Potential boost for investors as QuickFee targets the US market
QuickFee aims to modernise US accounting firms still using cheques.
The company says profits are just around the corner
When a company unveils an expansion into the US market, it more often than not sparks enthusiasm among investors.
The sheer size of the US market presents a fertile ground for substantial revenue growth, which in turn could drive an increase in the company’s share price.
One ASX-listed company that has made clear its plans to expedite expansion into that lucrative market is the fintech play, Quickfee (ASX: QFE).
Following a recent successful capital raise, QuickFee wants to quickly grow its footprint in the US as it seeks to capitalise on a massive opportunity in the American professional services sector which is still in its early stages of adopting digital payment solutions.
Over half of the 6,155 accounting firms in the US still rely heavily on cheques, which are labour-intensive to process.
QuickFee’s digital payment solutions, including the Pay Now and Pay Over Time, are designed to modernise those outdated practices.
It may sound ambitious, but QuickFee’s tech platform has the potential to lead, and even revolutionise, the whole digital transformation of the professional services payment landscape in the US.
“The amount of cheques that are still being paid in the US is just phenomenal,” said Dale Smorgon, Quickfee’s non-executive chairman.
There’s still a significant amount of cheque writing there, particularly in the professional services sector, which for many Australians seems completely foreign.
“So this modernisation and digitisation of payments in the US is something that Quickfee can really take advantage of.
“We’re already serving some 760 odd firms now in the US. We feel that we’ve got a really strong competitive advantage and we believe we can grow that number.”
What Quickfee does
Quickfee’s business is really about providing payment options and solutions to professional firms, mostly CPAs and lawyers.
With QuickFee Pay Now, firms have a variety of convenient payment options available to them.
“The Pay Now option allows clients of accounting and law firms to pay their invoices via digital means – whether that’s via ACH in the US, or EFT as we call it in Australia, or even credit card,” Smorgon told Stockhead.
It also allows them to pay via financing plans, or recurring ACH plans. These solutions are integrated directly into the major systems that clients are already using, like Xero and MYOB.
Quickfee believes there’s plenty of room for its platform to grow market share in both the US, and here in Australia.
Although Australia’s professional services sector is ahead of the US in payment technology, cheque payments are still common here. This indicates that there’s still progress to be made before we fully transition to digital payments.
But here’s the “real innovation”
Quickfee’s Pay Over Time service offers clients of accounting and law firms the convenience of paying their invoices over a flexible period of 3 to 12 months.
Simultaneously, Quickfee provides upfront cash payments to these firms based on the invoices, which helps them manage their cash flow better and stay financially secure.
“Our Pay Over Time product is the real innovation here, as it allows clients or firms to take payment plan options,” explained Smorgon.
“Essentially, we pay our clients the face value of the invoice for the work that they’ve undertaken, but allow their clients to pay overtime.”
QuickFee also offers disbursement funding specifically tailored for legal firms.
This is financing provided to cover the costs associated with legal disbursements – such as court fees, expert witness fees, and other litigation expenses. It enables legal firms to operate more efficiently by providing timely access to the capital they need to support their cases.
In Australia, QuickFee is already serving around a quarter of the $400 million accounting and legal market, which is roughly 40% of the overall market for ‘fee funding’.
Like BNPL, but less risk
Tbis funding business essentially operates in a similar way to Buy Now Pay Later (BNPL) services, but with a focus on business-to-business (B2B) transactions and without the same level of risk.
“The accounting or law firms that we deal with provide us with a full recourse on any payments that are made, or effectively any loans that are advanced, to their customer,” explained Smorgon.
In other words, if the firm’s client fails to repay the instalment provided by QuickFee, the responsibility for repayment falls back on the accounting or law firm.
As an example, imagine you’re a small or medium-sized business and you hire an accounting firm to do some audit or business advisory services for you, and the fee comes to $50,000.
If the accounting firm decides to use QuickFee to allow you to spread out that fee over time, let’s say, nine months, and for some reason you can’t make those payments halfway through the plan, the responsibility to repay QuickFee falls back on the accounting firm.
“That recourse provides us with a great degree of comfort,” says Smorgon.
“For a default to happen to Quickfee, it requires both the customer and the firm to both go out of business.
“Historically, our delinquency rates are at an extremely low 0.1%. Also, delinquency rates within accounting firms are historically much lower than in many other cohorts.”
Profit is just “around the corner”
In the latest trading update for Q3 FY24, Quickfee’s revenue grew by 36% on pcp.
US financing revenue was up 54% on pcp, while Australian financing revenue increased by 50% on pcp.
Importantly, there was a 200% increase in new US firms utilising Quickfee’s Finance facility in Q3 FY24, compared to the pcp.
Based on these results, the company said it was continuing its march towards operating profitability.
“We are on the cusp of consistent results that we’ve already seen in both in our Aussie US businesses,” said Smorgon.
“We are very close to profitability after three or four years of actively building the business and investing in the technology, the people, and the infrastructure to set up the business.
“Currently we’re growing at some 30% on an annual basis, so profitability is just around the corner.
“Now with the additional firepower, we don’t see any reason why we can’t continue to see that grow even more,” said Smorgon.
Quickfee share price today:
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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