Disrupt: Gaps in payment ecosystem that entrepreneurs can fill
By A. Asohan October 30, 2014
- No one company can do it all, ecosystem is strengthened by connections
- Even banks and telcos can’t do it because they are not ‘neutral’ parties
THE payments market has ensconced players and may be facing stiff competition from deep-pocketed foreign companies eyeing the South-East Asian region, but there are still opportunities aplenty for the enterprising startup.
These are gaps which smaller players can fill, said the two panellists at the Oct 29 DNA-TeAM Disrupt discussion on ‘Pay to Play’ organised by Digital News Asia (DNA) and the Technopreneurs Association of Malaysia (TeAM).
And they were panellists who know the payments space inside and out: MOL Global founder and chief executive officer (CEO) Ganesh Kumar Bangah, and Soft Space International founder and CEO Chang Chew Soon, both also DNA Digerati50.
The third panellist, Victor Khor, executive vice president and head of Group Transaction & Alternate Banking at the Alliance Banking Group, unfortunately could not make it.
“As a company, we only focus on what we do, which is [to allow credit card] payments over the phone, but we see a huge gap in value-added services – for example, analytics, where you can crunch all that payment data to help banks fight fraud,” said Chang (pic).
“We’re sitting on a lot of data, from all the transactions in the countries we’re in. I know it’s the buzzword now, but actually big data is a niche area and an opportunity.
“If you can only offer what everyone else is offering, you have no value proposition. There are so many things that can be done, but we’re a small and young company and we can’t do it all, so we’re looking to work with anyone who can bring these value-added services in,” he said.
READ ALSO: Soft Space acquisition plugs ‘huge gap’
Soft Space developed a mobile point-of-sale (mPOS) technology which allows smartphones to accept and process credit card payments. It had already landed a couple of large banks from Thailand as customers before it inked its first deal with a Malaysian bank, CIMB.
CIMB Bank group chief executive Nazir Razak, in launching his bank’s Soft Space-fuelled Plug n Pay service a year ago, described the technology as a “game-changer.”
Ganesh, who earlier this month saw MOL Global company list on Nasdaq, the first South-East Asian based Internet company to do so, concurred with Chang, saying there were “opportunities every day.”
“The thing is, the payments space is about highways. Not everybody is each other’s competitor. The value comes from connecting the highways,” he said.
The payments ecosystem, he explained, comprises the issuers (the companies which issue credit cards or digital wallets) and the acquirers (the companies which process merchants).
Banks are acquirers, while companies like MOL Pay and payment gateway iPay88 are non-bank acquirers. There are also acquirers which work with banks, and there are acquirers that work directly with credit card companies Visa and MasterCard.
“That’s where you can actually add bits of value – and that value becomes your role. So payments is … actually about connecting roads to highways, which in turn adds more value to the whole highway system,” he said.
Ganesh said that in the three to four weeks leading to MOL Global’s initial public offering, he was at “a ton of meetings every single day” with potential investors, whose most popular question was if Apple Pay was an MOL Pay competitor.
“To a certain extent, yes – but it’s completely different. If you’re an e-commerce merchant, and you need to process online or credit card payments, then you use MOL Pay,” he said. “Apple Pay is essentially NFC (near-field communications), and Samsung has been doing it for years.”
“I did say that banks are my biggest threat. But it’s not just me – if banks could do everything, there would be no other business in the payments space.
“If banks do their own EMV Level 2 compliant software, where would [Soft Space’s] Chew Soon be? If banks were processing online payments in 7/11 stores, I would be out of business,” Ganesh said.
“So why do banks and telcos partner with companies like us? Because, in the payments space, neutrality is important,” he said.
Ganesh (pic) said that the second-most popular question he was asked by investors was “What if banks came into your space? Aren’t telcos doing what you’re doing? Isn’t that telco rolling out a wallet?”
“But it’s about neutrality, for both merchants and consumers,” he said.
Noting that some Malaysian telcos have launched mobile wallets, he argued that there was no compelling reason for merchants to adopt these wallets – each a disparate one requiring a different device on their POS systems.
“Merchants want maximum acceptance, they want maximum channels. Consumers want maximum amount of merchants [who accept their wallets],” Ganesh said.
“So who are the ones who can bring these two together? The neutral party,” he said.
Ganesh was understandably sceptical about telcos coming out with wallets and such services, saying that any entrepreneur who has worked with telcos would you that the first thing they will ask for is exclusivity.
“But guess what? The moment you’re exclusive to one telco, your product won’t work. Your product won’t be a neutral party anymore, so you will fail. Right off the bat, if you partner with a telco, you fail,” he said.
“There is no one party that can do it all. Even I can’t say we do that – we can do that for online gaming payments, which is very niche. We help game companies collect payment from consumers across emerging markets.
“We do that a lot through cash, because people [in these markets] may not want to use their credit card. We do this through our core product, MOL Points. We may not be the global leader, but are definitely a regional reader – but I also believe that we do this best, globally,” he added.
That, he added, was an example of MOL Global’s ‘use case’ – the compelling value proposition it offers.
“You need a compelling reason, and it better not be ‘I can give you a discount.’
“The compelling reason for Soft Space’s solution is that people don’t have [credit card processing] terminals, and people have mobile phones … you put in a device, and now anyone can process credit card payments.
“The compelling reason for MOL Points is that you can go to a 7/11 outlet and pay for your games,” he added.
Meanwhile, Soft Space’s Chang said payments is still a pain point for e-commerce, which also means opportunities for startups.
“It is not as bad as it was 10 years ago when Malaysia had one of the highest rates of credit card fraud – we’re now one of the lowest.
“The payments industry is always thinking of ways to combat fraud, and want to make the payment process got a lot more smoothly.
“This is where, if you have an innovative solution that complies with regulations, that can make the process smoother, then you have a winner,” he said. “It’s always a balance between security and convenience.”
Ganesh agreed. “There’s always something you can do, and the big companies – whether MOL or Google or Tencent – will never have enough time to do it all.
“If somebody does it successfully, I don’t mind partnering with them; I may even acquire them,” he added.
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