Could B2B pivots give pandemic-hit fintechs a new growth story?

Singapore

TWO Singapore fintechs familiar to consumers - YouTrip and SoCash - have made pivots into the business-to-business (B2B) payments segment. This comes as their core businesses have been hit by the pandemic.

Both startups will have to contend with challenging margins and a crowded playing field. But if well-executed, these pivots could be crucial in attracting new capital or perhaps even draw in a buyer.

YouTrip announced its entry into B2B payments in September last year. The startup is set to launch a new corporate credit card, called YouBiz, for multi-currency payments.

Founded in 2018, YouTrip had been focused on the travel market, with its multi-currency card and e-wallet. While there has been some recovery in travel, global restrictions continue to weigh on this use case.

SoCash's pivot comes with the plunge of cash withdrawals in Singapore during the pandemic. On Wednesday, The Business Times (BT) reported that the 7-year-old startup has added a merchant acquiring business. Its merchant app allows brick-and-mortar stores to accept various forms of e-payments, such as PayNow and GrabPay.

SoCash had thus far been focused on turning stores into cash withdrawal points, as a cheaper alternative to ATMs for banks. This proposition has come under strain with the acceleration of e-payments.

Chief executive Hari Sivan told BT that the past 2 years have been all about "pivots, pivots and pivots".

But it isn't just that tough conditions that have pushed both startups to the B2B payments space - there are also pull factors.

The pandemic has accelerated the digitalisation of SMEs, creating new opportunities for merchant acquirers and payments processors. The e-commerce boom has also boosted demand for cross-border payments solutions.

While the market potential is great, the field is dominated by multinational players - such as Stripe, Adyen, Rapyd and Wise - and several regional startups with deep pockets.

Scale is a key success factor in the competitive e-payments processing space, noted Wong Wanyi, fintech leader at PwC Singapore.

"Therefore, the market in Singapore may not be wide enough for too many players. These players also need to build and maintain trust," added Wong.

In its corporate-card ambitions, YouTrip would be up against fintech unicorns Airwallex and Nium and SME-focused Aspire, which last year raised US$158 million.

Likewise, SoCash is up against established competitors such as Fomo Pay and UOB mCollect.

Pivoting into B2B fintech could help startups that have hit difficult times paint a more compelling growth story, to secure much-needed future funding and extend their runways. It could also make them potential acquisition targets. After all, this is a sector that is widely seen as due for a flurry of mergers and acquisitions.

"There will be many consolidations in this space, since the current vendor capabilities are quite fragmented and no vendor can offer a one-stop-shop solution to business customers," said Forrester analyst Meng Liu.

Wong of PwC echoed this sentiment: "It is a very crowded space and to achieve sustainable profitability, some consolidation will be required. Also, many of the players are at the maturity level to seek exits."

This is not to say that there is no room for new entrants to grow bigger on their own. But it will be a difficult road ahead as SMEs that aren't already tapping fintech solutions are likely a tough crowd to covert.

"It is a 'chicken and egg' problem. Merchants will only adopt e-payment when their counterparties, whether consumer or businesses, are ready to adopt e-payment," noted Liu of Forrester.