Can your smartphone help you save a trip to the bank’s ATM to withdraw cash? Singapore-based startup soCash is of the view that its technology can help consumers withdraw cash for free at every minimart, avoiding the need for a debit card or PoS, while also helping banks to make significant savings by offloading their ATM volumes, especially in residential areas.
But it is not banks alone that gain, and the startup’s primary objective is to address a core consumer issue of not having to search for, or queue up at an ATM, its managing director Rekha Hari, said in an email interaction.
soCash, which is currently in discussions for pilots with leading Singaporean banks, is looking to raise about $1 million to roll out operations.
Against the popular perception that developed cities are moving to a cashless future, Rekha says the startup is betting on cash, and adds that the billions invested in cash alternatives – mobile wallets, NFC, SMS – are yet to scale, while pointing out that that even in the city-state, cashless transactions were estimated to be between 55 per cent to 60 per cent.
“If you take the share of low value payments specifically, the cashless story falls apart. That is in spite of a fully banked population,” she added.
What was the inspiration behind soCash? At what stage is the startup in currently?
Contrary to the prevalent narrative, data from central banks show that Cash is actually growing, globally. Developed markets like US, EU & Australia show 6-7 per cent growth for currency in circulation.
Even Singapore has a 9 per cent growth in cash and coins in circulation. This establishes the demand side. As the next billion people are coming into the middle class & their consumption spending happen with cash & not with credit cards. Actually the problem is not ‘cash’ per se, but it is the ‘cost of cash’.
This is totally due to inefficient & long supply chain of cash that is over engineered. ATMs are the last node of this long supply chain. This insight on the inefficiencies in ATM networks led to the birth of soCash. ATM manufacturers – NCR, Wincor, Diebold etc. – are a $ 20 billion per annum industry.
That’s an elephant size cost for inefficiency which forces all of us to pay directly or indirectly, which smart technology can eliminate. Think about it, there is cash all around us, our neighbor has it, the minimart has it, we just need to know where to get it. soCash is an enterprise platform for banks and matches the demand and supply of cash in specific location.
The settlement is electronic & instant between the parties involved in the transaction – peer to peer. soCash converts every shop into a cashpoint and each individual a walking ATM. All you need is a smartphone.
Singapore is going to have five million cashpoints pretty soon. Banks love us as we are on their side. We enable them to reduce their costs, retain their liquidity within their books and offer a far superior customer experience in accessing cash. soCash is very young. We were incorporated in Singapore last October and our product went live in April. We are currently working on pilot programs with banks to fine tune the platform.
What is your business model and business case?
Our business model – transaction fees and network monetization. soCash is significantly cheaper than ATM transaction, so banks pay us a transaction fee, which we share with the cashpoint.
As we build our network of cashpoints across cities, we are building a last mile capability to banks & e-commerce companies. Our pitch to banks is this. For large banks with existing ATM network, we can offload 25 per cent of their ATM volumes, specially in residential areas. For banks betting on fully digital banking models, our pitch is to make cash ubiquitous via soCash platform rather than investing in their ATM infrastructure.
Some of the minimarts and even larger outlets already allow you to withdraw/collect cash if you have a debit card. This network will only grow. Won’t this cannibalize your business case?
It is true that debit card model is present for decades and this is the regulatory framework that we that we rely on. The key difference is in the customer journey. Today, customer needs to buy something before he can request cash. The cashier in the retail & chains are trained to collect cash and move the queues.
Cashier has no incentive to service cash withdrawals. At minimarts, with ‘soCash’, cash becomes a product that minimart sells, just like telco prepaid cards. The cashpoint earns revenue and he/she doesn’t have to bother about depositing daily cash collections in the bank next day. Since everything happens on a smartphone, there is no debit card or PoS machine to think about.
From small outlets to taxis, there is increasingly a pattern to move away from cash. The physical use of cash in countries such a Singapore may come down significantly. How does this impact soCash?
At soCash we are betting on cash. While there may be a cashless future, no one has told us when that milestone is going to be reached. It is important to realize that the distinction in narratives: Are there alternatives to cash? Have people embraced these alternatives? In spite of billions invested in cash alternatives – think mobile wallets, NFC, SMS – over a decade, while there are interesting case studies, nothing has scaled. Even in singapore cashless transactions in Singapore are estimated to be 55-60 per cent. If you take the share of low value payments specifically, the cashless story falls apart. That is in spite of a fully banked population.
How much funding have you currently based? How much do you need to raise? What is the timeline for raising the same?
We are currently internally funded & we are looking at rasing of $900K- $1 million by August. We will be using this to make the platform enterprise grade, build the team for driving product road map and enabling our network growth – banks and cashpoints.
Take us through your expansion plans?
Our focus is on Asia. We are evaluating between HK and Kuala Lumpur as next markets to expand to. India & Indonesia are obvious markets to expand to once scale our platform for that size.
A concept like yours, if successful, can be easily replicated by other startups in different cities/countries – how do you address this threat?
soCash will have to focus on product innovation and compete on business models to retain our edge. It will be good if there are others who replicate us as it will be a good product fit validation. The market opportunity is so big – ATM manufacturing alone is $20 billion revenue – we have enough space to grow and it will depend on the execution quality. It also means that we need to scale quickly in the most profitable markets and leave the others to competition.
Can you get this off the ground with a small team? There is a cost, time and effort, in meeting local/nearby shops and getting them to sign up. Won’t this therefore be a people heavy model? How can this challenge be addressed?
We will have to setup a strong team – 4-5 people – in each city to focus on network growth. This may involve investments early into the launch sequence. This is where partnerships with banks bring incredible value. We will rely on their access to small merchant to drive sign ups.
If you were to be successful, we could have a scenario, where banks, through their mobile apps, would extend a similar service to small outlets, and let customers withdraw/deposit cash. In such cases, most customers already have their apps of their respective banks on their handheld, and may prefer to use such an option that is provided by their bank – there is trust factor here too.
We agree theoretically and this is precisely what the big banks are asking us to enable via soCash platform. We are currently piloting our soCash API stack with banks and this enables them to control the user experience. But the smaller banks find value in marketing soCash to its customers – their strategy is similar to running a shared ATM network and its quicker execution. Replicating soCash by banks themselves is possible but is unlikely. It is similar to argument that banks know banking, so all the technology platforms inside the banks will be built by banks – which does not happen. If we continue to engineer our platform with excellence and we are able to generate value, then banks will embrace us.
You are projecting revenues of $20 million in three years. Take us through the numbers.
The above is the projection for Singapore. If we execute it right, we will scale into in five mega cities in Asia over three years and this is how the $20 million is derived, with some conservative buffers
There are several mobile wallet service providers. Do you see them getting into this space? Many of them already have a reasonably large captive audience.
We see mobile wallets as partners that enable settlements for soCash and we will seek them out actively. In fact, soCash could become their cash-out platform, should they have a road map for cash.