A look into our partnership with Finmo and the industry they are redefining, shaped by decades of experience and deep understanding of the treasury problem of global businesses

Money makes the world go round, goes the famous adage. This only means the industry that enables this to happen 24/7, 365 days a year can only be a massive one. The global payments industry is a colossal entity, one that plays a fundamental role in the world’s economy.

From 2014 to 2019, the industry marked consistent 7% year-on-year growth, and while this declined to 5% in 2020, it was still sized up to be around a US$1.9 trillion industry. Even this decline was short-lived, and payments rebounded sharply to reach US$ 2.1 trillion in 2021, according to McKinsey reports. 

The growth of this industry has unveiled key pain points over the years that have been the focus of many payments and treasury fintechs’ solutions:

1. Focus on transactions: Speed (how fast can settlements be resolved) and Definition (how atomic can settlements be served and managed) of transactions → Demand for real-time API-enabled payment rails
2. Focus on the nodes in transactions: Fragmentation and opacity across vendors and integrations → Demand for unified, agnostic platform
3. Focus on workflows: Fragmentation and opacity across cash flow and treasury management → Demand for end-to-end workflow platform for greater transparency

Case Study of the Shift in Global Payments Platforms from Transactions-Only to Workflows

The first evolution of B2B cross-border/global payments tackled money movement from one jurisdiction to another, leveraging an FX spot rate to maximize efficiency.

While we are quite familiar with fintechs that have emerged to tackle pain point #1 by building payment infrastructure (the Paypals and Stripes of the world), in recent years a new crop of payment fintechs evolved to focus more on #2 along specific payment corridors (e.g., APAC-Europe) and specific industries (e.g., ecommerce). 

A noteworthy example here is Primer, a company launched in early 2020 by Gabriel Le Roux and Paul Anthony, former senior professionals at payments gateway platform Braintree (acquired by PayPal in 2013). 

Briefly, Primer provides merchants with one integration that unifies payment service providers (PSPs) and other vendors in their payment flow without spending time and budgets on development. Primer has become a vendor agnostic infrastructure layer for merchants and offers merchants access to (i) universal check-out, (ii) connections (marketplace of third-party integrations) and (iii) workflows (drag and drop end-to-end payment flows). The company raised its first seed round in 2019 and has amassed a total of US$ 73.9M in funding since then. By its Series B in 2021, the company grew to 70 employees across 20 countries and was already operating in the UK, US, Europe and Asia. 

Primer made its dent in the market in two ways. First, they built ecommerce merchant payment workflows. Note that 2020, while an economically challenging period initially with the pandemic, ultimately saw massive ecommerce adoption globally in a contactless world. Second, they became a “platform of platforms”, consolidating merchant connections to the likes of Checkout.com, Stripe, WorldPay, Klarna, Riskified, GoCardless and many more.

While the likes of Stripe are full stack payment service providers, these multinational companies face challenges in domestic markets and are forced to partner with other PSPs and value-added services (VAS), providing an advantage to companies like Primer that are able to carve a piece of the market with a focus on specific regions and payments corridors. 

What the Primer case study represents is an evolution in the focus of global payments fintechs from just orchestrating transactions to improving the customer experience of managing these transactions. 

This type of evolution runs parallel to the evolution of platforms in other areas of the digital economy — think 4PL platforms unifying 3PLs, ecommerce platforms enabling omnichannel distribution, data processing platforms enabling integrations across all types of data sources. 

At the same time, Primer’s model and focus is not quite the holy grail that could unlock the full value of the industry, especially as payments are just one type of workflow a cross-border business has to manage.  

The Opportunity in Tackling the Ecosystem of Services Around Global Payments

Beyond thinking about global payments as just that — global payments — there is value to be created in supporting the financial management needs of businesses that use such systems and services on a day-to-day basis, whether that’s their FX, budgeting, accounting, tax management, or finance infrastructure. In a word, finops. 

Fintechs have taken different routes to support finops management for their customers. Players like Modern Treasury are straight to the point, focusing on reconciliation, ledger, and positioning and transaction management. Another approach has been to take the “SaaS on a platform” route, as in the case of Bill.com, where their SaaS model enables stickiness to their payment rails. 

Regardless of the approach, competition is carved around (1) the comprehensiveness of the platform’s services (breadth of integrations, depth of product stack from back-end accounts to front-end real-time payments), (2) as well as which corridors and regions the platform caters to, given that going beyond payments into these other workflows necessitates licenses to operate. Today, the biggest corridor is APAC – Europe (calling back to the Primer case study) with Australia being the largest region in APAC. These two facets need to be tied to the ideal customer profile of the platform. 

Ultimately the holy grail here is to become the “operating software” or OS for finops. This underlines a first principle for platform companies: to capture as much of a customer’s life cycle as possible, going beyond acquisition and topline growth to driving retention and positive unit economics. 

In Southeast Asia, while merchants can access alternative solutions to enable cross-border and/or last-mile payments, there is no modern treasury OS with a focus on the region. The region’s multiple markets present challenges in terms of unifying the variety of payment corridors. Though there’s no one platform dedicated to finops, cross-border fintech platforms abound in the region with product stacks that overlap. 

But at the same time, SEA Fintech exits in recent years, such as Wallex’s acquisition by M-DAQ for US$70 million and Curlec’s majority stake acquired by Razorpay, demonstrate the lucrative potential of this industry in the region.

Finmo’s Treasury OS as the Next Stage of Global Payments Platforms

In the crossroads of these challenges and opportunities lies Finmo, a SG-based cross-border payment orchestration platform that manages last mile payments, and is ultimately seeking to build out the Treasury OS for Southeast Asia.

Founded in late 2021 by ex-senior executives at Rapyd, Paypal, Citibank across Australia, Singapore, and the US (all APAC region), Finmo identified a massive opportunity within the global payments industry, particularly in Southeast Asia (US$233B globally, >US$100B in APAC).

And in our podcast with Finmo CEO and co-founder David Hanna, we talked about the company’s role in the evolution of B2B fintech and payments.

“There have been various studies over the last year or so around this space, and the addressable market for B2B flow is about $150 trillion. From our perspective, there’s a sizable addressable market that we’re helping to solve.

When you talk about treasury issues and problems, I think of the example of simple fintechs starting out in the space. Typically, they want to market their product, figure out their runway, and how they can add value to their clients. They need to get a business off the ground.

What we’ve found is a huge demand coming from that space. Fintechs want to serve their customers globally from day one. Gone are the days when you start in one market and then enter another. Now, they have funds collected all over the region and the globe.

Therein lies the problem of treasury. They need to figure out how to de-risk the fluctuation from an FX point of view, get consistency with cash management visibility, and look at yield and return on their funds. Quite quickly, they recognize the challenge of treasury management. That’s what we’re really trying to solve for our customers.”

While Finmo has addressed pain points #1 and #2 initially (RTP rails) as part of its solution, it has purposefully gone a step further to address organizations with collections from different parts of the world and multiple bank or virtual accounts in multiple jurisdictions — this is where today’s treasury challenge comes in:

1. How do you bring all those funds together?
2. How do you maximize your return on some of these funds that are floating around?
3. How do you solve for the spreading out of cash globally to de-risk the bank runs issue that we saw a couple of years ago while maximizing different components of treasury?
4. How do you have visibility over cash management throughout the globe, and in various regions depending on where you’re situated, and maximize yield and return capabilities?
5. How do you look at your AR/AP processes and how do you manage that in a way that relates to your cash management visibility?
6. How do you optimize FX in a way that isn’t just about spot trading from one currency to another?

These questions and more, often posed by treasurers themselves, are what Finmo has been building its modularized solution around.

What has made Finmo’s approach interesting, not just from an industry but also an investment perspective, has been their funds flow-first approach, in contrast to peers that have taken an open banking-first or data-first approach:

(1) Building the “pipes” for real-time payment capability was in response to a fundamental trend David and his co-founder saw when starting Finmo: more global companies were emerging thanks to tech but it is not uncommon to see these organizations holding cash in one environment.

“The catalyst, as I mentioned, is the bank runs, the fact that organizations are global from day one, and the complexity of managing different banking infrastructures around the globe.

These new problems are being faced every day by payment players, fintechs, trade, export merchants, etc. The need to better manage this complexity is clear. Frankly, we don’t see a similar platform in the market today. We believe we are category-defining in terms of the treasury operating system.”

(2) Covering the regulatory bases by securing five licenses around the globe not only allowed them to connect directly into banking infrastructure and operate RTP services across markets, but also build their reputation entering into the market and trust with potential customers entrusting them with their treasury flows.

“From a regulatory point of view, most regulators in the region, particularly around Asia, are starting to become more mature to these types of business models. There is a pretty clear framework in terms of licensing infrastructure. To your point, we went after the licensing component from day one, and now we’ve got five licenses around the globe.

We think that’s our moat, having the ability to connect directly into the banking infrastructure. To do that, you need licensing. You can control the end-to-end experience with our merchant base, and you should be robustly regulated.

From a treasury platform perspective, if we’re holding millions and billions of dollars worth of client funds, we want to be in a position where the most robust regulators are overseeing our business. That’s how we see regulatory compliance and licensing and why we’ve taken this approach from the beginning.”

(3) Addressing the funds flows pain point first opens up a wider pool of potential customers Finmo can build the full-stack treasury OS with.

“Actually, further to that, if you think about the problem we’re solving, at the smaller end of the market, a small flat organization might use accounting software like Xero or QuickBooks. This might be fine for their needs. 

At the large end of the market, they might buy software like Ariba or other large enterprise solutions, which can start at half a million dollars and above. You still need to code, develop, and mold it to your business. The problem we’re solving is in that mid-market space, where there’s complexity around the region, multiple bank accounts, and multi-org structures.”

(4) Building with treasurers allows them to build on their modularized approach to tackling workflow issues (e.g., things as simple as logging into 10+ bank accounts daily and downloading all this data into an Excel file / their global treasury book).

“Every treasurer we’ve spoken to over the years has mentioned the challenge of pulling everything together. For example, the CFO might call the treasurer and say, “Spread my cash around to de-risk the banking scenario.” The treasurer then has to consolidate this information, often using various tools and platforms.

They tend to rely on Excel to download data, manipulate it, and figure out their cash position. This is a broken process. What Finmo is doing is bringing all of that together into a single platform to solve the treasury problem.”

(5) More recently, Finmo’s customer-centric approach has led them to developing a white-label solution for customers (like fintechs) to have integrated services for merchants on their own platforms

Building up this solution stack in this way has allowed them to acquire and retain customers from various angles.

“There are organizations tackling this from different angles, such as open banking in mature markets that pull in data insights to a merchant’s banking infrastructure. However, they can’t necessarily move money in real-time…We’ve tackled it in the reverse. We’ve gone after the regulatory aspects, built the pipes, developed the RTP capability, and then laid on top the kind of insight and action, dealing with the treasury solution. 

This means that if merchants want to use us for just money movement, in that modularized approach, they can do just that. If they want to take additional value from the treasury component, they can do that as well.”