Online sales and eCommerce have come of age during the coronavirus pandemic.
That has given a major boost to mobile payments specialist Bango PLC (LON:BNGO) .
The business recently announced its first notable trading profit as sales jumped three-fold to £12mln, but this might just be the start of a period of supercharged growth for the AIM-listed group.
it should be noted that Bango is no overnight sensation and has been steadily laying the groundwork of its payments platform for years.
The company already works for some of the world’s largest tech corporations handling billions of pounds of transactions.
End-user spend, or the amount of business that flows through its platform, has been climbing at a rate of knots every year for some time now and in 2020 jumped by a further 73% to £1.9bn.
Bango earns only a fraction on each transaction, hence its revenues are nowhere near that scale, but a recent clever development to make twice as much from each deal is transforming its profitability.
Bango marketplace is a tool that uses payments data to help customers' marketing campaigns be more effective.
As Bango already has the data from the transaction, it is effectively getting paid twice and the more transactions it handles the more of these data insights it can provide for its customers.
It is a smart initiative and Paul Larbey, Bango’s chief executive, describes it as a virtuous circle for the company.
The £1.9bn of transactions processed in 2020 already gives it a huge amount of data he says, but that base will continue to grow this year as recent and new contracts start to come through.
“And that gives us an increasing volume of data that we can look to monetize using the Bango marketplace product,” he says.
Larbey notes that 2020 was really only the first full year of operating 'bundle marketplaces'.
“We grew from 200 people who we were engaged with to 2,000 or10 times growth in that product, but there are hundreds of thousands of developers out there.”
Not a blip
Lockdown has helped, but Larbey believes that a permanent change has occurred in online commerce and there is no going back.
" This is not a temporary blip."
Previous studies have shown that when people spend more time at home, they spend more time online and spend more online.
Lockdowns have accelerated the adoption of digital commerce and brought new users using online commerce who maybe had never used it before.
New games players are one example or people using streaming for the first time.
But when lockdown ends, Larbey says these people will still be subscribers to those video streaming services, playing the games or buying groceries and goods online and for Bango that is a very good thing, he adds.
Liberum, the company’s house broker, points to the quality of a customer base that includes Amazon, Google and Microsoft and underlines the trust they have in the Bango technology.
Amazon, for example, used Bango’s platform for a new payments method in Japan - one of its key markets says the broker - and also to launch in Brazil and India.
Microsoft, meanwhile, recently expanded its partnership to include Xbox subscriptions and console sales and enable telecoms groups to offer Xbox Game Pass Ultimate and Xbox All Access in their packages.
Subscriptions another growth area
These subscriptions services are another growth area for the Bango business, believes Liberum.
Currently, it is managing about 6mln subscriptions worth around US$10 per month, which generated around £4.7mln in revenues in 2020.
Liberum sees this rising by 25-30% a year helped by the deal with Microsoft, but this allows for nothing for the potential to expand beyond mobile into fixed-line, cable and connected TV.
The broker currently has a target price of 260p for the shares with a forecast for revenues to grow to £18.5mln by end-2022.
Unsurprisingly given the online surge Bango shares have done very well over the past year and at 202p the market value is around £154mln.
On traditional yardsticks, that might look a stretch but platform businesses of the Bango ilk have shown elsewhere that once a tipping point is reached the numbers can improve exponentially
Bango looks to have reached that point and with or without a lockdown tailwind, the outlook looks set fair for some good years ahead.