Switchpoint Payments Business Plan — Risk Analysis

Take-rate compression, merchant concentration, fraud and settlement risk, and the funding dependency, with trigger points for each.

Risk Analysis

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10.1 The risks that matter
10.2 Risk register
10.3 Trigger points
10.4 Assumptions most in need of independent verification

10.1 The risks that matter

The sponsor bank agreement is existential rather than merely important. No sponsorship means no participation in clearing and settlement, and therefore no business. It is treated as a condition precedent to drawdown rather than as an operational workstream, and a second sponsor relationship is initiated by month 18 to remove the single-point dependency.

Card merchant discount rate compression beyond plan is high in likelihood and high in impact, and it is the largest single sensitivity in the model. Eighteen basis points beyond plan removes FY2031 EBITDA entirely. Partial mitigations exist but none replaces card margin at the scale implied.

Account-to-account attachment below plan is equally consequential because it is the assumption the whole strategy rests on. At 75 per cent of plan the business barely clears breakeven; at 50 per cent it does not. The mitigation is measurement rather than intervention — the first two integrations are instrumented from month one so that the reading arrives while capital remains.

The Series A not being raised on the modelled timetable is high in likelihood simply because early-stage fundraising timetables slip routinely. The distinguishing feature here is that the cash position at month 16 leaves no room to absorb a slip, which converts a common event into a plan-altering one.

10.2 Risk register

Risk	Assessment	Response
Sponsor bank agreement not executed or subsequently terminated	Existential	No sponsorship means no participation in clearing and settlement, and therefore no business. Condition precedent to drawdown. A second sponsor relationship is initiated by month 18 to remove the single-point dependency
Card merchant discount rate compression beyond plan	High likelihood, high impact	25 basis points beyond plan removes FY2031 EBITDA entirely, taking it to negative R7.1m. Accelerate the account-to-account mix, renegotiate partner revenue share at renewal, raise subscription attachment. Partial mitigation only
Account-to-account attachment below plan	High likelihood, high impact	The R1.25m per trade merchant per month assumption is load-bearing. At 75% of plan FY2031 EBITDA is R4.8m; at 50% it is negative R9.5m. Instrument the first two integrations to measure migration from month one
Series A not raised on the modelled timetable	High likelihood, high impact	The seed funds 19 months to cash zero against a Series A closing in month 16. A three-month slip requires an immediate cut to the acquisition rate, not a bridge. Month 10 is a hard board trigger
Transaction values above the rail limit	Medium likelihood, medium impact	The real-time rail carries a per-transaction ceiling of R50 000. Trade invoices above that must split or settle by conventional transfer, which caps the addressable share of trade volume
Integration partner becomes a competitor	Medium likelihood, high impact	Vertical software vendors can monetise payments directly at renewal. Mitigated by multi-year terms, merchant contracting in Switchpoint’s name and settlement account ownership
Cost to serve automation not achieved	Medium likelihood, medium impact	The 34% decline across the horizon is an engineering assumption, not a contractual saving. Failure removes R19.8m from FY2031 EBITDA
Wholesale cost of the real-time rail rises	Medium likelihood, high impact	Rail and sponsor charges are set by parties Switchpoint does not control, and the account-to-account net margin is only 30 basis points. A material adverse change compresses it directly
Merchant fraud or chargeback losses above plan	Medium likelihood, medium impact	Budgeted at 4.5 basis points of card volume for a mixed retail and business-to-business portfolio. Credit-push settlement carries no reversal risk, which limits the exposure to the card rail
Key person departure before certification	Medium likelihood, high impact	The chief technology officer and head of risk are conditions precedent. PCI DSS Level 1 attestation depends on both
PCI DSS Level 1 attestation delayed	Low likelihood, high impact	No live card transaction may be processed before attestation. Qualified security assessor engaged at closing with a scoped timetable
Settlement float misrepresented as company cash	Low likelihood, high impact	Merchant settlement funds are held in a designated account, are not company money, and are matched by an equal and offsetting settlement liability

10.3 Trigger points

Point	Trigger	Committed response
Before drawdown	Sponsorship agreement not executed	Do not draw. A payments company without a sponsor is a software company with a burn rate
Month 10	Series A process not commenced	Commence the round or cut the trade acquisition plan. There is no third option at this cash position
Month 15	Cash below R5.6m against plan	Reduce the acquisition rate immediately rather than seeking a bridge
Month 18	Account-to-account attachment below 70% of plan	Strategic reassessment, not a sales intervention. This is the reduced-scope path
Month 18	Trade acquisition cost above R39 000	Stop trade acquisition, retain the existing book and redirect to the practice segment
Any quarter	Card merchant discount rate falling faster than 5 basis points a year	Accelerate the account-to-account mix and open partner revenue share renegotiation early
Any time	A single integration partner above 40% of originated merchants	Concentration risk in the channel that owns the merchant relationship

The month 10 trigger is the one with the shortest fuse

At month 10 the company has roughly nine months of cash remaining and a Series A that must close in six. Commencing the round at that point is tight but achievable; commencing it at month 13 is not, because the process cannot be compressed below about six months for an institutional round in this sector and the diligence includes a sponsor bank relationship a new investor will want to examine independently. The alternative response — cutting the trade acquisition plan — is genuinely available at month 10 and preserves roughly four additional months of runway, but it also removes the evidence the Series A is being raised against. There is no third option at that cash position, and the board should decide in advance which of the two it will take rather than discovering the choice under pressure.

10.4 Assumptions most in need of independent verification

Assumption	Modelled	Verification required	Consequence if wrong
Account-to-account volume of R1.25m per trade merchant a month	Held flat per site across the horizon	Measured migration of manual transfer volume at the first two trade integrations, from month one	The load-bearing assumption. At 50% of plan FY2031 EBITDA is negative R9.5m
Card merchant discount rate of 2.45% falling to 2.26%	19 basis points of compression over five years	Competitor pricing at diligence and a view on the regulator-led interchange trajectory	18.3 basis points beyond plan removes FY2031 EBITDA entirely
Sponsorship available on economic terms	Cost embedded in the modelled cost of payments	An executed agreement disclosing collateral, guarantee and monitoring obligations	Without it there is no business. The collateral requirement also changes the capital the company needs
Invoice values within the R50 000 rail ceiling	Average ticket of R7 600	Actual invoice value distribution at the first two trade integrations	Orders above the ceiling must split or settle outside the rail, capping addressable volume
Trade acquisition cost falling from R46 000 to R27 500	Through channel leverage as partnerships mature	Partner-originated acquisition cost once the second integration is live	The trade ratio does not clear 3.0x at all if the cost does not fall
Cost to serve declining 34% across the horizon	Through onboarding and monitoring automation	An engineering roadmap with the automation scoped and estimated	An engineering assumption, not a contractual saving. Failure removes R19.8m from FY2031 EBITDA
Series A of R85m at R380m pre-money in month 16	Required, not optional	Investor appetite tested informally before the seed closes	Every return figure in this plan assumes it. A lower price increases dilution proportionately

The list is ordered by consequence and the first three are the ones a funder should test before anything else. The first determines whether the strategic thesis is true; the second determines whether the terminal-year figures survive; the third determines whether the company can operate at all. Everything below them affects how good the business is rather than whether it exists.

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