Hello there

In the fragmented online lending market, one firm’s downfall is another’s gain.

This week, we investigated investor allegations against Capital Match, a Singapore-based P2P firm that specializes in invoice financing.

The P2P lending sector is no stranger to controversy, and Capital Match isn’t the first firm to go south. It also definitely won’t be the last.

In recent times, you’d recall CoAssets’ fall from grace, a story Tech in Asia broke in December 2020. And just last week, we covered the plight of Indonesia-based UangTeman’s investors and their futile efforts to claw back their money since early 2021.

P2P firms - at least in their most traditional sense - aren’t set up to be aligned with the investors they represent and the deals they enable. Unlike balance sheet lenders, many P2P firms do not have skin in the game - they purely provide a platform for lenders to connect with borrowers.

When loans go bad, it’s the lenders who risk losing their capital, while P2P firms risk losing only interest on repayments. There’s also limited incentive for platforms to take an active role in loan recovery and maintain the credit quality of the assets they’re taking on.

That said, to players serious about the long haul, having a good reputation matters. That means delivering on projected investment returns and keeping non-performing and default rates to a minimum, without compromising on credit quality even as loan books grow.

But not all is bad. Several online lending platforms are going from strength to strength even as they emerge from what’s hopefully the worst of the pandemic.

We examine one of them - Funding Societies and its US$144 million-backed push into Vietnam - in this week’s Hot Take.

-- Melissa

THE BIG STORY

Another P2P lender goes south: millions on the line for Capital Match’s investors

Image credit: Timmy Loen

Investors charge that years of poor oversight and irresponsible lending have compounded into a costly mistake for Capital Match.

THE HOT TAKE

Funding Societies’ new heavyweight investor

Funding Societies co-founder and director Kelvin Teo / Photo credit: Funding Societies

Here’s what happened:

• Last week, Funding Societies raised US$144 million in a series C+ round.
• The round was led by SoftBank Vision Fund 2 and joined by VNG Corporation and Rapyd Ventures, among others.
• The firm also received US$150 million in debt financing from institutional lenders from Europe, Asia, and the US.

Until now, Funding Societies’ main market has been Indonesia, where it operates as Modalku.

The Singapore-headquartered firm, which also operates in Thailand, Malaysia, and Vietnam, targets MSMEs. It offers various lending products such as invoice financing, term loans, and supply chain financing, and the values of these loans can range from US$500 to as much as US$1.5 million.

Its most recent funding round, however, signals its ambitions in Vietnam, whose internet economy is expected to see a compound annual growth rate of 29% to US$57 billion between 2021 to 2025 - a rate of growth outstripping even Indonesia’s - according to a report by Temasek and Bain & Co.

Most notably, Funding Societies may have pulled a coup with a prominent backer in VNG Corporation, the Vietnam-based gaming and entertainment unicorn that also owns social media platform Zalo, online media platform Zing News, digital payments app ZaloPay, and cloud services solutions provider VNG Cloud.

Without discussing specifics, Funding Societies CEO Kelvin Teo told Reuters last week that it plans to use its financing business to launch its “new businesses.”

VNG might offer some indication as to what those plans might be. Ryan Galloway, Funding Societies’ country director in Vietnam, has said that Zalo messenger and ZaloPay wallet could create “endless possibilities” for the fintech firm’s borrowers.

In Vietnam, Zalo’s 52 million monthly active users place it even ahead of WhatsApp. As Funding Societies forges ahead with its neobanking ambitions in the country, Zalo’s “innate data value and network” opens up a huge opportunity.

Since being flagged by regulators in 2021, Zalo does not provide loans to customers, though it refers them to third-party financial providers through its platform Fiza (short for Finance Zalo).

Funding Societies could potentially tap Zalo’s data on users - as well as merchants - to roll out microfinancing products for them. This will lower the lending platform’s customer acquisition costs.

That said, Funding Societies is not yet licensed in Vietnam, though a company spokesperson tells Tech in Asia that it is working with the country’s regulators. The spokesperson adds that customized or proprietary offerings will be rolled out as soon as “this or next year.”

Together, both Funding Societies and VNG Group can create a “seamless customer experience” across lending, payments, spend management, and other services for SMEs, the spokesperson adds.

With Funding Societies’ loan origination back on track after a tough start to the pandemic as well as a firm hold on default rates, which it has maintained at 1% to 2% for the “past few years,” Vietnam could hold the key to unlocking the lending platform’s next stage of growth.

That said, Funding Societies is not the only SME lending platform setting its sights on Vietnam, or the only one pulling in partners with strong networks.

In January, Singapore-headquartered Validus’ local unit, Validus Vietnam, formed a joint venture with VC firm Do Ventures and conglomerate TTC Group. Together, they aim to support SMEs in Vietnam through various financial inclusion initiatives.

-- Melissa

NEWS YOU SHOULD KNOW

Also check out Tech in Asia’s coverage of the fintech scene here.
 

1️⃣ Tinder co-founder’s fund joins $31m round of PHL payments firm

B2B fintech firm PayMongo will use the fresh funds to develop new services such as disbursements, capital lending, subscriptions, recurring payments, and buy now, pay later.
 

2️⃣ ShopBack in talks for $150m fundraise

Since its acquisition of BNPL firm Hoolah in November 2021, the online rewards platform is strengthening its fintech muscle by adding executives from Fave and PayPal to its team.
 

3️⃣ AC Ventures leads $4m round of Indonesian crypto app

Founded in 2018, Nobi facilitates the buying and selling of cryptocurrencies, among other services. The company says it currently manages around US$70.1 million worth of digital assets.
 

4️⃣ Bolttech buys SG insurance firm Ava

The acquisition will accelerate Bolttech’s insurance exchange in Singapore that will connect insurers, distributors, and their customers.

FYI

Photo credit: UangTeman

1️⃣ Investors in UangTeman struggle to claw back their money

A group of 11 investors, who collectively put in US$628,000 into the Indonesia-based online lending platform since 2020, continue to question when their principal will be returned.

That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter here.

Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center.

In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com.

See you next week!