Island Fintech Weekly (23 May)
Greetings Islanders,
Another week of major raises in fintech. Across the world, 39 companies celebrated successful fundraises..
The biggest news here in SEA is the merger between the major superapps, Gojek and Tokopedia, forming a giant called GoTo. I’m not writing about it just yet because the details are still hazy - will do so next week. Something I found interesting was that GoTo hired the Korean pop band BTS to break the news to their 80% Indonesian consumer base 🤔
Edit: so apparently this isn’t Tokopedia’s first time.👇🏽
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🥣 Dips
🍛 South Asia
PhonePe, a Flipkart-owned wallet in India, is acquiring Indus OS, a third-party app Android app store. Flipkart has been on a tear, raising about US $1 billion at a US $30 billion valuation, prior to an expected IPO. The Indus OS acquisition is supposed to help PhonePe, a phone recharge wallet, compete within the Indian payments landscape, where it is normal for payments companies to also operate their own app store. Paytm, a competitor, also has its own miniapp store. Having such a store allows Paytm and PhonePe to enhance stickiness and usage within their own platforms, while also allowing app developers to circumvent Google Play Store fees.
Amazon Pay received a capital infusion of ₹2.25 billion (~ US $30 million). This takes the total fund infusion in Amazon Pay to ₹4.5 billion (~ US $60 million) this year as Amazon doubles down on digital payments in India.
🍧 Southeast Asia
Grab was not included in the Malaysian government’s RM 300 million (US$ 72 million) eBelia programme - apparently by choice. The program essentially gives eligible Malaysian youth free deposits into their digital wallets, an effort to increase digital wallet usage. Grab’s rationale for opting out? They wanted to prioritise product initiatives, like expanding their merchants base, improving safety and security feature, and offering new services like PayLater.
Tazapay, a recently launched Singapore trade-finance platform, announced a partnership with Standard Chartered Bank (SCB). Through the partnership, SCB will issue escrow accounts to Tazapay that are then used for trade settlement within the Proxetara network.
Thunes, a cross border payments company based in Singapore, raised a US $60 million round led by Insight Partners, with participation from existing investors. According to Thunes, they didn’t need the extra funds, but accepted the investment opportunity anyway to help them scale into North America. According to Thunes, each investor has played a strategic role in expansion efforts - Helios Capital helped in Africa, GGV Capital helped in China.
🥟 East Asia
Two banks, ZA Bank and Mox Bank, account for 70% of Hong Kong’s digital bank deposits. It’s a crowded market, with eight banks for a 7.5 million population. ZA Bank has done particularly well in offering a diversified pool of products, including insurance, personal and business loans - increasing value for customers.
🍽 Everywhere Else
PayPal wants to enter superapp territory. But as PayPal is still mostly a payment gateway focused on e-commerce, it lacks the ubiquity and wallet usage with consumers. So I think the project will probably stall, much like the failed Chase Pay experiment - another major financial player’s attempt at a fintech pivot.
After a US $250 million raise, Pipe became the fastest ever fintech to hit a US $2 billion valuation. The Miami based company allows SaaS (Software as a service) platforms to ‘sell’ subscriptions to investors upfront in cash, who then earn the upside of their investment as the platforms invoice real customers. Pipe’s ‘massively oversubscribed’ round will be used to expand globally, and I think that they will probably move to SEA soon - especially given the explosion in SaaS in the region (random side note: I think a part of why Pipe is doing so well is because of their bold and twitterific CEO, Harry Hurst).
🐋 Dives
📸 Banks and younger audiences
As I wrote earlier, Goto and K-Pop seems to be a match made in heaven. Meanwhile, banks have been struggling to get the attention of younger customers.
Revenue-wise, young customers are valuable to banks. Millennials are particularly valuable, since they are now of working age - UOB Bank noted that 90% of millennials are now in the workforce. So getting those direct deposit checks and disposable spend from them should be a priority, right? Well, for some reason, large banks aren’t doing a very good job of that here in Singapore. We’ll get back to why that might be the case in a bit - let’s first look at how, on the other side of the globe in the US, neobanks in particular have been leading the charge and are successfully acquiring millions of young customers.
As Alex Johnson puts it:
The average consumer no longer spends 20 minutes a week chatting with a teller at their bank, but they spend a lot more than 20 minutes a week engaging with celebrities, influencers, and content creators on platforms like YouTube and TikTok.
And so, adjusting to these consumer needs and being cognisant of the right channels to be used, is key to appealing to these customers in the most appropriate fashion.
1. Current
A neobank in the US, Current, is trying to put the ‘relationship’ back into banking. Current quickly became a $2.2 billion company after it recently raised a US $220 million Series D fundraise led by Andreessen Horowitz. The neobank has also grown to almost 3 million users, up from 1 million in the summer of 2020.
Current is using the power of social media (TikTok and YouTube in particular) to build relationships - particularly with consumer who are younger and of lower income brackets. Current works closely with social media influencers like YouTube personality Jimmy Donaldson aka MrBeast (who has 175 million subscribers) as part of their marketing and outreach programme to build awareness of their core product, as well as to shape and build new features.
There are tons of slick neobanks in the US, but a big differentiator for Current is the fact that they build, rather than buy, their core banking infrastructure. As a result, the cost of opening a bank account for Current is a mere US $0.15 per account, allowing for cheaper services, at scale. Given the fact that Current’s intended user base is the younger and lower income, this makes a lot of sense.
2. Fidelity Investments
Last week, Fidelity launched no-fee teen brokerage accounts. Fidelity Youth Account will offer teens aged 13-17 debit cards, as well as investment and savings accounts. Plus, they won’t be charged account fees or commissions.
By keeping parents as the custodians of the actual account, the idea for Fidelity’s youth product is education and responsibility. Fidelity thinks that by creating these accounts, they can help teach teens about financial habits and responsible investing before they are able to create full service brokerage accounts at the age of 18.
3. Cash App
Cash App is a well-loved P2P player in the US, and have really listened to consumers. They were one of the first fintechs to offer bitcoin investing - and it’s paid off handsomely in the form of 11x YoY growth and US $3.51 billion revenue in Q1 2021 alone.
Cash App has found a niche within the hip hop-loving community in the US. Cash App’s owner, Square, has made partnering with rappers a priority with Cash App - they gave away US $100,000 as part of a promo with Travis Scott, Megan Thee Stallion, Cardi B and most recently with Miley Cyrus - see below. Cash App Fridays is their weekly social media assault, where they give away cash to users who tweet at @cashapp.
Cash App has boasted impressive growth metrics - 36 million monthly transacting active customers and gross profit per monthly transacting growing +70% YoY. A natural by-product of the musician collaborations is that the app is well loved by hip hop; it is often referenced in rap lyrics - even more free organic marketing.
And what about Singapore?
Local banks have made attempts to connect with millennial consumers in Singapore. But they seem to be missing the beat. Aaron Wong of Milelion, a Singapore based credit card miles blog, recently produced a scathing review of UOB’s rebranded ‘EVOL’ card, which used to be called the ‘YOLO’ card. Aaron’s review did a surprisingly good job of encapsulating local banks’ fraught attempts at attracting younger consumers.
Firstly, should it be pronounced “Evil”? UOB seems to have tried to make the cashback structure the main lure of this product, with a relatively straightforward 8% cashback on mobile payments and online spend. But this is where the limitations lie. UOB EVOL’s monthly cashback cap is set at S$60, but in reality it is more like S$40. If you spend S$250 on mobile payments, you get S$20 for mobile payments. If you spend S$250 on online spend, you get S$20 cashback for for online spend. A consumer will need to be prepared to spend S$6,667, to max out the cashback for all other spend - S$20. Somewhat misleading if you ask me - and perhaps taking advantage of the fact that the target clientele may not be aware of how cashback is earned, and the limitations of the feature - particularly with the third segment.
UOB claims the card is made out of sustainable materials with a 10g smaller carbon footprint - essentially greenwashing the product. A similar product from DBS, the DBS Live Fresh card, is also made of sustainability-inspired materials - 85.5% recycled plastic. I just wonder why this has to be associated with millennial products and not just a bank standard for even its more geriatric customers. Are millennials supposed to be more concerned about the environment since we live longer, and therefore feel the effects of climate change more?
Aaron also points out a couple of other examples of ineffectual attempts at attracting younger consumers in Singapore.
Corny YouTube-based corporate soap operas - DBS Bank’s SPARKS series about fictional bankers?
”Youthful” bank branches - UOB Bank’s FRANK bank branches that are designed to be study spots at universities, but are really just card promotion outlets.
Existing cards that don’t really provide much value - Citibank’s Lazada co-brand card that does not offer much additional value over existing cards with similar miles and benefits.
Sponsored posts insisting that debit cards are superior to credit cards - A UOB Bank sponsored post on Mothership sharing the purported perks of their debit cards.
As Aaron puts it -
it’s like all these [ideas] were conceptualized by a bunch of senior executives sitting in a boardroom throwing darts at a monkey.
But at the same time, I appreciate that banks are making an effort to connect with the younger consumer. But to really make an impact, they should probably take some inspiration from Current, Fidelity and Square, and start to really listen to what the consumers want. One way could be by bringing younger people into the decision-making process for overall product strategy, so that the outcome is closer to what the intended audience may prefer and much rather consume. Another approach could be doing broader user research on what consumers want - data is key, and insights on consumption patterns could be more strongly considered when a bank decides to say, launch a new card. Banks should also tap into the power of social media and influencer partnerships, should they want to get broader adoption for some of their youth-centric products.
And they should probably start soon, before the digital banks come around and steal the show later this year. It’s a pity that Razor Youth Bank didn’t meet the selection cut this year - it would’ve been a good player in filling this gap with the younger population, particularly with gamers who are already tied into the Razer ecosystem. Speaking of ecosystems, I have my bets on Grab’s digital bank doing a fantastic job - they have already been ranked as the the most positively talked about brand amongst young adults in Singapore.
🏝 Twitticisms