Indonesia-based C88 Financial Technologies’ strategy of stepping up focus on the business-to-business (B2B) appears to be paying off as the pandemic has accelerated demand for its services, a top executive said.
The Experian-backed fintech startup offers enterprise services such as credit risk management and digital banking software while its B2C brands — Jakarta-based Cekaja and Manila-based eCompareMo — sell financial products to consumers online.
The B2B business currently accounts for 80% of the firm’s operations.
In line with the shift, C88 has recently rebranded itself as Caxe Technologies to reflect its B2B focus.
“The fintech infrastructure part of our business was and is very large,” Caxe Technologies co-founder and CEO JP Ellis told DealStreetAsia in an interview.
On the diminishing size of the B2C business, Ellis noted that against the uncertainty created by the pandemic, underwriting departments were focused on existing portfolios, which, in, turn affected the number of products that were available for distribution.
The company, which was selling products of 70 financial institutions across the region, then restructured its contracts to include digital scoring and other services.
“By doing so, we realised an immediate jump in profitability almost overnight,” he said, referring to a jump in demand for the B2B services.
While the pandemic saw demand evaporating in sectors such as travel and tourism, in the financial services space, it led institutions to recalibrate their products to prevent insolvencies.
“Clients need automation, data, analytics, better risk management and much more. The pandemic and lockdowns really put a stress on the financial services sector, because so much of it was still paper-and-people-based,” Ellis said.
During the early days of the pandemic, Indonesia’s financial regulator OJK relaxed debt quality assessments and restructuring requirements for loans. As a result, banks were not required to immediately set aside loan-loss provisions.
“It’s like a supermarket that needs to have products on its shelves. But, as soon as lockdowns began, products were pulled from the shelves by financial issuers and risk criteria tightened by several orders of magnitude,” Ellis said.
He noted that the pandemic had created both an opportunity and a challenge for the company.
Having collected data throughout its operations since its inception in 2013, Ellis said, “All we needed was the discipline to look at the numbers, the humility to listen to our clients, and the courage to take action.”
Preparing for B2B
Caxe’s leap to the B2B side of the fintech play did not happen overnight. The company had laid the groundwork to step up its core capabilities in fintech infrastructure by executing three acquisitions long before the pandemic.
Caxe, formerly C88, acquired ThinkTank Software in Manila in 2015, a sales company ReachWorks Corporation also in Manila in 2016, and IDXOptus in Jakarta in early 2019.
While ThinkTank offered the company depth in engineering, ReachWorks lent distribution strength in the Philippines and IDXOptus gave it market leadership in Indonesia.
“We believe we are a clear market leader with over 70% market share in a lot of mission-critical areas around data, analytics, risk and lending automation,” Ellis said, noting the company’s position in the market at this time has been a clear sign to adopt a fresh new look and brand.
Caxe counts global players such as Wiserfunding and its strategic partner Singapore-based CrediLinq.Ai as companies operating in the same space as itself. It also competes with several AI firms across the region.
Caxe’s rebranding decision has received the support of its investors. “They continue to play an important role in financial access and inclusion in the market,” Peng T. Ong, co-founder and managing partner of Monk’s Hill Ventures, told DealStreetAsia. Monk’s Hill Ventures has backed the firm since its Series A funding round.
C88 had raised $28 million in Series C round in 2018 led by global credit-scoring giant Experian. It had also secured an undisclosed Series C extension in 2019 after Korea Investment Partners belatedly joined the Series C round in late 2018. Prior to that, the startup had raised a Series B round led by Telstra Ventures in September 2016.
According to C88’s filings with Singapore’s Accounting and Corporate Regulatory Authority (ACRA), the company received $1.48 million this year from a rights issue joined by its existing shareholders, $4.85 million from Intervest Star Southeast Asia Growth Fund I, Responsability Participations, and Experian Asia-Pacific Holdings in 2020, and a total of $10.02 million in 2019. According to DealStreetAsia’s DATA VANTAGE, Caxe Technologies have so far amassed $60.37 million in funding and is valued at $128.19 million.
While claiming to be capital-efficient on the back of solid profitability and growth, Caxe is looking to raise fresh funding in the first quarter of 2022 to meet working capital needs, scale up its sales team and invest in product R&D.
Going forward, Ellis has IPO plans for Caxe buoyed by the company’s financial performance. However, there is no clear timeline yet.