Fundiin and 3 compelling reasons for our investment decision
Under the current stressful lockdown in the 4th wave of Covid-19, it has been more than 100 days since I have strictly implemented social distancing, all my study and work activities have taken place in a small apartment in Ho Chi Minh City. Probably not only my family and friends who know me well, even myself, are also surprised that an extrovert like me can stay home for almost a third of the time in 2021. With no time for staying depressed, I choose to maintain a busy, meaningful life. Besides my busy day-to-day work with startup investment activities, I am actively participating in an e-learning course to improve my financial expertise during this period. Interestingly enough, enrolling in the course gave me some initial inspiration and meaningful suggestions for our fund's new startup investment, which I would love to share with everyone in this blog: Fundiin with 3 compelling reasons that led to our investment decision.
1. The rising demands of flexible and user-friendly payment methods
One day at the beginning of August, I decided to take the Leading with Finance course - one of the well-known online courses of Harvard Business School. When I went through the process of paying tuition fees, besides e-check and payment in foreign currency via Western Union, I had options with credit cards. Thankfully, I could split the tuition fee in half to pay with different cards or choose to forward the tuition fee payment via email to the person paying on my behalf. Maybe these experiences are not new to learners in the US or other developed countries, but from Vietnam, having access to a "friendly" and "flexible" solution like this one, I felt very grateful.
Having the flexibility to pay tuition fees and opportunity to study a high-quality course while staying at home during a difficult pandemic has been a real blessing to me. Because there are many Vietnamese people who have not had much luck like that. The data below will clearly show that many Vietnamese have difficulty with decrease their income during this time while having very limited payment options due to the low usage ratio of banking services.
Under the current long Covid-19 lockdown period, according to the Vietnam General Statistics Office’s report released on July 6, 2021, up to 12.8 million Vietnamese people of working age were negatively affected by the pandemic such as job loss, have to leave work due to a distance order or job rotation or have their working hours reduced, resulting in loss of income or decreased income in the second quarter of 2021.
According to the report of Boston Consulting Group in 2020, among 5 countries in the region, namely Singapore, Malaysia, Thailand, Indonesia, Vietnam has the lowest percentage of the population owning a bank account (40%) and owning a Debit card (34%). Moreover, Vietnam has 2nd lowest after Indonesia in the percentage of owning credit cards (11%), and after Thailand in owning loan account ratio (15%). And also, Vietnam has a portion of the population with e-wallets is 11%, rank 2nd lowest in the region after Malaysia.
Therefore, during this period, it is not hard to imagine a lot of people are facing extreme difficulties, when they can not afford to products and services which make their life more comfortable and easier on these days, or even opportunities to learn new skills to find new jobs, to have a better life, also become far away for them, when they do not have access to flexible alternative methods of payment which are friendly enough to their wallets.
With that concern, I researched many different payment methods and found out the most suitable solution, called Buy Now Pay Later (BNPL), which allows consumers to buy a product or service now, and then pay it in installments in the future, without interest. A lot of people might confuse this payment method with the normal installment loan, the fundamental difference here is that consumers have to pay interest on the normal loan installment over the payback periods, but to pay zero interest with BNPL.
In Vietnamese, there have been several startups that provide Buy Now - Pay Later services, among which, I found Fundiin.
With choosing Fundiin as an option of payment at the shopping checkout time, consumers can divide it into 3 payment periods: pay 1/3 of the order value for the first period at the time of purchase, the second period within 30 days, and the last third period within 60 days after purchasing, consumers will pay respectively the remaining each 1/3 of the order value.
Fundiin convinced me by showing that, it is a new flexible, and extremely "user-friendly" payment option, when the consumer "has nothing to lose", with zero interest if they pay back on time. In case the consumer does not pay on time, they will be penalized 0.6% of the outstanding amount each week, but Fundiin still ensures they do not have to pay penalties totaling more than 25% of the order value. But the best thing for all is still consumer paying on time.
According to a survey by Morning Consult conducted in the first week of July 2021, interviewing 4,400 adults in the US about how the payment methods among credit cards, BNPL, or a combination of these two methods, have been playing a role in reaching financial goals in the previous month, June 2021. Survey results show that using the BNPL payment method has a more positive effect than other forms of payment (credit card only, combination of credit card and BNPL) in the process towards goals of eliminating debt and purchasing a home.
Actually, BNPL has proven and shown its great growth potential, with prominent names such as Klarna (founded in 2005 in Sweden), Affirm (founded in 2012 in the US) ), AfterPay (founded in 2012 in Australia), Paidy (founded in 2008 in Japan, with over 6 million users), etc... Recently, we have continuously received positive news, showing great expectations for growth in this segment, for example, AfterPay announced that it will be acquired by Square for more than $29 billion, PayPal announced that it was preparing to buy Paidy for about $2.7 billion.
In Southeast Asia, there is also a big BNPL player named Kredivo, founded in 2016, with about 4 million approved users on 10 e-commerce platforms. Kredivo is also expected to surpass $100 million in revenue this year. Recently, this startup has had many positive big moves. Kredivo's parent company FinAccel has acquired a 24% stake in the Indonesian lender Bank Bisnis Internasional for about $38 million, to serve as a springboard to expand into digital banking with the service name Lime. This was followed by the announcement of an ambitious plan to list in the US through SPAC in a deal valued at $2.5 billion. Three weeks later, FinAccel announced its plan to enter the dynamic market of nearly 100 million people, which is Vietnam, in the form of a joint venture with a family office - Phoenix Holding, which invests in digital bank Timo and P2P lending platform Interloan to start with bill payment for daily needs and personal loans, followed by the launch of BNPL service on e-commerce platforms from Q4 of this year.
Vietnam has favorable characteristics for the BNPL model to develop explosively in the near future, such as the scale of a large retail market worth USD 172 billion, young population with about 55.5% of the population under 35 years old, credit card ownership is still low at 11% and other forms of payment besides cash are limited, as well as in the context of the economy being affected by the current Covid-19 pandemic. It can be said that this is a very potential new payment market, witnessing the progress of many domestic and foreign startups entering Vietnam, but no company has yet dominated this market. Therefore, we expect Fundiin, with its superior BNPL solution, to be able to anticipate the rise of consumers' demand for flexible and wallet-friendly payment in Vietnam, to become a successful leading company in Vietnam's BNPL market.
2. We support the creation of a prestigious society for Vietnam, where everyone strives to build and improve their own credit
In the developed countries, the credit card ownership ratio is quite high, for example, this ratio is 87% in Japan and 79% in the US in 2020. Is anyone curious why the ratio of credit cardholders in Vietnam is so low with only 11%? There have been many articles mentioning that many Vietnamese people are still afraid to use credit cards since they are worried about losing money on the card or not grasping all the costs incurred in the process of using the card.
In addition, as the Boston Consulting Group report explained, in developing countries, the conventional consumer finance services are still underdeveloped and facing many difficulties, where it is difficult for consumers to get credit cards from banks because there is no way to verify the credit level of customers. In Vietnam, we do not have enough credit information database, which requires to be updated regularly, with high reliability.
Despite we do not have a complete credit information data infrastructure, we can "take a shortcut" with new technology and innovative approach, anyone with a phone number, a phone connected to the internet, an ID card can use BNPL. It can be said that the credit card was an invention of the last century, then BNPL would be a new form of credit of the 21st century. BNPL has a mechanism to encourage people to pay on time with interest-free benefits, and have the right to increase the credit limit for the next usage. Consumers' timely payments contribute to their own "credit balance". Thereby BNPL will encourage the creation of a society where people try to increase their creditworthiness and enjoy benefits from that in access to better opportunities.
At Genesia Ventures, we have a clear vision with 6 major challenges in today's society, towards building a better prosperous life. We are supporting Fundiin's vision through its BNPL solution, to provide equal access to opportunities, a more flexible and user-friendly payment method that helps individuals have more choices that contribute to improving the quality of life. And it is extremely important to us that Fundiin can contribute to creating a more prestigious, healthier society by empowering us to build our own credit.
3. Founder with previous failures, but stood up with important lessons for Fundiin's growth
Last year, I had an opportunity to talk for the first time with Mr. Nguyen Anh Cuong, Co-founder & CEO of Fundiin, but it was hasty catchup that didn't really leave an impression until about half a year later, by chance I listened to Vietcetera Podcast Vietnam Innovator, an episode with Mr. Nguyen Anh Cuong talking about his startup journey with Fundiin, which really left me with many good impressions. He is a calm demeanor, humility, careful wisely selection of words that are easy to understand for anyone even outside the financial industry can clearly understand what BNPL service he wants to do. Especially, I was impressed by the way he faced his past startup failure, which made him lose all accumulated money from his previous investment career and reflected with valuable lessons learned, for the next startup journey with Fundiin.
From his sharing in the Podcast, I could understand two important lessons that Mr. Nguyen Anh Cuong learned to make sure he will not repeat the same mistake with Fundiin: His solution must be much better with a clear value proposition compared to any competitor in the market, and Not rush in scaling the business when it has not been matured and achieved Product-Market Fit.
In addition, in the process of consideration, we was discussing a lot about Fundiin's growth strategy, how to build a sustainable competitive advantage, and MOAT for Fundiin. Mr. Nguyen Anh Cuong also showed that he was a founder with a sensitive spirit, sharpness, eagerness to learn, aim to build a sustainable growth business.
Perhaps because of his excellent capability and his vision with Fundiin, a lot of people around him want to come support and accompany him, this is reflected in his ability to build a strong founding team with Co-founder & CTO - Mr. Vo Hoang Nam. In order to successfully build a credit risk assessment model for Fundiin, Mr. Nam's role is enormous. Mr. Nam has previous experience as Head of Technology at TP Bank, was responsible for building TPBank MyGo - a financial application that helps TP Bank manage Credit and Debit cards database, and TPBank Savy- an online saving app. Both co-founders have convinced us that they are Product Fit Founders - the right people to create Fundiin's future success.
Above are 3 reasons that convinced us to make the investment decision in Fundiin. There is still a long way to go and many challenges ahead, but we hope that the two co-founders and Fundiin team will step by step convince users and retail merchants, as the way Fundiin has convinced us and other investors, to successfully contribute to the development of BNPL payment, thereby helping people to create more opportunities to access goods and services for a better life, in Vietnam.