Island Fintech Weekly (20 June)

Jun 20, 2021

Greetings Islanders,

Hope you're well! While I've been enjoying staying indoors with the recent rainy weather in Singapore, I'm also looking forward to getting out now that measures here are being ever-so-slightly more relaxed tomorrow ☕️

US IPO rant: Marqeta (MQ) had its IPO debut two weeks ago. An Oakland-based infrastructure company, MQ's stock didn't follow the blockbuster performance of another hyped-up fintech IPO, Paymentus (PAY), which was up more than 100% on debut in May. MQ's S-1 filing had strong fundamentals, so the performance might be because the business model was not well understood by retail and institutional investors (the business model is fairly technical, MQ's core business is centred around issuing physical and virtual cards). Or it could be due to bears having well placed concerns about MQ's heavy reliance on Square (MQ attributes 70% revenue to Square in 2020) and the underlying risk to MQ's PnL - a risk for infrastructure fintechs. For example, some companies like Airbnb have "aged out" of Stripe's API, taking their capability in-house. I actually still believe that great APIs are fundamental building blocks in fintech, so it may be time for the market to understand this in the months (or years) to come.

Note: If you’re interested in contributing content or getting involved with Island Fintech Weekly, reach out to me! vinay.palathinkal@gmail.com.

🎣 Dips

1. DBS Bank and UOB have issued their first digital bond offering in Singapore.

UOB is opting for Marketnode (a joint venture between Singapore Exchange and Temasek) as their platform of choice, while DBS is issuing directly on their own platform, DBS Digital Exchange, which was launched in 2020.
According to DBS, they want STO (security token offerings) to improve bond access to retail investors, with this token being offered in board lots of SGD $10,000. Compared to most wholesale bonds, this is a lot smaller - wholesale bonds trade in multiples of SGD $250,000.
DBS Digital Exchange is currently members-only, with 120 participants, comprising only institutional and accredited investors. So, it is not immediately clear to me how this translates into the broader access to retail investors that DBS has been touting.

2. FamPay, a youth-focused neobank in India, raised a US $38 million round.

This provides a boost for demographic-tailored financial services in Asia, something I covered in ‘Banks and younger audiences' a couple of weeks ago.

3. BRI Agro, the digital bank spinoff of Indonesia’s largest bank, BRI, is apparently going to be venture-backed rather than purely funded by the bank itself.

Extricating the digital bank from the main parent bank is a great step forward for BRI Agro's future as a tech-forward bank.
Working with a fintech, bank governance can overemphasise the need to rely only on risks and strategies that are well-known and understood.
This could create a cultural clash in the strategising of long term investments in consumer-driven products and tech. These two realties can’t exist in parallel forever.

4. LINE, the South Korean chat app, has launched its digital bank arm in Indonesia.

LINE owns 20% of Hana Bank in South Korea. Riding on the coattails of the digital bank boom in Indonesia, LINE has opted to take Hana Bank's Indonesian subsidiary, PT Bank KEB Hana Indonesia, down the digital bank track.
LINE also has a banking presence in Thailand and Taiwan, which is part of LINE's broader play for monetising its mobile chat platforms using embedded finance.

5. Citibank is closing down its Citibusiness unit serving small and medium enterprise (SME) businesses in Singapore.

This follows the strategy laid out by Citi's new CEO, Jane Fraser, who has opted to withdraw from Asia in order to consolidate the bank's footprint in the United States.
As former Citi-banked SMEs look for new banking options, this is good news for SME-focused neobanks in Singapore like Aspire and Flex by Finaxar.

6. BukuWarung, an operating platform for SME businesses in Indonesia, has raised a US $60 million series A round.

BukuWarung has done incredibly well since launching in 2019 - the platform currently has 6.5 million registered merchants on its platform across 750 Indonesian cities and towns.

7. Finantier, a SEA-focused open finance platform based in Singapore, raised an undisclosed seed round.

Along with Brick and Brankas, I expect that open finance will play a key role in increasing financial inclusion in SEA.
More on this in another edition!

8. Carro, a marketplace for cars based in Singapore, raised a mammoth US $360 million Series C round, making it SEA's latest unicorn.

Wait, why is this fintech? Just like Finantier, it's a data thing.
A cool thing about Carro is that they have their own loanbook - offering auto loans and insurance to their buyers, where the insurance is underwritten using driver data.
Instead of relying on upfront metrics like driver age, Carro does a continual assessment - they're building their own AI-driven insurance modelling based on driver behaviour. For example, Carro claims that someone will get better pricing if they typically stick to speed limits.
MSIG and other insurers are apparently onboard with this model. This is a step forward for actually accepting more unique data sources (which, thanks to devices are also now more measurable) to make more accurate and complete assessments, be it for insurance or loans.

🐋 Dives

How David Vélez Built The World’s Most Valuable Digital Bank And Became A Billionaire (Forbes)
It’s Time to Fight for a Dual Product Management Career Path (Ken Norton, Bring the Donuts)
CEO of major Asian bank says a 'tsunami of money' is rushing into sustainable investments (CNBC)
Startups in Indonesia have grown up, but how crucial a role does fintech play? (Techwire Asia)