individual payment gateway providers. More providers in the portfolio mean better offerings as far as aggregators are concerned. This will benefit gateway providers as aggregators beef up their services by making available more payment options. The bottom line is that growth of aggregation services is beneficial for gateway providers.

Recent partnerships render GH Capital an aggregator play

GH Capital Inc (GHHC), a gateway provider for online banking electronics payments, can also benefit from this trend. The company already entered in several partnerships with multiple payment processors. It recently partnered with Allied Wallet and has taken a 23% equity stake in VMoney. 

Allied Wallet is global payment providers and a credit card processor, basically an aggregator. The company exposes GH Capital’s payment service offering, ClickDirectPay (CDP), to 196 countries around the world. Note that online banking payment is dominant is Europe. So, GH Capital is only expected to benefit from its European exposure, especially in Germany and Austria. 

As CDP offers competitive fixed pricing, lack of switching costs make it a favorable option for aggregators. More deals of such kind should be expected in future due to attractive pricing of CDP.

As mentioned above, GH Capital also took an equity stake in VMoney. This is also a key development as VMoney is operating in the industry of non-conventional money transfer. You can see many services, like Azimo and Transferwise, flourishing in this space.

It is worth mentioning that money transfer industry is set to reach $600 billion during the current year. InfoSys notes that the brick-and-mortar agent-based models will continue to feel pressure while digital modes will continue to take off. The firm further argues that proliferation of connected devices is enabling the growth of digit money transfers.

Thanks to reduced overheads, online transfer fees are much lower compared to fees in the agent-based models of money transfer. This is also contributing towards the growth of online money transfers.

GSMA conforms to the thesis. A report published by GSMA cites proliferation of connected devices and improved connectivity as the reasons for online money transfer growth. Not only this, VMoney also provides payment processing solutions for businesses. This is another growth segment as discussed above.

GH Capital isn’t only a FinTech company

GH Capital is involved in the provision of IPO services for small corporations. The company offers its advisory services to small, potential growth, firms planning to get listed on stock exchanges. GH Capital Inc helps such companies to get listed on OTC markets including OTCQX, OTCQB and OTCPINK. GH Capital assists companies from across the globe to execute initial public offering. The company’s services range from advising on private placement and FINRA compliance to investor relations, and M&As. 

The company is basically a one stop shop for small firms that desire a higher capital exposure through OTC markets. GH Capital Inc.’s competitive advantage is the provision of one point of contact for taking firms public. The company helps small firms in reducing their point of contacts for going public. It uses in-house capabilities and specialist partners for a seamless initial public offering.

There are numerous benefits of using a one-stop IPO advisory service. Firstly, IPO candidates don’t have to use separate firm for several services, which leads to cost efficiency and limited administrative work. Further, IPO advisories usually agree to equity compensations, allowing small firms to preserve their cash in order to capitalize on market growth. That’s among the reasons why IPO services business is a valued asset for GH Capital. Further, the company can use this business segment to steer towards any new growth opportunities that can arise over time. 

Final thoughts

To review, GH Capital is exposed to the growth of FinTech through partnerships will payment processors and stake in a company that operates in the industry of online money transfer. And, this is just two of the recent partnerships of GH Capital. The company’s ClickDirectPay offers a cost effective alternative payment solution directly to merchants in Europe. Due to Europe’s predisposition towards financial intermediaries and growth of online payments, online banking electronic payment gateway service of GH Capital is positioned well to take market share. And, the only know competition in Germany is Sofort GmbH as of now. Given low switching costs for merchants, things look good for GH Capital.

From an investors’ perspective, although GH Capital trades in a risky OTC market, it is trading at a significant discount to its IPO price. The stock is trading around $0.22 compared to its IPO price of $1.25. It seems like much of the downside is already priced in.