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Analysing OFX’s 2020 Results with CEO Skander Malcolm

OFX published its full year results last week. OFX serves a mix of customer segments, ranging from higher-value consumers to corporates and e-commerce players. 

We talked to Skander Malcolm, OFX’s CEO since February 2017, to understand how the company’s strategy is driving growth in their key metrics.

Our main takeaways from the results and our conversation:

  1. OFX is focusing on higher value customers who want service
    Competition in the consumer space, especially at the lower end of the market, has focused heavily on price. Whilst OFX had previously tried a strategy of competing on price with TransferWise, it has found a much better path focusing on those customers who value phone-based dealer services and are willing to pay for them. 90% of transactions may still be done digitally at OFX, but there is still 10% that is carried out with the help and support of a human dealer. Notably, OFX saw an 80% rise in customer calls during the recent Covid times of uncertainty, which led to a 17% increase in digital revenue.

  2. Securing growth through operational leverage
    OFX has been able to grow net operating profit by 6%, with underlying operating expense growing at a slower pace (5% year on year). This is helping to pull EBITDA margins back up. Keeping customers loyal even when they had longer periods of inactivity, and bringing in new customers through larger white-label partnerships has helped cut the marginal cost of acquisition. 

  3. North America and e-commerce future drivers of growth
    OFX has been strongly investing in its North America operations. Improving the payment infrastructure and payment engines allowed OFX to reduce the cost of USD transfers. This led to a 24% increase in North American revenue during the year. E-commerce is another fast growing area for the company. Although a highly competitive segment, expect OFX to focus again on those customers who value service.
  4. What’s next? Loyalty, cash and consolidation 
    In 2021, Skander believes we’ll see fintechs switching to a different business model, which is based on retaining customers rather than gaining them. Companies will focus more on cash accumulation as they saw how important it is to have free cash flow in a period of uncertain revenue. Finally, further consolidation within the sector can only be expected. 

With no debt and a cash pile, OFX is well positioned to get through what will be a challenging year ahead. As Skander puts it:

“Just continue to be highly engaged with your clients, look what the data is telling you and get through the next few quarters.”

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