Whether it is a startup or small business, cashflow management is one of the most important, and oftentimes frustrating, parts of running a company. While a business owner might technically have the money they need to operate, it could be stuck in the transaction process, making the money useless while its in limbo.
iPaymy, a Singaporean fintech startup wants to help break down payment barriers by allowing SMEs to use their credit cards to pay for costs like payroll, supplier bills and rent.
Launched by Chrystie Dao-Szabo (the Chief Business Development Officer) and Ethan Dobson (The CEO) in April of 2016, iPaymy allows SMEs to charge their credit cards when paying for basically anything.
The idea is it frees up 55 days of interest-free cash for the startup while allowing recipients to receive early payments. Banks and payment gateways are also incentivised to use the product as it increases transaction volume and allows SMEs to use a higher percentage of their credit line.
“We always say, if you are running a business and you want to keep your money longer so you can invest in growth, then you are a customer or potential customer,” said Dobson.
If a company needs US$3,000 to repair a piece of machinery, instead of taking out a loan, borrowing money from family or selling other assets, they can use their credit card to pay, for example, salary, and free the three grand for 55 days. Then, when other sources of revenue become available, they pay off the credit card.
Unlike a loan, the temporary cash injection is interest free.
iPaymy generates revenue by charging a 1.99 per cent fee per transaction and a portion of that commission is given to its financial institution partners. The startup currently has about 300 SMEs using the platform.
The company is getting support from VCs. iPaymy announced today that it has raised US$1 million in funding from BEENEXT and Digital Garage Incubation, two firms from Japan.
“[We are excited] about their experience around payments businesses, which is super important, especially at the strategic board level. Understanding how a payments system works, what is important at what stage, is really good,” said Dobson.
Part of the money will be used to expand the service regionally.
Banks and Payment Gateways — The other side of the transaction
While the cashflow benefits for an SME make sense, iPaymy needs the buy-in from the other side of the transaction; credit card companies, payment gateways and banks.
So far, Dao-Szabo and Dobson feel good about their ability to strike these partnerships, specifically pointing to a ‘turning point’ when the company saw a sharp increase in inbound queries. Financial companies know who they are and are starting to reach out for potential business.
The benefit for a payment gateway or credit card company is similar. iPaymy helps these companies put bulk payments on plastic, not something they typically experience. The largest transaction a credit card or payment gateways typically sees may be the occasional plane ticket or blue-moon shopping spree.
Usually, people use these systems to pay for dinner, buy a cab or settle a cell phone bill.
“We are allowing them to capture a lot more volume on their platform. Without an iPaymy they are traditionally only seeing a smaller amount. We come in and are capturing thousands of dollars.
Traditionally an SME averages US$70,000 a month on expenses and traditionally a Stripe or Adyen are not seeing these values today,” said Dao-Szabo.
For the banks, the logic for use iPaymy is quite interesting.
Issuing credit for banks is expensive. When a bank provides a company with a credit line, that money is allocated to only one customer. So if a startup has a US$50,000 credit limit, but only puts US$10,000 a month on the credit card, the bank has US$40,000 of credit just sitting there, getting mouldy.
Unless a company has a supplier that accepts credit cards, SMEs may never get overly close to the credit limit because their big-ticket purchases are traditionally paid for with bank transfers, debit or cash.
“We can help [banks] increase the utilisation to 100 per cent, because you can pay anyone with a bank account in Singapore. So we break down the walls,” said Dao-Szabo.
Concerning the possibility of credit card default, Dobson and Dao-Szabo said they haven’t had a problem with that to date. They acknowledged it as a risk for any company operating with credit but said iPaymy works with banks to build a channel of potential customers with a good credit history.
“We work very closely with our banking partners, so that means they come to us and say, ‘we’ve got this set of clients that we really want to use [iPaymy],'” said Dao-Szabo.
Dobson said one of its banking partners has over twenty sales reps selling iPaymy through its leads list.
Company history and looking forward
iPaymy initially launched as a platform to allow individuals to use their credit card to pay rent — a service similar to the Singaporean startup Cardup, which incentivises people to use credit cards to pay for big-ticket items so they can to boost their rewards.
After talking with consumer customers, iPaymy discovered SMEs presented a potential product-market fit.
“Four or five months after launching, organically we started to have conversations with consumer customers who were running a business and they were saying, ‘this would be great for my business’. Fast forward and after looking at the economics of that, [we found] it was much more appealing,” said Dobson.
He pointed out that SMEs spend a lot more. They have more credit and the customer profile is far different. The company still has the consumer product, but very little resources are being directed to that function in the company.
“We are SME-focussed, that’s all we do today. The tech is built for SME, the processes are built for SME, we have customer-service managers who will give you complete white glove service. We will go out to your office. We know SMEs are busy, and we are here to help SMEs grow and become successful,” he said.
iPaymy has a wide-range of SMEs on the platform, ranging from micro-businesses with one or zero employees all the way up to international schools.
Dobson said the company doesn’t plan on pursuing the enterprise space any time soon. Corporations usually have a priviledged access to the credit infrastructure as well as a sophisticated internal payment systems.
As mentioned above, iPaymy plans to expand regionally in the next year. It also will continue fundraising efforts and hopes to see significant growth within Singapore.
Whether it is in the media, political stump speeches or business events, a lot of lip service is paid to the SME as being the backbone of any economy. And yet, while they are deemed to be essential to most countries, small businesses are often left scrapping for customers, performing financial circus tricks and constantly hustling to the next job.
iPaymy wants to put their money where their mouth is by providing a legitimate avenue for startups to find capital an in doing so contribute to the success of the SME sector.