Funding Societies to acquire payments startup CardUp

FUNDING Societies, a digital financing platform for small and medium enterprises (SMEs), said it is acquiring payments startup CardUp for an undisclosed amount in a cash-and-shares deal.

The transaction is subject to regulatory approval.

Singapore-based CardUp was founded by Nicki Ramsay in 2016. It helps individuals and businesses make and collect payments digitally, including with a credit card, even where cards are not accepted.

The startup’s capabilities also include invoice automation tools and integrations with third-party business software. Its revenue increased 53 per cent quarter on quarter in Q2 this year, the company said.

Funding Societies said the acquisition strengthens its suite of financial services for SMEs. The company recently co-invested in Indonesia’s Bank Index and launched a virtual business card in Singapore. Last month, it launched in Vietnam, marking its fifth market expansion.

“Having known Nicki and CardUp since 2018, we find CardUp has a great cultural and strategic fit. Acquiring CardUp enables us to leapfrog and accelerate our market leadership in the regional fintech space, integrating payments capabilities, enhanced user experience and local licences to our digital lending experience across key markets,” said Funding Societies group CEO Kelvin Teo.

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The majority of CardUp users are based in Singapore, with other customers in Malaysia and Hong Kong. Businesses use CardUp for payments related to payroll, rent, corporate tax, vendor payments, receivables and cross-border expenses.

If the acquisition goes through, Ramsay will join Funding Societies’ management team to lead its payments business. All CardUp employees will be retained, and post-acquisition, Funding Societies will have about 500 staff across 7 countries.

The startup is one of several tech companies tackling the underserved SME segment in South-east Asia. Innovation, government support and improvements in critical infrastructure could make the region’s digital financial services industry a US$60 billion business by 2025, according to Bain & Co.

Funding Societies originated from a peer-to-peer lending model and has expanded into providing a range of loans – including invoice financing and supply chain financing – from a diversified funding base. Last February, it raised a Series C+ round of US$294 million, of which US$144 million comprised equity funding led by SoftBank Vision Fund 2.

The company has disbursed S$3.43 billion in loans, according to its website. Its funding comes from retail and accredited investors, as well as institutional lenders such as commercial banks, development banks and credit funds.

But the business could soon hit a snag amid rising interest rates and a softening economic environment that could hit the region’s SMEs hard.

“It’s a fluid situation and we’re watching the markets closely, including speaking to experts and visiting our operating countries as well as the US for first-hand information,” said Teo.

“The macro environment is evidently fraught with risk of financial crisis. Our cost of funds will rise, but we are cushioned by our strong capital base from our Series C+ raise… and solid Covid-19 track record. There are opportunities in a crisis and I believe we’ll continue to thrive.”