The company has a number of key competitive advantages as it looks to scale up its BNPL platform in the Malaysian market.
Fintech high flyerIOUpay (ASX:IOU)hascaught the market’s attention, as it looks to scale up plans for growth in its key south-east Asian markets.
The company has already had plenty of positive news flow in recent weeks,including approval from Malaysian authorities for a money lending licence,which will allow it to provide buy now pay later (BNPL) services to consumers and merchants.
That was followed by a distribution partnership with online marketplace EasyStore.
And as the company positions itself with a first-mover advantage for BNPL services in south-east Asia – led by key markets in Malaysia and Indonesia – its share price has also raced ahead.
Investors sent IOUpay shares another 59 per cent higher in Monday trade, the stocks’s third straight session with strong demand.
In light of all that,*caught up recently with chief financial officer Kenneth Kuan to discuss the near-term outlook.
While the company has plenty of momentum, Kuan said the IOU executive team is focused on a number of key operational targets in the year ahead.
The aim is to scale up a BNPL service in its core target markets that not only generates strong revenue growth, but is also profitable.
For starters, he said Malaysia is a high-potential market with a large, underbanked population and a relative lack of consumer credit services.
“So BNPL really hits this sweet spot in terms of an underserved and highly convenient facility for all forms of credit markets,” Kuan said.
Local network
While the market opportunity is large, Kuan said IOU is also focused on leveraging its competitive advantage in a region where it already has an important strategic foothold.
Khan, and other members of the executive team, already have extensive local networks in Malaysia’s banking sector.
“Across our management team, we’ve got 20 years of history with the banking sector here, and that’s definitely one of our competitive advantages,” Kuan said.
“We’re not seen as an Australian company in south-east Asia, we’re seen as a south-east Asian company.”
“But our ASX listing gives us the relevant compliance and regulatory obligations of an Australian company. And we find that’s something that appeals to the domestic banking sector here (in Malaysia),” he said.
That local network gives IOU a critical advantage in terms of both distribution and wholesale funding as it scales up the platform in the years ahead, Kuan added.
Cybersecurity compliance
Along with its strong footprint in Malaysian banking circles, IOU also had a world-class cybersecurity compliance function led by a team of experienced staff.
The company’s compliance team is led by a group of senior staff who previously worked at ipay88, a leading Malaysian payment gateway network which was acquired by Japanese conglomerate NTT Data in 2015.
For Kuan, IOU’s cybersecurity function gives the company a leading edge in terms of anti-fraud KYC (know your customer) compliance and credit risk.
“We’ve built our platform to ensure we’ll meet the relevant financial sector compliance obligations,” Kuan said.
That includes the financial guidelines issued by Malaysia’s central bank, as well as the global payment groups such as Visa and Mastercard.
“As a payment facilitator, we’ve set the company up under the same classification status as a payment gateway,” Kuan said.
“So our system is built in such a way that we will have the capacity to carry out monthly audits. Because when you roll out consumer app or merchant apps, those are the compliance measures that you have to adhere to in Malaysia,” he said.
With a strong existing network across Malaysia’s banking sector and an advanced compliance function in place, IOUpay is putting the pieces in place when it comes to a successful rollout of BNPL services in the south-east Asian market.
And as the company drives profit growth in the year ahead, investors can expect plenty of good news flow to follow up the recent momentum in IOU’s share price.
“If you look at the platform we have and the timing of our entry to the market, we have an opportunity to scale up while keeping costs down,” Kuan said.
“Getting to profitability and generating strong returns on capital invested is right at the forefront of what we’re looking to do.”
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