NIUM

LEVERAGING FINTECH TO DISRUPT CROSS-

BORDER REMITTANCE SERVICES
 FINTECH REVOLUTION

Fintech uses innovative technologies to deliver financial services that could disrupt the way traditional institutions function. Born out of global financial meltdown.
After collapse of US sub-prime mortgage market and public’s loss of confidence in the well-established banking systems

Enablers
• Smartphone launch (iPhone in particular in 2007)
• Mass mobile adoption by younger generation
• Emerging technologies like cryptocurrency, blockchain etc.

Servicing Key Areas

• Bill Payment and Fund Transfer
• Credit Lending
• Savings and Investment
• Insurance solutions

Offerings
• Fee reduction
• Cost transparency
• Fast transactions
 GLOBAL FINTECH MARKET

• In 2016 – US $24 billion worth of investments. Asia devoured the biggest piece of the pie US
$14 billion (bulk going to China and India)
• Singapore the leader among the Southeast Asian hotbeds. In 2017 – they had the highest e-
wallet penetration at 23.3%, the highest volumes of cashless payments on consumer purchases
at 69% and over a hundred fintech start-ups our of 367 in the region.
• By 2018 – global fintech market was valued at US $113 billion doubling its revenue from US
$55 billion in 2015

Fintech friendliness
Strong regulatory support
Due to huge potential of fintech and its impact on economic development
Example:
Singapore had adopted a “regulatory sandbox” that provided a space or fintechs to experiment with
innovative financial solutions under relaxed legal and regulatory requirements
Philippines has established special economic zone to incubate fintech start-ups such as the Fintech
city
 DIGITAL REMITTANCE LANDSCAPE

• An estimated 258 million migrants were living outside of their country of origin and the global remittances made by diaspora
communities reached US$528 billion in 2017
• For some developing countries, inflow of remittances had even exceeded official development assistance and FDI to become the largest
source of external financing

Criticality of remittances
• On a macro level, financial remittance played a major role as an economic vehicle by boosting the GDP of developing countries
• A way to lift people in developing countries out of poverty through funds channeled into improving health, education and housing
conditions, as well as for the pursuit of entrepreneurship opportunities

Transaction Rates
• Global average transaction rate for transferring US$200 stood at 7% in 2017
• Goal of United Nations Sustainable Development was to bring it down to 3% by 2030
• World Bank estimated that a reduction of 5% could add US$16 billion a year to the current flows to receiving countries
 DIGITAL REMITTANCE LANDSCAPE

Market Shares
• Digital channels had a tiny nibble of the market share (6%) while cash, which had traditionally dominated the cross-border transfer market held on to a
chunky share (94%), as of 2014.
• Among the fintech segments, the remittance market was the third-largest (US$5.33 billion) after payment (US$68 billion) and mortgage (US$6.64
billion) in 2018
• In the Asia Pacific region, Southeast Asia’s emerging market demonstrated enormous potential due to a massive population of 438 million of unbanked
people
• Within Asia Pacific, Singapore stood out as the most promising market for digital money transfer operators with the highest forecasted CAGR (26.7%) for
the period 2019 to 2025, ahead of Japan (26.0%), Hong Kong (23.8%), India (21.9%) and China (19.8%)

Transaction Rates
• As at the second quarter of 2019, across remittance channels, banks were the most expensive at an average fee of 10%, followed by post offices at 8% and
money transfer operators at 6%, with the cheapest being mobile operators at 3%.27

By providing last-mile access to financial services for the underserved community who did not own bank accounts and/or those living in rural areas without
retail bank branches, digital financial solution providers could fulfil some of the unmet needs for payment, transfer, savings, credit and insurance services.
 NIUM

Born out of inconvenience

• Founded in August 2014 by two friends, Prajit Nanu and Michael Bermingham (Mike)
• Prajit, conceived the idea of a start-up while trying to organise a bachelor party for another
friend in Phuket, the idyllic resort-island in Thailand. It was then that he stumbled upon the
inconvenience of remitting money across countries.
• What appeared to be a seemingly straight- forward payment for booking turned out to be a
cumbersome process.

The Growth Spurt

• Headquartered in Singapore
• Nium’s modest beginning took place with a seed funding of US$500,000 from Rocket
Internet, a start-up incubator based in Germany.
• A year later, in March 2016, it secured US$5 million in a Series A funding round from Vertex
Ventures, a US-based venture capitalist.
• A round of Series B funding of US$13 million, led by China-based GSB Ventures, followed
shortly in July 2017.
• A subsequent boost of US$41 million was raised in March 2019, and was again supported by
Vertex and a new South Korean investor, Atinum Investment.
 DISRUPTION

It addressed challenges besetting prevailing modes of money transfer –

• high-margin foreign exchange (FX) rates,
• hidden transaction fees, and
• slow transfers

How did it resolve the problems?

Nium built and sustained its competitive edge through
• real-time or same-day payments made to their clients in multiple market
• did not charge additional fees on top of the FX rate, and as such it was more competitive and transparent compared to other banks
• played on economies of scale
 NAVIGATING DISRUPTION

Regulations and Licensing

• Licensing remained one of the significant barriers to entry. First of all, Nium would require a local money transfer operator license to operate in the
respective countries’ markets.
• Getting one in Singapore was relatively fast and easy, but not for the other markets. The process of applying for a licence may take 3, 6, 9, 12 or 18 months.
• Even in established currency corridors the speed of remittance ultimately depended on the efficiency of the banking systems in the corresponding countries
• The challenge in existing corridors is to ensure our systems and controls are in place to process transactions in a timely manner. For some countries,
like the US, the banking systems are older and it may take a day, or sometimes, two days.

Liquidity Management
• Historically, managing liquidity was a headache for traditional money transfer operators.
• Nium found itself in the same spot as not all markets allowed them to ‘net off’, a practice of paying the recipient from a pool of ready funds in the
destination country’s bank.
• Relying on the previous month’s transaction data, Nium would predict two days of currency volume required for each exchange corridor.
• In addition, Nium had to take caution in minimising exposure to liquidity and foreign exchange risks when administering payments in multiple directions.
The general direction of remittance flow was from the larger, developed economies to the smaller and developing countries.
• Due to fluctuating demand patterns and exchange rates, managing currency inflows and pre-empting outflows was of critical importance to Nium.
 NAVIGATING DISRUPTION

Unexpected Competitors

• Remittance had attracted the attention of many non-financial companies that wanted a piece of the pie.
• Grab Holdings Inc., a transportation network company founded in Malaysia and subsequently based in Singapore had announced its wallet-to- wallet
remittance function
• Go-Jek had teamed up with Coins.ph, a fintech company in the Philippines that provided remittance services on mobile wallets.
• These companies will eventually face the challenges of getting the licenses to operate in different countries. Nium will reach out to them instead. In Asia,
they are one of the largest (remittance) service providers, and they do it faster. They have a lot more global reach, and they have been in the market longer.
So when the competition comes, it creates an opportunity for them.
• Nium could also provide ready-made integration with the banks.
 FROM RETAIL TO INSTITUTIONAL CLIENTS

• While the duo founders had initially set out to serve retail customers, such as expatriates remitting money back to their home countries, they soon discovered
the opportunity to facilitate payments for small to mid-sized companies, and eventually for corporates
• Nium started picking up large clients in 2018.
• By 2019, the business-to-business (B2B) segment had expanded considerably to constitute almost 60% of Nium’s overall transactional volume.
• Nium began to embark on a major shift in business direction towards growing the B2B business to newer heights.
1. The first pillar of growth would be the launch of a platform for SMEs to help them collect and manage payments in overseas markets as they expand
globall
2. The second pillar was to provide back-end payment infrastructural services which would be connected to the SME’s front-end consumer-facing portal
• Apart from this, Institutional customers including payment companies and small-scale banks also needed help on last mile payments within a country

Partnerships
Ripple
• Nium’s decision to engage a technology partner, Ripple, was strategic to its rapid global expansion.
• RippleNet, a global network of over 200 banks and payment service providers, was a financial infrastructure platform built on blockchain technology, which
was a common shared ledger consisting of, in this case, all of Ripple’s partners.
• Nium’s partnership with RippleNet opened up doors for the latter’s network members to access Nium’s Southeast Asian market, in which the start-up had
established a stronghold.
 MICROSERVICES

• Quicker transactions, lower fees, & wider geographical coverage would not be possible if not for Nium’s enhanced technological capabilities in areas of
1. agility,
2. interoperability and
3. scalability
• Technological agility was a prime factor that enabled fintech start-ups to launch new services to the market quickly.
• Microservices, a software development approach in which a large application was divided into smaller and independent units that worked together as a
whole, was the enabler of fast availability of payment features.
• Using microservices, Nium could release a new feature in a week, while most banks would have taken a month as they are using old technologies.
• Interoperability was the key to ensuring seamless integration between Nium and other financial entities in the fintech ecosystem.
• Each integration with a bank had to take into consideration key information such as the payees, the amounts, and the currencies to pay.
 SUSTAINABLE GROWTH STRATEGY

• Nium adopted product development and market expansion as its key growth strategies
• Three Service Offerings: Send, Spend, Collect
1. ‘Send’ is about payment remittance made by consumers and institutions.
2. ‘Spend’, which is about card business. Basically, it means that if any company wants to launch its own cards, we can help them do so within a few
weeks’ time.
3. ‘Receive’. Let’s say a company which does not have a presence in a country wants to accept payments from customers in that country. We can collect
the payments through credit card, collate them and send them to whichever part of the world the company wants.

Two New Markets: Japan and Indonesia

• Japan, the third-largest economy in the world by GDP, was largely supportive of fintech and e-payments, and had legalized bitcoin for sending remittances.
Opportunities were abound for money transfer operators as the nation was a major market for outbound remittances, hosting over one million foreign
workers in 2016, who remitted US$4 billion overseas in 2015.
• Indonesia, on the other hand, was one of the largest inward digital remittance markets in Southeast Asia, as billions of dollars were sent home by migrant
workers every year.
 UPCOMING OPPORTUNITY

• In a move viewed as one of the biggest liberalisation initiatives of the financial industry, the Monetary Authority of Singapore (MAS), the nation’s central
bank, announced the issuance of up to five new digital bank licences in 2019.

• The five new digital bank licences will comprise –

1. up to two digital full bank licences, which allow licensees to provide a wide range of financial services and take deposits from retail customers; and
2. up to three digital wholesale bank licences, which allow licensees to serve SMEs and other non-retail segments.47

• The new digital bank licences would be extended to non-bank players to cater to the underserved segments, as the existing locally-incorporated banks
(including the three major banks, DBS, OCBC, and UOB) had been given the green light to establish digital banking subsidiaries in an earlier policy
introduced in 2000.
• Applicants to the full licences would need to be headquartered in Singapore and controlled by a Singapore company, while wholesale license applicants
would not be subjected to any eligibility criteria.
• In March 2019, the Hong Kong Monetary Authority had issued its first batch of three virtual bank licences while the UK had granted digital bank licenses
back in 2016.
 POTENTIAL FOR GROWTH

• A huge unbanked and unserved opportunity in Southeast Asia.

• According to a research by Bain, the region is home to 70% of underbanked or unbanked adults, as well as millions of small and mid-size enterprises
(SMEs) who face large funding gaps.
• While digital financial services are expected to generate about US$38 billion in annual revenue across the region by 2025, Southeast Asia remains a very
diverse region, and market potential varies across borders.
• For instance, particularly strong growth opportunities in Indonesia, where the e-payment market is expected to surge to US$95 billion by 2025 – a nine fold
jump from where it is today, and B2B eCommerce and payment revenue is continuing to clock an annual growth of around 50%.
• The very core of BaaS lies in strategic collaboration – where parties can connect directly with the systems of banks to build products on top of regulated
infrastructure – to create seamless, scalable payment experiences across and within borders.
• More collaborations between and amongst industry players such as regulators, FinTech partners, and businesses in the banking and financial services.

International expansion and partnerships will be the key priorities for company’s growth. Payments are all about scale, and hence the focus should be – to
scale and grow the business across our Send, Spend, and Receive products.
THANK YOU!