iFAST Corporation Limited (SGX: AIY) is progressing in the right direction towards its ambitious goal of achieving assets under administration (AUA) of S$100 billion by 2030.
In its 2024 first quarter (1Q 2024), iFAST reported a record AUA high of S$21.05 billion, up from over S$19.83 billion at the end of 2023.
To hit S$100 billion by 2030, the fintech’s AUA will need to grow at a compounded annual growth rate (CAGR) of about 26% for the next seven years.
How far has iFAST come?
The S$100 billion target was first announced during its 2Q 2018 earnings as a 10-year goal.
Since then, the group has grown its AUA from around S$8.05 billion in 2018 to over S$19.83 billion in 2023, or a CAGR of about 20% over the past five years.
Source: iFAST annual reports and earnings releases
While its historical CAGR is less than what it needs to achieve for the next seven years, iFAST is not far off.
Hence, it is still possible that the Singapore firm can meet what it has set out to achieve in 2018.
The pursuit of this ambitious goal has propelled the group forward to look for bigger opportunities.
iFAST’s participation in Hong Kong’s eMPF (Mandatory Provident Fund) platform project and the acquisition of a UK-based digital bank are examples of such opportunities.
Going forward, the two ventures will play a huge role in iFAST’s next phase of growth.
Hong Kong ePension
There are two components in iFAST’s participation in the Hong Kong ePension project.
The first part is the development and maintenance of the eMPF platform.
On this note, the platform is completed and onboarding of participants will start in 2Q 2024.
iFAST earns a fee for providing a service under this project. The company is not the custodian of the assets in MPF, thus these will not be counted towards iFAST’s AUA.
While HK’s eMPF does not contribute to iFAST’s AUA, the project has provided a significant boost to iFAST’s top and bottom lines.
There is already a visible impact from the project.
iFAST Hong Kong’s 1Q 2024 profit has jumped by more than 478% year-on-year to S$13.2 million.
That said, there will not be much of a profit increase for the next few quarters.
The bigger ramp up is expected to come in 2025.
For context, the company has guided for a profit before tax of more than HK$500 million in 2025.
Elsewhere, iFAST also launched ORSO ePension Services, a one-stop digital pension solution for Hong Kong Occupational Retirement Schemes Ordinance (ORSO) Pension schemes in June 2023.
The group is still in the preparation stage for ORSO and contributions should start in 4Q 2024, with more significant contributions in 2025.
Unlike eMPF, ORSO will contribute to the group’s AUA and net recurring revenue.
iFAST Global Bank (iGB)
iGB continues to gain traction in attracting deposits, hitting S$515 million in the latest quarter (4Q 2023: S$359 million, 3Q 2023: $232 million), up 476% year on year.
The cash deposits in iGB come from about 70 countries, of which about a third comes from the UK.
The company believes that there is a strong demand from customers to open a bank account outside of their home countries.
While the market is competitive for the high net worth individuals, there is little competition for the mass affluent.
At the current moment, iFAST prefers to be conservative with its banking business, so as to minimise the risk on their balance sheet.
The current strategy is simply to take the deposits and place the bulk of them in safe instruments with the Bank of England.
This approach earns a spread of between 1.0% to 1.5%.
iGB is targeting breakeven by 4Q2024.
Get Smart: It does not matter if iFAST hits its target by 2030
To grow AUA at a CAGR of 26% over the next seven years is indeed a tall order.
However, if iFAST is savvy with its business strategies and executes them well, this goal is achievable.
Even if the Singaporean company is only able to grow its AUA at a CAGR of 20%, consistent with its current growth rate, AUA will still hit S$70 billion in 2030.
Guess what!
At a CAGR of 20%, achieving S$100 billion AUA will be delayed by just two years!
That is the beauty of compounding.
No matter whether the target is hit or not, iFAST is likely to be a much bigger business by 2030.
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Disclosure: Chan Kin Chuah owns shares of iFAST.
