Switchpoint Payments Business Plan — Sensitivity and Scenario Analysis

What moves the terminal year: merchant additions, volume per merchant and card interchange compression, with scenarios.

Sensitivity and Scenario Analysis

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9.1 Card price compression
9.2 Account-to-account attachment
9.3 What moves FY2031 EBITDA
9.4 The reduced-scope path
9.5 Where the plan is deliberately conservative

9.1 Card price compression

Figure 19. FY2031 EBITDA under card merchant discount rate scenarios.

Further compression beyond plan	FY2031 EBITDA (Rm)	Interpretation
None — as planned	19.2	Profitable
10 basis points	8.7	Profitable
15 basis points	3.4	Profitable
25 basis points	(7.1)	Loss-making
40 basis points	(22.8)	Loss-making

EBITDA reaches zero at 18.3 basis points of further compression

The plan already assumes the blended merchant discount rate falls from 2.45 per cent to 2.26 across five years — 19 basis points of compression. A further 18.3 basis points beyond that eliminates FY2031 EBITDA entirely; 25 basis points takes it to negative R7.1m and 40 basis points to negative R22.8m. On card volume of R10.5bn in FY2031 every basis point of merchant discount rate is worth R1.05m of EBITDA, and there is no operational mitigation that fully answers it. Partial responses exist — accelerating the account-to-account mix, renegotiating partner revenue share at renewal, raising the subscription attachment rate — but none replaces card margin at the scale the sensitivity implies. An investor who believes South African card pricing will compress by more than 18 basis points beyond the plan should not underwrite this transaction on the terminal-year figures presented.

9.2 Account-to-account attachment

The account-to-account volume assumption of R1.25 million per trade merchant per month is the load-bearing assumption of the entire plan. It reflects the proposition that a meaningful share of a trade counter’s existing manual electronic funds transfer volume migrates onto a request-to-pay rail once it is available in the merchant’s own system.

Figure 20. FY2031 EBITDA against achieved account-to-account attachment.

Account-to-account volume achieved	FY2029 net revenue (Rm)	FY2031 net revenue (Rm)	FY2031 EBITDA (Rm)
50% of plan	42.3	153.4	(9.5)
75% of plan	47.0	171.8	4.8
100% of plan	51.6	190.2	19.2
125% of plan	56.2	208.6	33.6
150% of plan	60.9	227.0	47.9

At 75 per cent of the planned attachment the business still clears breakeven, but only just, at R4.8m. At 50 per cent it does not, at negative R9.5m. The practical implication is that the first two trade integrations must be instrumented to measure migration of electronic funds transfer volume onto the rail from the first month, and that a reading below 70 per cent of plan by month 18 should trigger a strategic reassessment rather than a sales intervention.

9.3 What moves FY2031 EBITDA

Driver	Downside (Rm)	Upside (Rm)	Swing (Rm)
Card merchant discount rate ±25 basis points	(7.1)	45.5	52.6
Account-to-account attachment ±25%	4.8	33.6	28.8
Cost to serve automation not achieved / 20% better	(0.6)	26.9	27.5
Merchant churn ±0.5 points a month	7.8	30.6	22.8
Partner revenue share 18% / 12% at renewal	13.5	29.2	15.7
Personnel cost ±10%	13.5	24.9	11.4
Base case FY2031 EBITDA	19.2

Card price compression leads by a wide margin and is the only driver in the table that is entirely outside management control. Attachment follows, and it is measurable but not directly controllable — a merchant either migrates its manual transfer volume or it does not. The third and fourth drivers, cost to serve automation and partner revenue share, are the two the company can actually act on, and together they are worth R43.2m of swing. That is where operational attention belongs, because the two above them can only be monitored.

9.4 The reduced-scope path

If the attachment reading is poor, the response is not more capital against the same plan

If by month 18 the account-to-account attachment reading is below 70 per cent of plan and the trade acquisition cost has not fallen below R39 000, the appropriate response is to stop trade acquisition, retain and serve the existing trade book, and redirect the entire acquisition effort to the practice segment where the economics are already sound. That produces a materially smaller business — on the order of a third of the modelled FY2031 net revenue, or about R63.4m — but one that reaches operating breakeven on a smaller cost base and does not require a further institutional round. Investors should understand that this outcome, while a substantial disappointment against the plan, is not a loss of capital, and that it is the board’s intended response rather than a failure scenario without a plan attached to it. On that path a trade sale of the merchant book returning one to two times invested capital is the realistic expectation.

	Downside	Base	Upside
Account-to-account attachment	60% of plan	As modelled	+25%
Further card compression	25 basis points	None	None
FY2029 net revenue	44.2	51.6	56.2
FY2031 net revenue	160.8	190.2	208.6
FY2031 EBITDA	(30.0)	19.2	33.6
FY2031 EBITDA margin	-19%	10%	16%

The downside case combines a 60 per cent attachment reading with 25 basis points of further card compression — the two largest risks in the plan occurring together, which is not an unreasonable pairing given that both follow from the same underlying condition of a market that prices payments more aggressively than assumed. On that combination FY2031 EBITDA is negative R30.0m and the reduced-scope path in this section is the correct response rather than a further round.

9.5 Where the plan is deliberately conservative

Assumption	Treated in the base case as	What is left on the table
Same-store volume growth	3% a year	Below expected nominal gross domestic product growth. A merchant whose own business grows faster contributes more without any acquisition cost
Account-to-account pricing	Held flat in nominal terms across five years	A real-terms decline of roughly 25% over the horizon. Any inflation-linked adjustment is upside not modelled
Engineering treatment	Expensed as incurred, not capitalised	Depresses reported EBITDA throughout the build phase. A capitalising presentation would show materially better early figures
Lifetime value cap	36 months in both segments	A trade merchant at 1.4% monthly churn has an expected life well beyond three years. The cap understates the trade ratio specifically
Partner revenue share	18% held flat until renewal	Renegotiation is contemplated but not modelled. 6 points is worth R11.3m of FY2031 EBITDA
Subscription attachment	Modelled at the current rate	The payouts and reconciliation module is priced independently of volume and is unaffected by take rate compression

None of these is included in the base case and none should be relied on. They are listed because a reader comparing this plan against a more optimistic one should know which direction the conservatism runs. Two are worth particular attention: the 36-month lifetime value cap understates the trade segment precisely where the plan is weakest, and the decision to expense engineering rather than capitalise it makes the early years look worse than an equivalent business presenting the other way.

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