The Douugh Ltd (ASX: DOU) share price looked a little unhealthy on Thursday, falling 12.7%, despite the company saying it delivered “strong growth”.
Douugh is a financial wellness neobank, meaning it’s a bank that operates exclusively online with and doesn’t have a physical presence, unlike a typical bank. The company focuses on US markets. Douugh entered the ASX in early October 2020 through a reverse listing of Australian telco ZipTel.
Douugh shares were recently halted on the ASX following concerns relating to listing rules around the time of its IPO.
According to its ASX update today, Douugh, a company with a market capitalisation of around $150 million as I write this, said its banking app had been installed 29,034 times since its launch and a total of 8,001 customers had been approved and onboarded. It currently gets an AppStore rating of 3.8/5, based on 77 ratings.
Interchange fees for the three month period came in at $US281,512, which it said was up 364% since launch. The company recently acquired Goodments, an investment app designed to focus on ESG (Environmental, Social and Governance) principles when selecting stocks. It said the acquisition will fast-track the company’s wealth management service and monthly subscription revenue.
In terms of card spending, the company’s compound monthly growth rate (CMGR) (a metric I hadn’t heard of until today) rose 92%, it said. The increase in user numbers and spending resulted in customer deposits rising to $US804,297, also up around 93%.
Founder and CEO Andy Taylor said, “whilst it’s early days, we are delighted with our initial traction and the achievement of first revenues.”
Adding, “Customer acquisition is currently correlated to marketing spend, which the company expects to accelerate as word of mouth builds to increase the rate of organic acquisition.”
The company had $16 million of cash in the bank at the end of the quarter, which it said allowed it to accelerate customer growth through prioritised product development based on feedback (I saw signs of this in a review of AppStore feedback), as well as strategic marketing initiatives.
My thoughts
Unfortunately, while I like the concept of a financial wellness app it’s extremely early days for Douugh and it’s trying to crack a big market. Personally, as an investor, I’m opting to watch this company from the sideline for a few months. I would need to see a material increase in the number of conversions from downloads to customers, plus lots more revenue growth to justify the valuation, before I’d consider investing.
If you’re looking at the sector, consider having a look at Raiz Invest (ASX: RZI) or Bendigo Bank’s (ASX: BEN) UpMoney. It might be worthwhile comparing these companies side-by-side to get a better indication of the industry trajectory.
