Singapore-based Nium became Southeast Asia’s first B2B payments unicorn in late July following a series D funding round that raised more than US$200 million. Nium is using that substantial capital injection to support an ambitious international expansion plan that includes the United States, Europe and India.
PayPal has long been one of the world’s preeminent online payment companies, but to stay at the forefront of the industry it needs to capture new market segments and build a larger presence in Asia Pacific, the fastest-growing region for digital finance. Targeted acquisitions will be integral to PayPal’s strategy, hence the recent purchase of the Japanese buy now, pay later (BNPL) platform Paidy for US$2.7 billion.
Ant Group-backed Mynt has grown expeditiously thanks to the success of its e-wallet GCash in the Philippines. In January, Mynt closed a funding round that raised US$175 million and brought the company close to unicorn status. In late July, Mynt’s chief commercial officer Frederic Levy told Nikkei Asia that the company was aiming to become a “double unicorn” – with a valuation of US$2 billion. But it is unclear if Mynt can maintain the same level of growth now that the Philippines has five genuine digital banks.
With the Australian buy now, pay later (BNPL) segment increasingly crowded, some of the biggest players are searching for greener pastures overseas. While Afterpay has been the most aggressive in terms of global expansion, its rival Zip (Australia’s No. 2 pure-play BNPL firm) is catching up. Having already expanded to New Zealand, the U.S., Canada, Mexico and the UK, Zip is now foraying into Africa with the acquisition of South African payments startup Payflex.
The super app trio of Grab, GoTo and Sea is growing increasingly dominant in Southeast Asia, but not yet in Vietnam. In fact, it is the homegrown MoMo which leads Vietnam’s e-payments market. MoMo says it has a 60% market share and processes US$14 million annually for 25 million users.
Not every tech company is cut out to be a fintech. Even the super apps that have bet everything on a fintech transformation will agree with that statement: They just will insist their particular business model is a winner. Not gaming hardware maker Razer though. The Hong Kong-listed firm is the latest non-financial company to have second thoughts about a fintech foray, pulling the plug on its Razer Pay e-wallet and card after failing to win a digital bank license in Singapore.
Move over Grab and GoTo: There is a new Southeast Asian unicorn in town. The rapid ascendancy of Singapore-based payments startup Nium, which reached a US$1 billion valuation following a Series D round that raised more than US$200 million, shows that there is more to Southeast Asian tech than consumer-oriented super apps.
United Payments Interface (UPI), the National Payments Corporation of India’s (NPCI) flagship payments platform, had another stellar month in July. According to NPCI data, UPI processed a record 3.24 billion transactions in July, up 15.7% from June, while in terms of value the payments platform processed transactions worth Rs 6.06 trillion, up 10.76% from a month earlier.
Just when buy now, pay later (BNPL) had seemingly reached an apex in Australia, Jack Dorsey’s Square buys Afterpay for US$29 billion, the largest M&A deal in Australian history. Anyone who thought Afterpay would be easily surpassed by deep-pocketed global payments giants like PayPal or Australia’s own banking heavyweights will have to think again.
Big Tech increasly has its eyes on Asia-Pacific’s growing fintech market. Yet most of the US tech giants are off to a late start in the region. Although it has been present in numerous APAC markets for years, PayPal is not really an exception to the rule. The U.S. payments giant has historically focused on North America and to a lesser extent Europe, with only a minor footprint in APAC. That is changing now that PayPal has super app ambitions and sees new opportunities in China, Southeast Asia and Australia.
Australia’s Afterpay is making the jump from payments into banking as it seeks to develop new revenue streams amid intensifying competition in its core buy now, pay later (BNPL) business. Afterpay said on July 20 that it would launch its banking app, Afterpay Money, in October. The move into banking has a hint of irony to it, coming on the heels of the recent entry of several incumbent banking giants - such as Citibank and Commonwealth Wealth Bank of Australia – into Australia’s BNPL segment. Afterpay is the only BNPL firm besides Klarna to segue into banking.
India’s remittances market was supposed to contract 9% in 2020 per a World Bank forecast. It was a reasonable prediction given the turmoil wrought by the coronavirus pandemic on public health and the global economy. Yet the market was much more resilient than expected. Data from the World Bank show that remittances to India fell just 0.2% in 2020 to US$83 billion.
Zip has been one of the biggest Australian buy now pay later (BNPL) success stories, second only to Afterpay. Zip, Afterpay and others have been so successful that other financial firms are hopping on the BNPL bandwagon, from PayPal to incumbent lenders like Commonwealth Bank. As the market grows more crowded and restrictive regulations loom, Zip is looking to expand overseas, including Canada, Europe and Southeast Asia.
Long lauded for its outstanding pandemic control, and accustomed to no community transmission, Taiwan is now fighting a truculent coronavirus outbreak that is averaging about 300 cases a day. As a result, Taiwan is in a quasi-lockdown state for the first time since the pandemic began. With the government telling people to stay inside and avoid face-to-face contact, this could be a turning point for cashless payments in Taiwan.
Taiwan’s two top e-wallets, Jkopay and Line Pay, have grown exponentially in terms of transaction volume in recent years yet have failed to turn a profit. Data compiled by Taiwan’s Chinese-language Business Next show that Jkopay lost about NT$346 million, slightly less than the NT$347 million in losses a year earlier. Line Pay likely lost NT$424 million in 2020, up nearly 70% year-on-year.
Ride-hailing giant Gojek is stepping up its super app play with new fundraising and the purchase of a stake in Indonesian conglomerate Lippo’s retail unit, MPPA. Earlier in May, Indonesian celluar operator Telkomsel, a subsidiary of state-owned communications giant PT Telkom Indonesia, said it would invest an additional US$300 million in Gojek. Shortly thereafter, a filing on the Indonesian Stock Exchange revealed that Gojek paid 144.85 billion rupiah (US$10.2 million) for a 4.76% stake in MPPA.
The United Payments Interface (UPI) has become a kingmaker in India fintech. The real-time payment system owned by the National Payments Corporation of India (NPCI) has grown exponentially since its inception in 2016, with varying estimates of its overall share of India’s payments market. PwC reckons that UPI could reach a 59% share of Indian digital payments by 2024-25, while Indian tech media site Inc42 says that UPI already has a 73% share of the market, up from just 9% in 2018.
Singapore and Thailand have made cross-border payments history with the linkage of their respective real-time retail payment systems, PayNow and PromptPay. The linkage is the first of its kind in not just Asia but the world and comes after several years of close collaboration between the Monetary Authority of Singapore (MAS) and Bank of Thailand (BoT).
Indian payments unicorn Razorpay has grown exponentially during the pandemic as the subcontinent accelerates its transition to online shopping and digital finance. In the six months since it hit unicorn status, Razorpay has seen its valuation treble to US$3 billion. The Bangalore-based firm will use the US$160 million it raised in its latest fundraising round – in which Sequoia Capital India and Singapore’s sovereign fund GIC Pte participated – to fund expansion in Southeast Asia and develop new product lines. With this latest round of funding, Razorpay has raised US$366.5 million.
In the world of fintech unicorns, a bit of exaggeration comes with the territory. After all, we are talking about companies valued in the billions or tens of billions of US dollars, despite failing to make a profit (in most cases). This is a world where what counts is not the shaky balance sheet today, but the supposed potential to revolutionize banking tomorrow. Growth is paramount – that’s how to keep the funding spigot on. But this approach to financial services comes with manifold risks. Possible compliance deficiencies at Australia’s Airwallex illustrate this point.
If there is one thing Revolut excels at, it is growth. It would be hard to find another neobank with as many accounts in as many different markets. All that growth is expensive, as seen in the £107 million Revolut lost in FY 2019, which it attributed to a hiring spree. Whether the UK’s most valuable fintech startup is any closer to profitability is an open question. What we do know is that it is eyeing expansion across Asia in 2021-22, with India the first stop.
The buy now, pay later frenzy is moving from the advanced economies into emerging markets with Southeast Asia a hotspot. Given the rapid growth of fintech in the region and lack of credit card penetration in most countries it is relatively easy for BNPL to make inroads. In fact, BNPL is proving so popular that the segment is growing fast in Singapore too, where credit card penetration is 73%.
Nobody can accuse Airwallex of having modest ambitions. The Australia-founded and Hong Kong-based unicorn just raised another US$100 million in an extended Series D round at a valuation of US$2.6 billion. The U.S.'s Greenoaks was the lead investor. The cross-border payments upstart plans to use the capital injection to expand across four continents - Australia, North America, Europe and Asia.
Can buy now, pay later (BNPL) get any hotter in Australia? Judging by Commonwealth Bank of Australia's (CBA) foray into the market, yes, it can. CBA's move comes less than two weeks after PayPal announced it would enter the market. CBA is the first of Australia's big four banks to roll out a BNPL product, and it likely will not be the last. The product, CommBank BNPL, will be available to four million of the bank's retail customers for transactions up to AU$1000 from mid-2021.
Amazon may be the world's biggest e-commerce firm and a major player in India's online shopping market, but that has not translated into digital payments dominance in the subcontinent. In fact, Amazon's share of the Indian payments market is paltry compared to Google Pay, Walmart backed-Phone Pe and Alibaba-backed Paytm. But with India's payments market expected to grow more than 300% to Rs 7,092 lakh crore by 2025, Amazon sees plenty of room to boost its market share and eventually expand into more lucrative fintech segments.
Paytm is India's most valuable tech startup and largest fintech. The company says it processed 1.2 billion transactions in January, more than its rivals Google and PhonePe that are dominant on the UPI platform. It claims to serve more than 17 million merchants. Yet Paytm is still losing money after more than a decade, burning cash faster than it can earn revenue. That must change soon if the SoftBank-backed firm expects a successful IPO in 2022.
Australia is a key market for PayPal in Asia Pacific. The U.S. payments giant has 9 million accounts Down Under - not too shabby for a country of 25 million people. It has a 17% share of what JP Morgan calls the "alternative payments market (essentially non-cards), ahead of Google Pay, Apple Pay and Samsung Pay. But there is a new payments game in town led by firms like Afterpay and Zip. To maintain its competitive edge in Australia, PayPal needs to enter the buy now, pay (BNPL) segment.
Stripe may be the biggest fintech to fly under the radar in Asia Pacific. In private markets, its valuation is reportedly close to US$100 billion, up from about US$35 billion in April 2020. The San Francisco-based merchant payments provider saw its fortunes soar during the pandemic as its many North American customers moved online. It is now looking east to fuel its next stage of growth, including China, India, Southeast Asia and Australia. In 2020, Stripe increased its staff in the APAC region by 40% to more than 200.
PayPal is a payments giant with super app ambitions but a small footprint in Asia. Indeed, although PayPal has been present in many Asian markets for ages, it is not a market leader in any of them. In fact, to date, it is more notable for reducing its presence - exiting the domestic payments business in both Taiwan and India, for instance - than scaling up. Becoming a bigger player in Asia will not be easy for the US$340 billion company, despite its vast resources.
Afterpay is the world's foremost buy now, pay later rising star. The Australian company has been on an unmatched hot streak, its share price surging by about 300% in 2020. At roughly AU$134, Afterpay is trading 27 times its price-to-earnings ratio. In the six months to December 31, Afterpay's overall income rose 89% to AU$420 million, even as losses reached AU$76.5 million. Merchant growth in North America was 141%. The company's active users rose 80% year-on-year to 13.1 million. It seems that nothing can slow the company's ascent, with the possible exception of tighter regulation.
It seems that almost every plucky fintech in the cross-border payments space seeks to challenge SWIFT these days. Airwallex is perhaps the best known. The Hong Kong-headquartered (but Australia-founded) unicorn boldly proclaims that it wants to rejig global payments rails at SWIFT's expense. Then there is Lightnet, which is only slightly less ambitious. Lightnet aims to dominate B2B remittances in Asia with none other than cryptocurrency, which it says will render obsolete traditional global payments methods like SWIFT and Western Union. Lightnet is focused on making cross-border payments more economical by trimming the number of intermediary parties from about five to just the sender and receiver. The company expects costs to be further trimmed as its network grows.
The clock is ticking for a Grab exit. Southeast Asia's most valuable startup has been in business now for almost nine years. It has been losing money that entire time. To be sure, Grab has seen its user base, valuation and revenue grow exponentially over that time. The company has evolved from an Uber lookalike into an aspiring super app betting on digibanking to deliver it from the red ink into the black. That could be easier said than done.
While many countries have experienced a surge in cashless payments during the pandemic, for the Philippines fast-tracking the financial sector's digital transformation is a game changer. The reason is that the Philippines is a fast-growing, highly connected and populous country (108 million people) that lacks payments incumbents. There are no entrenched credit card companies in the market. That means ascendant e-wallets like Mynt's GCash have the chance to become dominant players in one of Southeast Asia's largest emerging markets.