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Gamechangers in fintech

Three homegrown startups that are quietly making waves


SINGAPORE'S NEXT BIG THINGS?: Here are three companies led by former bankers who saw an opportunity to close a gap and worked those niches into winners.

Head of global outreach Mr Kang (middle, in black T-shirt), with CTO Mr Takahashi (on left of Mr Kang), CEO Mr Koh (behind Mr Takahashi), and the M-Daq team.

The firm's office has a large, unique table that can transform itself into different permutations to accommodate different discussion group sizes.

''I'm not afraid to take on responsibility that's too hard,'' says CXA Group founder and CEO Ms Chow-Koo.

Chairman Mr Tan (in white, centre), CEO Mr Man (at extreme left) and COO Mr Lee (fifth from left) with the rest of the CCRManager team.

FOR every 10 startups, just one survives. These are the odds that Singapore fintechs stare down, but for those who dare and make it in today's winner-take-all market, the gamble offers rich rewards. But what makes a Singapore fintech that can beat the odds, and emerge from the hype?

While the three fintechs featured this week vary in maturity, they share a few similarities. For a start, they don't sell technology that is seen as cosmetic, or what has been dubbed "lipstick" fintech. Instead, they face up to problems that are closely tied to Singapore's fortunes and concerns.

M-Daq tries to bring down the exorbitant forex spreads, working into Singapore's edge as the top Asian forex trading centre. CXA Group is targeting escalating healthcare costs that are a top concern for policy-makers here. And CCRManager has created the world's first platform for a secondary market for trade finance, which is at the heart of Singapore's raison de entre as a top entrepot. They are also led by veterans in the finance business. Asked by The Business Times about the experience behind the management team at CCRManager, they quip that the six-man team is 274 years old.

These fintechs frown on the word "disruption", because the incumbents are not viewed as the enemy. They partner large banks and insurers to improve processes plagued with problems that seem insurmountable for large corporations.

Their leaders have gained courage from tough times through their childhood as well.

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Richard Koh, 45, CEO of M-Daq, worked through his studies to support his family after his father got into a forklift accident; Tan Kah Chye, 53, chairman of CCRManager, paid for his school fees by selling vacuum cleaners and encyclopaedias; CXA's Rosaline Chow-Koo, 56, is immune to fear after her days in the Los Angeles ghetto.

In a country accused of lacking in entrepreneurial drive, these three startups may just prove critics wrong, and emerge as Singapore's next big things to pave fresh paths for the next generation.

Making forex cheaper for you and me

Singapore's M-Daq could redefine online retail by targeting invisible forex costs

THE best way to understand what M-Daq does is to tally up the cost of a smartphone. The device surgically attached to millions is made up of multiple parts sourced from all around the world. So the glass may be priced in Japanese yen, the microprocessor in Taiwanese dollar, and the manufacturing costs totalled in renminbi.

Say the phone manufacturer is from the United States, and wants to make a guaranteed sales margin of 30 per cent. It could then command its suppliers down the line to lock in all the costs at its domestic currency, the greenback. The suppliers with their varying currencies dutifully do so, but not before charging a 4 per cent spread to the forex cost.

Add a screw here, and a chip there, and the cost of the final product balloons, leaving the consumer footing the bill of this invisible expense. The sum of all parts becomes greater than the whole.

Homegrown fintech M-Daq has an ambition: it wants to make the concept of forex disappear. Into its ninth year of operation, the fintech of 55 staff, including several bankers with more than two decades of experience in finance, has carved out a niche in being able to shrink the 4-6 per cent forex charges levelled on items bought off e-commerce sites.

M-Daq, among the most valued fintechs in this region at more than S$300 million, has flown under the radar for years despite the link to one prominent investor: a certain Ant Financial. In 2015, the Chinese payments firm - a third of which is now owned by Alibaba - was among investors that participated in the fintech's Series C fundraising round.

Other investors included Singapore's EDBI, the venture capital arm of the Economic Development Board.

M-Daq was so shy of publicity that it took more than a year for the team to agree to speak with BT, even after moving into new digs with two noticeable signs of its potential: a separate room set aside for staff of Ant Financial, and a plaque commemorating the opening of its new office on Oct 25 by Singapore's Finance Minister Heng Swee Keat.

M-Daq's founder and CEO Richard Koh gives full credit to the startup's chairman, Tan Hee Teck, for introducing the company to Alibaba. Mr Tan is also the president of Genting Singapore, and the CEO of Resorts World at Sentosa, and was appointed as M-Daq's non-executive chairman after the Ant Financial deal was completed. With that seismic deal sewn up, M-Daq tied up with Ant Financial to re-price their eye-popping number of wholesale goods found on AliExpress in various local currencies for buyers, giving China's Amazon an immediate new revenue stream. Previously, AliExpress had priced everything in US dollars. Wholesale buyers also get full transparency on their final cost, once forex has been factored in.

M-Daq's selling point lies in the margin it offers. M-Daq has priced the AliExpress products at a forex spread of 1.25 per cent - a number calculated and confirmed by several wholesale buyers on various overseas forums, BT understands. By comparison, transactions on other e-commerce sites for the exact same product can translate to a fee of some 4 per cent.

Mr Koh would not give the full details of M-Daq's patented technology, but it comes down to getting data feeds from the world's biggest forex trading banks, running algorithms to quickly secure the best possible pricing for the needed forex currency to make it worthwhile to charge wholesale buyers that low margin.

Consumers don't often realise that the real cost of most forms of forex is a mere one to two pips (or 1/100th of a per cent), says Mr Koh, who had helped to set up parts of JPMorgan's forex business in Asia. This lack of transparency, adds Thomas Kang, head of M-Daq's global outreach, is what M-Daq hopes to address for businesses and consumers.

Mr Kang, 49, joined M-Daq in 2016 after a long stint at Citigroup, where he previously ran segments of the global bank's forex and derivatives sales. "From the consumers' perspective, there is that uncertainty," says Mr Kang.

M-Daq's business does not cause disruptive jitters in the traditional banking space as much as it would seem at first glance, because in return, banks get a slice of the e-commerce business. And there is clearly growth potential: In 2017, M-Daq's volume grew by about five times from a year ago.

Mr Kang says the fintech will now look this year to expand and diversify its revenue base - something that he says Ant Financial is open to, and that EDBI is likely eager to see. With e-commerce growing in Asean to an estimated US$88 billion by 2025, the market is ripe for M-Daq.

Up from the grave

The company is open to an IPO in a few years' time, and going public offers its staff an opportunity to reap their handsome paper gains. It is a matter of rewarding loyalty. Mr Koh recalls how his core team stuck with him through the difficult times. In 2012, the fintech had been caught out in a squabble between two investors, leaving it stranded without cash for some eight months.

Yet, many of his staff stuck on, sold on the vision of the company. It finally snagged funding from other venture capital funds in 2013 after pitching a solution that could reduce forex risks in share trading, turning that into a successful pilot with a securities firm. M-Daq pivoted to tackling forex risks in e-commerce in 2015, securing Ant Financial as a strategic investor by the end of that year.

The story of how M-Daq's co-founder and chief technology officer Noboru Takahashi came on board gives an idea of how tightly knit the team is. The JPMorgan veteran was just six months shy of receiving a pension for his 20 years at the bank. But with a call and a meeting with his long-time colleague, Mr Takahashi re-located to Singapore in 2010 to join M-Daq. Never once did he ask about his salary, recalls Mr Koh. (Though, his co-founder eventually asked for a bidet at the new office.)

Mr Takahashi, who at 45 is the same age as Mr Koh, is placid about his decision. "You don't calculate your money now, you need to be forward-looking," he says, adding that he was "simply moved" by Mr Koh's creativity.

Indeed, while the interview goes on, the rest of the staff has gathered round a large, unique table that can transform itself into different permutations to accommodate different discussion group sizes. That table was designed by Mr Koh himself.

There is budding camaraderie. Staff whip up lunches for one another in the company's comfortable kitchen. The rice cooker can cook enough rice for about 50 people. Groceries are all provided for by the company. A week ago, salmon wellington was on the menu. Another day, it was pork chops in the oven. The team showed off their culinary skills when they also cooked for the Finance Minister when he visited.

"We believe in servant leadership. Through tough times, the leadership takes the cut first. In good times, we give it to the staff first," says Mr Koh.

M-Daq has also become a place for other fintechs to find mentorship. Every week, fintechs of varying types and sizes walk through the doors, seeking advice on how to refine their pitches for investors. M-Daq shares notes right down to the type of charts to include in the pitch book.

Mr Koh thinks M-Daq has become that port of call because other fintechs have seen how M-Daq clawed its way out of darker times to become one of the most valuable fintechs in South-east Asia. "That is a battle scar that people look for," he adds.

It is also a refreshing change from his time at banks, where a boss once told him that he had to be nastier in order to get ahead - conduct that Mr Koh says he simply would not accept. "We do not believe that being nice is mutually exclusive to success."

Fear is not an option

A former life in the ghetto gives insurtech CXA Group's founder the guts to tackle healthcare woes here

"I'LL kill you, or I'll beat you up." Rosaline Chow-Koo recalls such visceral threats she faced during her childhood while wearing a serene smile on her face today.

For the young girl born to Chinese immigrants who had set up a home in the ghettos of Los Angeles, being Chinese in a black neighbourhood meant she had to run. Fast. She ran from bullies who would beat her purple if she did not run fast enough. She ran while remembering that her mother, who was a seamstress by day and cook by night, once put a cleaver in her bag to guard against a man harassing her at work. She ran so fast that she qualified for her school's track team. She charged into top US schools to run from the ghetto.

At some point, all that running numbed the fears that stalked her. The 56-year-old now brands herself as fearless, so much so that five years ago - just as she crossed into her fifth decade - she tossed aside a top corporate job as Asia-Pacific head of Mercer Marsh Benefits, dug into her life savings of about S$5 million, told her daughter to pay for her own tuition at Boston's Tufts University, and ploughed it all into an insurtech based out of Singapore. "I'm not afraid to take on responsibility that's too hard," Ms Chow-Koo tells BT.

ConneXionsAsia (CXA) Group was started in 2013 because Ms Chow-Koo spotted an asymmetry that was extending into a problematic gap. Healthcare costs were climbing for large employers and not entirely to the benefit of their staff. While heading the regional operations of Mercer Marsh Benefits, the largest employee benefits brokerage and HR benefits consultancy in this part of the world, she noted the utter waste as too little money was going into preventive healthcare for employees. Claims were going up for insurers, leading to escalating costs for employers over time. Premiums were doubling every three to five years, primarily due to chronic illnesses.

Yet little had been solved by this vicious circle. By Ms Chow-Koo's assessment, the healthy were merely getting healthier, and the unhealthy were just getting unhealthier. "I used to beg to ask for fifty million to solve this issue," she says, recalling the days when she would lobby for her ex-employer to invest into a potential solution with her. When her immediate boss left, she felt a tugging to start something new. And so she started CXA Group, which is now a firm that, as at February last year, reportedly made roughly S$10 million in annual revenue. It makes money by selling healthcare benefits to nearly 1,000 corporate clients, including several Fortune 500 companies which were once her clients at Mercer Marsh.

CXA's solution is to offer a healthcare wallet to employees. They are entitled to an amount, say S$2,000, from the company that goes towards medical bills, as well as preventive healthcare such as exercise classes. With employees' permission, CXA also looks at their personal data, scrutinising key numbers such as BMI, blood pressure, lipids, and cholesterol levels. The information allows it to design a personalised healthcare package for each employee.

CXA then helps large employers to negotiate lower premiums tied to healthcare insurance for staff. The insurtech aims to solve a problem for all the actors involved: employees who are not engaged in preventive healthcare, employers who are getting stuck with escalating medical insurance bills from their staff, insurers who are increasingly concerned by higher medical claims, and healthcare providers who need a distribution platform to sell wellness packages. Banks and insurers have also licensed CXA's services to offer to their SME clients. "We're not competing. We've just joined all the dots in the industry," says Ms Chow-Koo.

With its Series B funding, the insurtech that is valued at US$100 million has won the backing of Facebook co-founder Eduardo Saverin and Singapore's EDBI. CXA has as well secured funding from electronics player Philips, with CXA using the Dutch firm's health monitoring services to manage chronic health problems, and to apply data analytics to anonymised healthcare data to find trends that could alleviate healthcare challenges today.

CXA is looking to expand into 10 countries, having already established offices in Singapore, Hong Kong, and China. It employs more than 250 staff, including 75 roped in from global HR consultancies, insurers and brokerage firms.

Ms Chow-Koo says the business could break even in a couple of years. But more investments have to be pumped into the data analytics business for now, for the business to be sustainable to fit new and pressing healthcare demands. "We're tackling insurance in a way that has never been done before."

No more WhatsApp for trade loans market

CCRManager wants to correct unwieldy practices, and profit off that

THERE is a US$1.7 trillion market where a fintech backed by Singapore's central bank is keen to stake a claim.

This trillion-dollar marketplace is for the secondary market in trade loans and represents 10 per cent of global cross-border trade. Trade finance refers to the flow of money that helps to get shipped goods from manufacturer to consumer, and represents the ebb and flow of activity through trading centres such as Singapore, the world's busiest port.

CCRManager is a Singapore-based fintech that is supported not just by the Monetary Authority of Singapore, but by also by some 22 member banks from 15 countries looking for a platform to re-distribute trade finance to other banks, credit insurers, and fund managers. On the platform, which went "live" across more than a dozen countries in May 2017, banks can list the assets for distribution, firm up deals, and exchange the necessary documentation through a secured channel.

The reality today is that banks have been hit by compliance requirements, and need to find more efficient ways to manage their balance sheets, says Man Ka Kit, CEO of CCRManager.

Chief operating officer George Lee notes the unwieldy practices behind this market over the last 20 to 30 years, with banks in some markets using WeChat, WhatsApp and Viber to sew up these deals. Spreadsheets are used to track transactions, and Microsoft Outlook calendar pings remind them to pay.

As Tan Kah Chye, chairman of CCRManager, quips: "You'd think that banks would learn from the Libor problems."

Having a platform to re-package parts of trade loans could open up new asset classes for insurance companies and asset managers hungry for yield to meet liabilities and investors' demands. CCRManager also aims to gather transaction data to offer pricing analytics to customers, offering important transparency into an opaque market. CCRManager charges a transaction fee on every successful deal.

CCRManager helps the banks in effect digitise some parts of trade finance, which remains a painful, paper-based process. It brings down the execution time from the current five days, to a single day.

Such existing inefficiencies contribute to the trillion-dollar funding gap that if closed, can help to smoothen out the kinks in global trade that has benefited open economies such as Singapore. For a sense of scale, the city-state has the world's high trade to GDP ratio.

The startup of 16 staff has a wealth of experience, going by the management team alone. Mr Tan, 53, is a veteran in the trade finance business, and was former vice-chairman of corporate banking at Barclays Bank. Mr Man, 41, was previously director of trade finance syndication, Asia-Pacific, for Barclays Bank. Mr Lee, also 41, came from IE Singapore, where he spent more than 17 years, having led various policy teams.

CCRManager has already geared up for its Series A fundraising round, looking to raise a "seven-figure" amount from investors that may include venture capital, investment arms of government agencies, or banks themselves. The fintech aims to hit US$10 billion in transaction volume in the first year, and US$250 billion in the fifth year.


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