Singapore-based fintech firm ApexPeak – which provides working capital solutions to enterprises seeking to finance their growth and expansion – is largely focussed on the emerging economies in Asia, says Gakim Solomons, president & CEO of ApexPeak.
An online finance company, ApexPeak enables SMEs to access cash tied up in invoices, contracts, future sales or tenders. “We want to focus on the businesses a tier below where the banks would,” says Solomons, adding that the company’s largest differentiator is their in-house technology and risk assessment capabilities.
Solomons is a key member of the ApexPeak leadership team and has more than a decade of experience in the private equity industry, having worked as a Principal at Sanlam Private Equity and Standard Chartered Principal Finance in emerging markets.
DEALSTREETASIA caught up with Solomons to discuss developments involving ApexPeak, fintech as an industry, the regulatory landscape as well as how he sees the operating terrain of his industry evolving.
Excerpts from the interaction:
What motivated you to leave South Africa, a major emerging market that has extensive opportunities, and shift to Singapore?
The vision for our business was an emerging markets fintech venture that was a globally focused financial service business, much like Standard Chartered. Due to the nature of the business we know, the choice was between a major transshipment hub in the world, outside of Rotterdam and or some mainland Chinese port.
We wanted to build an emerging market business, and a large part of my seed money came out of Singapore. However, it doesn’t mean there aren’t opportunities in Africa. For instance, the technology side in Africa driven by how you can provide services within a mobile context. ApexPeak also maintains an office in South Africa. We also have a huge commitment to African markets, particularly in the East Coast
A lot of our trade finance business originates from different parts of Africa, and this is split between East and Southern Africa, where the trade is generally wholsesale businesses dealing with agribusiness and food.
But the bulk of the revenue lie in Asia, as we finance the receivables of international clients. For many of our clients, its those importing out of mainland China via Hong Kong. So we have to finance transactions to suppliers in mainland China, who deal with African partners.
With the recent acquisition of ASYX, are there any other impending mergers & acquisitions that ApexPeak is looking at?
We’re always on the lookout for business that we can partner with or acquire, which can contribute to the core of what we do. ApexPeak has two core areas: the origin of trade and the financing of that trade, in addition to credit risk management, its execution and trade execution.
Any entity that can supplement or otherwise complement these two activities with a sufficient reservoir of capital, we can partner through a joint venture (JV) or strategic alliance. On the origination side, we developed a base of origination through Sesami, which is the largest e-procurement hub in Southeast Asia.
With Sesami, you’ve got a community of 18,000 suppliers doing business with MNCs. It’s not easy to find deal origination at that scale. For us, Sesami was a strategic investment, where we hold a 48 per cent stake.
What makes ApexPeak different from your competitors? What do you reckon is the greatest advantage that positions ApexPeak as a market leader?
The idea is that we want to focus on the businesses a tier below where the banks would look. We typically target the Series A level or slightly under and allow them to grow to become bankable entities – that’s one segment from a business perspective. We’re looking to support growth-stage/mid-market entities. Our largest differentiator is our in-house technology and risk assessment capabilities.
We’ve had various interactions with top tier financial institutions (FIs) and the observation is that anything they’ve got in-house doesn’t match what we have internally. We’re able to process trade receivables more efficiently than them and a number of global banks have indicated that we are better in that respect.
It’s our speed in evaluating and processing transactions, enabling us to place clients in a process where they can be funded. We are very symbiotic with corporates and banks and don’t see ourselves as a disruptor.
Our overwhelming focus is emerging markets. We evaluated the business models present in the US and UK and when we looked at fintech models they were developed on the basis of information that’s easily available and with easily populated databases. What we’re doing is something that can work in markets that aren’t as efficient as something like the US.
How did you come to meet John Fearon and the rest of your team? What’s the story behind the founding of ApexPeak?
John and I were at university together and we’d known each other for many years. After going our different ways due to our professional work lives, we ended linking up again. Nick Gan was introduced by John Fearon, as Nick & John knew each other, when Nick had assisted John in setting up his own business.
John and I had been talking about it for years, starting in the US in 2008. This was called the Receivables Exchange. John and I looked to find a way where his tech and marketing background with my investment banking and finance background. That was the root of ApexPeak, in those respects.
With reference to this report about fintech on CB Insights, what’s your take on the investment landscape in the Asia Pacific and the most appealing sectors?
What’s usually charactersitc and specific to the Asia Pacific (APAC) is the dispersed geographies. There’s a huge opportunity to look at businesse that are able to address the conditions of different economies and possess the potential to scale and remain relevant to those markets. The ideas that you’ll see winning are ones that address serioues issues surrounding cross-border trade, payments and inefficiencies in B2B or B2C settings.
Indonesia has less than than 10 per cent credit card penetration. If one were to look at innovative ideas that are simple, such as working capital and financial service problems, that could change the landscape. For instance, currently all the e-commerce players use the charge on delivery (COD), which is very inefficient.
The real potential for fintech lies in Asia’s e-commerce potential. Ultimately, fintech is an enabling force that can support e-commerce and B2B businesses that can support the growth of payment infrastructure.
Fintech solutions have to address that, given that the challenges are different, relative to the US and European markets where there are deep reservoirs of capital at a corporate and institutional level. In Asia, there are no structures in place to institutionalise fintech investments in the way they should be implemented.
Right now, MAS in Singapore and Malaysian regulators are contemplating specific pieces of legislation. In order for the businesses to flourish, regulators need to be able to support the concepts that emerge. It’s a funny sort of domino effect that needs to make its way from Western Europe and the US to Asia and the ripples have begun.
The potential is huge, from an impact point of view. But the frameworks and institutions need to catch up. I’ve met a lot of people, many of whom have expressed a desire to find and build concepts that can scale across countries.
When comparing and contrasting the Asian markets, many cite MPESA in Kenya as an example of something innovative. What are the African opportunities for fintech?
When talking about the fintech space in Africa, the knee jerk response is to focus on the mobile market, where mobile use is higher than most places in the world. Africans almost skipped the PC and moved to mobile. Anything where you can provide tools in a mobile format is a good opportunity. Last year, we ran a pilot with a businesse called Umati Capital and the problem that they were solving involved the dairy industry.
They had farmers with multiple cows. Very often, these farmers have to transport the their milk to a central dairy, put it through processing and then ship it out. What Umati tried to solve was this problem; farmers often deliver 30 days of milk, are paid for the entire supply for the month in cash as a stack of notes, which then disappears for whatever reason.
Umati provided a facility that could handle that cash, dealing with the various processes and sorting out the administrative details. After 30 days, the dairy facility would pay Umati and Umati would then pay the farmers, making business processes more efficient.
With Indonesia and the Philippines, something similar could work out. This is a working capital solution with a real-life impact. The local environments in Africa often forces people to think in a practical context, especially with regards to solutions.
For African entrepreneurs and firms seeking to enter the Asian market and vice-versa, what do you feel are the key differences? Let’s emphasise African regions bordering the Indian Ocean.
It’s not as different as you think, other than language and currency issues, as well as the differing levels of efficiency in the systems. The same goes for Africa as it does for Asia – fragmented markets with different levels of efficiency. The common thread is the case of always understanding the regulatory and legal environment; understand your banking and payments infrastructure and the risk and how to mitigate them.
You can also work through trade embassies to help navigate these challenges, as well as seek their aid. Also ensure that you have good professional service firms (i.e. lawyers and accountants) working for you. It’s bout the ability to set up a business and see how you get paid. The rest is about character assessments and proper checks in terms of the parties you’re dealing with.
What’s your perspective on microcredit as a finance vehicle for small businesses and micro-enterprises?
I think that it’s been hugely effictive in certain parts of the world where it plays a role as an enabler. There’s many successful microcredit stories. Grameen Bank is really one example where microcredit has been an enabling force for businesses, as it can cater to the unbanked.
However, when implementing these models, sustainability is important. If you don’t account for it, it can be damaging at a social level and must be sustainable in a socioeconomic context.
What are your comments on the recent developments of MAS opening a fund for fintech and the establishment of the FTIG to facilitate strategy and policy?
It’s a step in the right direction from a regulatory perspective, as it provides frameworks for fintech businesses to develop and a piece of the puzzle needed to support growth. In terms of the initiatives that I’d like to see beyond existing capital structures, I’d like to see a greater diversity of entities introduced to support the growth of the fintech ecosystem.
Whether its venture capitalists (VCs) or corporates, it has to be the type of structure where people can invest capital, and that is where I’d like to see MAS develop more frameworks. There’s still a number of other aspects that still need to take shape, and most of that is linked to the payments infrastructure
For entrepreneurs from other industry verticals or backgrounds looking to enter the fintech and financial services space, what’s your advice?
Work with co-founders that have a combination of banking and finance capability and experience, in addition to market experience. They must possess a good skill set in addition to understanding regulatory environment, as well as get a critical mass in terms of originating deal flows and understand regulatory and market environments.
Based on manual processes, backwards engineer things and try to understand at what point the fintech emphasis is on. Many entrepreneurs have solid technology and marketing backgrounds, but this space requires understanding of finance services as a sector and the regulatory frameworks
We started of as FINSERV and became a FINTECH. Others start with technology and then shift the other way.
What’s your advice to investors seeking to put their capital into ventures in financial services space?
I’s say you want to back a team with good experience. Secondly, you want to ensure that whatever fintech business you invest in satisfies the regulatory requirements of the jurisdictions it operates. Always ask how are these ventures are going to scale and get to a critical mass. What strategies to they have in place? And no matter what space, have a strong focus on risk management.
What is your position on Bitcoin and other digital currencies as enablers and possible solutions in the finance space?
The underlying blockchain technology of cryptocurrencies is what I see impacting financial services the most. The Bitcoin blockchain, for example, is a decentralized digital ledger that verifies transactions between unknown parties — which allows for faster processing times.
Imagine how this might improve the customer experience. This could be a game-changer in the financial space. The only caveat is that adoption of crypto- currencies and the block chain will likely be slower in emerging markets compared to the mature financial markets in the West. Digital currencies are something we’re keeping our eye on but it’s not an area of focus for us at the present time.