Helicap Fireside Chat with Fintech Unicorn, Kredivo

Introduction

Hi, it’s David, Co-Founder and CEO of Helicap. For this September issue of The Heli-Pad, I am super excited to be chatting with Abhijay Sethia, Head of Strategy at FinAccel, the Singapore-based parent company of Indonesian buy now, pay later platform Kredivo. You probably read in the news back in August that FinAccel has agreed to a merger with a U.S. SPAC sponsored by Victory Park Capital in a deal that values the company at $2.5 billion. This is a milestone precedent for all startups in Southeast Asia, and particularly for FinTechs as FinAccel becomes one of SEA’s first FinTech unicorns.

In my chat with Abhijay, we cover a wide array of topics from Kredivo’s accelerated growth, future plans, to the Afterpay-Square merger. I highly encourage you, especially if you are a fellow founder, or avid Fintech fan to watch or listen to the video of our virtual chat. You can see further below a brief outline of our conversation with time stamps if you’re short on time.

I am certain you will find Abhijay’s thoughts very valuable – and as always, feel free to drop me a line and let me know what you think!

Best Wishes,
Dave

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FinAccel is the parent company of Kredivo, one of Indonesia’s largest and fastest-growing “buy now, pay later” (BNPL) platforms. Founded in 2016, Kredivo leverages AI to offer instant credit financing for e-commerce purchases and personal loans at competitive interest rates. With approximately 4 million customers thanks to a rapidly growing middle class and e-commerce market, Kredivo aims to provide fast, affordable and accessible credit to tens of millions of Indonesians.

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Fireside Chat

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In a Nutshell,

Disclaimer: This interview has been edited and condensed for clarity. For your convenience, we have included timestamps at the end of each question to help navigate the video.

I. What were the drivers of Kredivo’s accelerated growth over the past year? [00:03:40]

1. The rise in e-commerce:
   E-commerce has been growing 40-60% over the last few years, and is forecasted to grow 30-40% over the next 5 years. As a BNPL platform, Kredivo’s growth is tied to e-commerce growth.
2. The credit card penetration rate in Indonesia is extremely low:
   Unlike other countries like the US, Indonesia’s credit card penetration rate is one of the lowest in the world. Hence, BNPL is growing even quicker in Indonesia; Kredivo is not replacing credit cards as a mode of payment, but they are providing people with access to credit for the first time. Traditional credit cards have not been able to fill that gap historically.

II. How will the new private investors contribute to Kredivo strategically? [00:07:20]

PIPE investors are critical to validate the quality of the business & the valuation at which that business has been valued between the sponsor and the target. Getting investors in that PIPE validation was extremely important to rubber stamp the entire transaction.

III. With the Afterpay-Square merger, what is the outlook for the fintech payments industry? [00:10:58 & 00:12:19]

Seeing how Square has agreed to acquire Australian BNPL firm AfterPay in an all-stock deal valued at $29 billion, this highlights how the BNPL is a very real and scalable business model, and that it is here to stay. Square appears to have all the ingredients to go into BNPL on their own. In both sides of ecosystem, Square is way ahead of Afterpay in terms of merchant base and end consumers . The fact that Square is choosing to acquire Afterpay for nearly $30 billion instead of going into BNPL themselves validates that BNPL is a business for specialists, highly focused on risk and regulation.

IV. What are some of Kredivo’s future plans? [00:15:18]

1. Digital Banking Space:
2. As countries in the region are beginning to have a more open mindset towards fintech disruptors, Kredivo has aspirations in the digital banking space in Indonesia, and a portion of funds raised in the SPAC will go to that.
3. Organic Growth:
   
4. As a market leader in Indonesia, Kredivo wants to accelerate its gain in market share over the next 3-5 years. With BNPL penetration in Indonesia remains extremely low, there is clear room to pick that up and reach millions of customers in their home market over the next 4-5 years.
5. Regional Expansion [00:18:07]:
   
6. Kredivo is looking to expand to Vietnam, Philippines, and Thailand for the next few years. Markets like Vietnam and the Philippines share many of the same macro characteristics that is important to a digital BNPL business like Indonesia does. Specifically, low credit card penetration rates, booming e-commerce markets, and high but still rising smartphone penetration.
7. Each of these regions will have different data ecosystems as well as different merchant partnerships that Kredivo will need to strike as they enter those countries. Kredivo can apply learnings from Indonesia into the regional markets, so they will not be starting from scratch. That experience will hopefully allow a 1-2 year head start in applying their business model into regional markets, before taking into consideration local nuances and launching in said markets over the next couple of years.

V. Read together: what is a book that Abhijay would recommend? [00:22:18]

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William Thorndike.

It highlights the need to be not just a good entrepreneur to start, run, and scale a business, but also of capital allocation within the company.

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‍– End of Fireside Chat –

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Top Reads

In this issue of The Heli-Pad, you will find some recent press picks highlighting fintech topics like BNPL, unicorn status and financial inclusion. Happy reading!

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Singapore startup FinAccel announces $2.5bn SPAC listing in US

A Southeast Asian tech company has jumped on the special purpose acquisition company (SPAC) bandwagon. Read on AsiaNikkei for more details about the merger and FinAccel’s expansion plans.

Read more on AsiaNikkei

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Singapore’s fintech industry sees 3-year record of 72 deals worth $833m in H1

As corporates are coming under increasing pressure to accelerate their digital transformation and to enhance their digital capabilities, Singapore’s fintech industry saw a three-year high in deals transacted in the first half of 2021.

Read more on The Straits Times

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Singapore fintech Nium turns unicorn, topping US$1 billion in valuation

Despite having more than 1,000 fintech start-ups in Singapore that mainly focuses on payments, lending, investment and personal finance, Nium raised more than US$200 million in fresh funding. As a result, Nium became a rare fintech unicorn which marks a milestone in Singapore.

Read more on The Straits Times

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Bukalapak Posts Sales Jump in First Report Since Record IPO

Bukalapak went public in August after raising US$1.5 billion in Indonesia’s biggest-ever IPO, highlighting Indonesia’s thriving market for tech unicorns and its potential to generate premium valuations for homegrown companies. Read Bloomberg for more details on their debut report.

Read more on Bloomberg

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Southeast Asia’s tech start-ups could be valued at $1 trillion by 2025, venture capital firm predicts

A new report from venture capital firm Jungle Ventures predicts Southeast Asia’s technology start-ups’ combined valuation will reach a sky-high figure by 2025, thanks to factors like the growing internet economy, emergence of SPACs and huge appetite for IPOs.

Read more on CNBC

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Driving Financial Inclusion with BNPL and Smarter Decisioning

The following article explores the benefits that Buy Now, Pay Later (BNPL) can bring to the table. These include business empowering consumers and driving significant growth in financial inclusion.

Read more on Fintechnews

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