- Sees deal synergise with existing partnership with Japan's Sumitomo Mitsui Card Co
- Allows SMEs to better compete with the big retail players in the market
From left: Soft Space chief strategy officer Chris Leong, Softspace CEO Chang Chew Soon, transcosmos corporate executive officer and deputy general manager Kentaro Ogata and transcosmos ASEAN regional managing director Hiroki Tanigawa
AFTER spending five years building its foundation and keeping its business sustainable, Malaysian fintech company Soft Space Sdn Bhd - which secured its Series A US$5 million investment this week - is all set to scale its business aggressively.
"With this fund, we are looking at entering Japan, and a much stronger presence in Indonesia," said founder Chang Chew Soon after the official announcement of its Series A fund raising in Kuala Lumpur yesterday.
To recap, Japanese e-commerce and commerce solutions provider transcosmos Inc has agreed to invest US$5 million in Soft Space for an undisclosed amount of stake in the fintech company.
Although Soft Space did not reveal how many percent stake transcosmos acquired, it did reveal that none of the Soft Space's existing stakeholders sold their stake, and that the board of directors seats will be increased to four seats (from three seats previously). The additional board seat is for transcosmos representative.
The deal also allows Soft Space to embed transcosmos commerce solutions - which includes Chatbot, call services, big data analytics and others - into its existing solutions.
At the same time, it also serves at a platform for transcosmos to offer Soft Space products to its customers.
Why Japan and Indonesia?
While Japan is a technology advanced nation, it is also a country that has a relatively low card and e-money usage.
According to a Bloomberg report, the country has more than 101 trillion yen (US$966 billion) of cash circulating at the end October 2016. A different statistic showed that Japan's card and e-money usage is significantly below the 20% mark (based on transaction value).
Such trend puts pressure on central banks to further lower (current rate is -0.1%), as it may encourage people to take their money out from the banking system.
With Soft Space's cost effective and convenient solutions, coupled with integrating transcosmos' solutions, it may play a role in helping the country to boost its card and e-money usage.
Also, the strategic partnership with transcosmos will provide synergies with its ongoing partnership with Sumitomo Mitsui Card Company.
With transcosmos as a strategic investor, it will be able to support Soft Space's plans to penetrate the Japanese market. For example: transcosmos will be able help look for the right talent (such as business development team, sales support team, and others) to operate the market.
Meanwhile, the company - which already has presence in Indonesia - is hoping to have a bigger presence in the country.
Indonesia, a country with more than 250 million population that has a growing middle income population, is showing strong traction in its efforts to become a cashless society.
From January to November 2016, there were 1.26 billion non-cash payment transactions. The figure is also 42% compared to the 2.97 billion cash transactions made in the same period. In 2013, 2014 and 2015, the non-cash payments were 26.8%, 28% and 40% of cash transactions.
For the past five years, Soft Space has been growing with the help of an initial angel investment and a grant by the Ministry of Trade and Industry (MITI).
As at last year, the company is profitable and generating over RM27 million in revenue. It also has over 183,000 credit card terminals shipped to 20 financial service institutions in 10 countries.
With its business growing and sustainable, it puts Soft Space in a good position when comes to having a new strategic investor -- it allows the company the time to get an investor that offer synergies and strategic fit, at a right valuation.
With transcosmos' solutions integrated with Soft Space's, it virtually allows Soft Space to grow its revenue and also to be part of the software-as-a-service (Saas) play.
Currently, Soft Space's revenue is largely driven by sale of the card terminals, a small annual fee for the usage of the terminals, and others.
With the new services to be introduced, it allows Soft Space's customers (the banks) to offer a full suite of services to its customers.
For example: A restaurant owner goes to a bank with the intention to apply for a card terminal. The bank, besides offering the terminal, is now in a position to help the restaurant owners on other areas -- solutions that allows the restaurant owner to better engage with its patrons.
"Our aim is to be in the position to equip the small and medium enterprises the tools to be able to better compete with the big boys. This is partly why the strategic investment is important," said Soft Space chief strategy officer Chris Leong.
With the deal sealed, the company hopes to offer omnichannel customer relationship management solutions to the market.
For example: currently, via lender CIMB, Soft Space has a partnership with cinema operator GSC. The partnership allows CIMB to place a tablet and Soft Space's card terminals on every seats in GSC's higher end cinema hall (those that comes with a reclining sofas). With the tablet and the card terminal, moviegoers will be able to purchase food and drinks during the movie.
"With Omnichannel solutions, the experience will change significantly. Imagine if you are watching a movie, and at a certain scene, the tablet will smartly alert you that the shoes that the actress is wearing can be purchased at a 10% discount if the moviegoer purchase it now, and they can collect it after the movie or have it delivered to the home," said Leong.
Besides the two key market expansion, the company also hopes to use the Series A funding for other purposes, including: research and development, growing its team size, and others.
"When you want to make your solutions simple to use, there are a lot of work that needs to be done behind the scene," said Leong.
Will there be also another round of fresh funding coming in?
"Hopefully there will be a Series A+ round," said Chang.
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