Singapore’s cross-border payments startup Nium, formerly known as InstaReM, is setting its sights on a New York Stock Exchange (NYSE) listing by 2022 and profitability by Q3 next year.
In an interview with DealStreetAsia, Nium’s CEO and co-founder Prajit Nanu said the fintech company still has several “important indicators to fire” before hitting the IPO stage. By 2021-22, he hopes to earn the company a coveted spot on the NYSE.
The Vertex Ventures-backed company wants to grow its revenue by 5-6x to touch $75-100 million by 2021. By the end of this year, it wants to double its user base to 1.6 million people, and triple transaction flows to $15 billion.
“Payments are all about scale,” explains Nanu. “The more you scale, the more your cost of transaction can go down… Our focus in 2020 is to scale and grow the business like crazy across our Send, Spend and Receive products.”
The Singapore-based company has come a long way since its inception as a remittance operator. Last year, it re-branded itself from InstaReM (short for instant remittances) to Nium to reflect the expanded nature of the business.
While remittances still account for the bulk of Nium’s revenues, the company is also getting into the card business. In November, it became the first Asia Pacific player to partner with Visa to allow instant money transfers through Visa cards in more than 32 countries globally.
More capabilities will be added in the coming months, says Nanu. The cross-border payments startup is already preparing at least two acquisitions to beef up its card segment. Nium is also eyeing licensed fintech startups, which will allow it to enter new markets.
Nium currently holds e-money licences in Australia, Singapore, Hong Kong, Malaysia, US, Europe, Canada, Indonesia, Japan. It is applying for licences in Malaysia, Mexico and Brazil.
The growth of Nium’s operations also means that its likely to see competition across multiple fronts.
In digital remittances, Nium competes with European and US players such as TransferWise, Remitly and Worldremit, all of which have expressed interest to enter the Asia Pacific, a fast-growing region projected to grow at 24.2 per cent CAGR between 2018 and 2025, according to estimates by Allied Market Research.
In cards, Nium comes head-to-head with local players like Matchmove, Youtrip, and even Grab Financial, which launched its GrabPay Card in December.
Nium was last reported by DealStreetAsia to be raising up to $100 million for its Series D round in December last year. Nanu declined to comment on the fundraising.
The company last raised its $41 million in Series C led by Temasek-backed Vertex Growth Fund in March last year.
Nium’s other investors include Vertex Ventures SEA, Atinum Investment, Indonesia’s MDI Ventures, Thailand’s Beacon Venture Capital, Global Founders Capital, Fullerton Financial Holdings, GSR Ventures, SBI-FMO Emerging Asia Financial Sector Fund and Rocket Internet.
Edited excerpts of an interview:
How did Nium come about?
We were a consumer analytics platform back in 2015. The brand back then was Instarem. We didn’t realise that people would frequently get us mixed up with Instagram because it sounded so similar!
The theory was to basically provide cross border payment platform for consumers and SMEs. The first market we launched was Australia. In 2016, a large financial institution came to us and said they wanted to use our infrastructure to make payments and we said yes.
Today, we power four of the top 10 banks in Southeast Asia: Kasikornbank, CIMB, BRI Indonesia and Siam Commercial bank. By the end of this year, we should have two of the other large top 10 banks as well.
Around end-2018, we felt the need to revitalise the brand because Instarem meant instant remittance, but our brand meant so much more. After lots of searching, we found the name, Nium. Nium means rules in Sanskrit, and we strongly believe we are rewriting rules of payments all across the globe.
Today we are licensed in Australia, Singapore, Hong Kong, Malaysia, US, Europe, Canada, Indonesia, Japan. We are now applying for a license in Malaysia, Mexico and Brazil and trying to upgrade our licenses in India, Malaysia.
What is your revenue model?
You can access three products when you plug into our service – Send, Spend and Receive. ‘Send’ is a disbursement product, so a consumer sending money, a bank sending money, SME sending money. ‘Spend’ is card issuing. We can issue cards using a single platform across multiple markets. The last product is ‘Receive’, which is a collection product. So, if you’re an SME, we can help you collect money in USD, Euro, GBP, etc. That provides you the ability to collect money.
When it comes to revenue, each market looks different. On the ‘Send’ and ‘Receive’ sides, you will have an FX and remittance fee component. For ‘Spend’, it’s like an interchange where we take a cut off every transaction made on our cards.
Youtrip will be one of your competitors on the cards business then?
Yes. But the big difference between us is that Youtrip builds products for itself. We don’t build products for ourselves, we build a product for the whole technology infrastructure community. So, if you want to launch your own version of a Youtrip card, you can use your brand and we will provide you the full infrastructure to launch not only in Singapore but in 40 countries where we are present.
But you partner with Visa for your cards, which takes another cut out of every transaction that a consumer makes. How do you then compete with other banks when it comes to price?
Margin is a very key aspect of what we build. Unlike a bank, we run a very lean infrastructure and process billions of dollars of volumes annually, but we don’t have the same infrastructure as a bank. What we’ve built is a strong infrastructure platform, which can scale into multiple markets. So, once you plug into us, you can use our infrastructure in India, Australia, Singapore or Hong Kong, etc.
Why work through you when they can work through a bank?
We are far lower in cost and much faster than a bank. Some of our largest customers are banks. They use our infrastructure to do cross border payments. For larger value amounts, Swift is the best platform to use. But for smaller value transactions, it makes more sense for them to use platforms like us, which is real-time. You can receive the money in full amount so there is no reduction.
What kind of amounts are you talking about here?
Sub-$100,000. We’ve actually stopped defining them as SME, B2B, consumer, retailer. We just provide the financial infrastructure there – you can be SME retail, anyone – you just plug in and then send the money.
So we don’t really care whether it’s an SME payment of $50,000, or a consumer payment of $50. What we provide is the ability or options for customers.
That means that your ticket sizes vary quite widely.
Oh, absolutely. I can’t name clients, but we have one – a large global booking site. Their average ticket size per day is 70 bucks, but they will do about a million transactions themselves. For some of the banks, the average transaction size would be $10-15,000. Each of our customers is different.
That’s interesting because the media’s portrayal of remittances has always been about low-value transactions and catering to emerging markets…
We have never been a low-value remittance provider.
Our average ticket size in a market like Singapore is $4,000 per transaction. Remittances happen on two levels. One is among blue-collar workers. These are the guys who are sending money back home to put the food on the table. Unfortunately, we’ve not been able to acquire too many of them. Less than 15 per cent of our consumer base sends less than $500 a month.
Second is the white-collar base, which is people like you and me, and the high net worth individual (HNI) base. In our platform, we’ve got more white-collar workers and HNIs who are sending money, not to put food on the table, but to make investments, buy a property, set up some fixed deposit accounts, so on and so forth.
On competitors, we’ve seen a few global players like Transferwise, Revolut. Some of them are also entering Asia. Do you foresee competition stepping up further this year?
I don’t see them as competition. I see them as peers because I think the market is big enough for everyone to have their own niche and setup. I don’t even utter the word competition. The whole remittance market is significantly large. The banks charging some 3-5 per cent to their customers are the ones who still have the biggest pie. So, our focus is to make the business more transparent and make things better.
What’s the big focus for 2020? What about products in the pipeline this year?
The focus is for us to scale. This month, we are announcing two banks, one in the Middle East and one bank in Brazil. We were already there in those markets for some time. Without a single person in Latin America, we had over 10 clients and it’s a market we are scaling fairly rapidly. Our focus is to really proliferate our services. Through Bolt, we also want to see startups, young fintechs, young companies leverage our infrastructure.
In Singapore, we are launching a new product called Amaze. We’re beta testing it at the moment. This goes live in Singapore in January, (and in) Australia in March.
How many transactions do you generate in a year? How many active users do you have?
We did about $5 billion of flows a year in 2019 and we have a very ambitious target to grow 3x of this number in 2020.
We have close to about 800,000 users now on a platform. I think this will double by this year. Most of our users are from the Asia Pacific region – Singapore, Australia, Malaysia, Hong Kong, India, among others.
How much is your cost per transaction at the moment?
Extremely low. Our margins are 60-65 per cent, so if I’m making $1, 65 per cent is my net. It’s very, very healthy, so all we need is for a scale to grow further.
Are you profit-making yet?
Not yet, because we’ve scaled so significantly over so many different countries and segments. We are still building for scale and high volumes, so we are looking at profitability sometime Q2 or Q3 next year.
You have previously mentioned that you are targeting an IPO in 2021. Is that still on the cards?
It’s still on the cards. But I want our revenue to scale a bit more and I think we can (do an) IPO in around 2021-22. Our target is to 5-6x our revenues to hit $75-100 million by 2021.
We also plan to make at least two acquisitions this year. These will be in complementary services, which we don’t provide today, linked with Send, Spend, Receive products, as well as complex geographies where we can acquire a license and build into.
(On acquisitions) we are speaking with somebody in Latin America, but also looking at North Asia, Europe and Singapore. We already acqui-hired an American bank’s digital banking team last year. We are also looking at businesses on the card side. It’s a new area and we don’t do much on travel cards, so we will do something there.
And when you talk about an IPO, I guess you’re gunning for the US.
Yes, it has to be NYSE.
No, it has to be NYSE. You know, childhood aspiration, whatever you call it. I’ve worked for a couple of NYSE-listed firms, so it’s very much a dream. But there are still a few important indicators for us to fire before we get to that IPO stage.
Do you find your investors nitpicking on revenues and profitability targets a lot more since the WeWork scandal blew apart last year?
Not really. I think we’re extremely blessed. I think the investor-founder relationship is like a marriage. A general rule of thumb for me is to only take money from people you can pick up the phone and tell them – you know what, there’s been an issue. Don’t take money from people who you’re scared to tell them what’s happening. We’ve always taken money from people who we like, so Vertex Ventures is one of them.
How were you introduced to Vertex?
Cold calling, cold emailing! A lot of my early-stage fundraising was done that way. In the early days, I used to send monthly emails with a progress update of our business. Somebody from Rocket Internet noticed our progress and contacted us. We needed half a million dollars and they became our first investor. We were just two guys and a PowerPoint.
How do you see the fintech and remittances landscape evolving in the next year?
I think we’ll see a lot of consolidation in 2020-21. This will happen among the smaller players and the mid-sized players, even the smaller players in geographies. Some of the bigger players might absorb them and give them a bigger window footprint to do things.
Nium dropped the Singapore digital bank licence application last year. Why?
We were absolutely excited to do it. We had a lead-in before putting through our application, but after we sliced and diced the P&L, financial statements and market size in 20 different ways, we just couldn’t figure out how to make money.
Singapore is such a small market. Lending is the only way you’re going to make money. The top three banks here are digitally savvy. It’s not a painful market like Hong Kong.
How much more value does a digital banking license bring to the Singaporean ecosystem then?
I think it’ll be good for customers. You will get a lot of freebies, so let’s just be happy with that! When I first moved to Singapore I opened accounts with several banks and soon realised I didn’t use many of them, so I shut all of them. Today, I have one bank account and I’m very happy with the service. I’ll be very keen to see what offerings will be built on the consumer side. It’ll be very exciting.