The share price of fintech neo-lender Wisr Ltd (ASX: WZR) has performed strongly over recent months, driven by the company's robust fourth quarter FY20 results. Since falling to a low of 6.6 cents in March, the Wisr share price has rallied 233% to 22 cents at the time of writing.
Wisr offers an alternative to the traditional forms of personal lending provided by the major banks. It claims to offer more competitive interest rates by tailoring loans to meet customer needs and eliminating early repayment penalties and annual fees.
The company has also released an app that allows users to round up their purchases and automatically pay the funds collected towards their debts – even if those debts are held with outside lenders. There are a number of ASX-listed companies with similar apps: small-cap Raiz Invest Ltd (ASX: RZI) employs a similar 'round up' technique, but allows users to invest their spare change into a diversified share portfolio.
Wisr hopes this more holistic approach towards personal financing will help the company differentiate itself from the major banks in the wake of the Banking Royal Commission. Wisr seeks to market itself as a more ethical, compassionate alternative to the profit-driven major lenders.
It joins a host of other next generation and alternative credit providers, including buy now, pay later (BNPL) companies like Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P), which are stealing market share away from traditional lenders.
And from the company's most recent quarterly results, it seems like its message is beginning to resonate with customers. The company reported record monthly loan originations of $19.1 million in June, which brought total loan originations for the fourth quarter to $42.2 million, a 92% increase over fourth quarter 2019. Unaudited operating revenue for the quarter jumped to $2.9 million, a 50% increase quarter-on-quarter.
Is the Wisr share price a buy?
Neo-banks like Wisr are capitalising on a number of converging macroeconomic trends.
Australian consumers were already wary of the major lenders following some of the more damning findings to come out of the Royal Commission. Additionally, the success of BNPL platforms shows that consumers have an appetite for small, tailored credit. Additionally, the COVID-19 pandemic means that more people may have to rely on short-term credit to meet their everyday living expenses.
I believe Wisr has some strong momentum behind it, making it an exciting investment opportunity with the potential for rapid growth. Market penetration is still low, and the company is well capitalised, with $40 million of cash and equivalents.
However, the positives must also be weighed against the potential risks stemming from a looming economic downturn. Wisr has reported that its loan origination run rate is now 45% over pre-COVID levels. And while its portfolio average credit score is well above the industry average and 90+ day arrears still quite low at 1.44%, it will be worth monitoring how these metrics track once COVID-19 government support packages start to dry up.
