What’s next for fintech pioneer Red Dot Payment after its sale to Naspers

If you’ve ever had food delivered from McDonalds or Foodpanda in Singapore or spent a night at an Ascott hotel, there’s a chance that Singapore-headquartered fintech company Red Dot Payment (RDP) helped make that transaction possible.

Founded in 2011, RDP provides an integrated payments solution for businesses, which allows clients to accept and process online transactions and handle invoices. The firm’s value to businesses and key differentiator is its payment gateway, which helps merchants access multiple payment options, RDP CEO and founder Randy Tan tells Tech in Asia. These include eNETS, DBS Paylah, UnionPay, WeChat Pay, Alipay, Virtual Accounts, Visa, and Mastercard.

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The company broke even in October 2018. This year, it is on track to processing over S$1 billion (US$722 million) in transactions.

As a business, RDP focuses on ecommerce rather than point-of-sale transactions and earns revenue by charging merchants a discount rate (MDR) and a fee per transaction. It targets businesses that have a monthly transaction volume that’s in the “millions.” However, Tan says that he also takes into account strategic factors like branding when evaluating merchant partners because few companies in the region handle such volumes. It currently serves under a thousand merchants.

Earlier this year, RDP received an investment from Naspers-owned fintech company PayU, in exchange for a majority stake in the company. Valuing RDP at US$65 million, the deal has the potential to propel the startup’s growth both within Southeast Asia and beyond.

South Africa-based internet titan Naspers has not been shy about its push into Southeast Asia. In the last three years, it’s invested over US$700 million in fintech companies and M&A deals within the region. Earlier this year, Naspers’ listings arm OLX took a 10% stake in Southeast Asia-focused classifieds app Carousell.

Naspers’ push into Southeast Asia

The all-cash deal grants RDP access to PayU’s international client base, which includes ride-hailing giant Uber. PayU processes US$40 billion in transactions annually and serves over 300,000 merchants in 18 international markets – with a significant presence in Latin America, Europe, and India.

On the other hand, RDP’s network in Southeast Asia now serves as a stepping stone for PayU’s multinational partners that are looking to enter the region. “Currently they have no way of doing it,” Tan says. Singapore, Indonesia, and Thailand are the payment startup’s key markets in Southeast Asia, he reveals, though the broader goal is to eventually establish itself in Asia Pacific, excluding China where competition in stiff and the business environment is tougher to navigate. “There’s Tencent in China,” Tan says. “We’d rather focus on areas that we’re good at, which is Southeast Asia.”

The investment also integrates RDP’s services into PayU’s network. PayU CEO, Laurent le Moal, has reportedly said that his company will focus on growing RDP’s cross-border trade business.

Le Moal has expressed an interest in launching a consumer credit product in Southeast Asia down the line. PayU has already built a credit platform in India to trial instalment loans, and its credit product LazyPay, reached nearly 700,000 consumers in its last financial year ending March 2019.

Tan is tight-lipped on whether RDP has already begun work on the consumer credit product, but says he is “very open to” importing such a service for its partners in Southeast Asia. He hints that the guidelines for the upcoming issuance of a virtual banking license in Singapore is something he’ll be watching closely.

Pioneering payments

Since inception, RDP’s vision has been in “helping payments,” but the company has had to pivot to different products as the market matured. The startup did not always operate as a payments platform. At some point before its current product was built in 2013, it was a reseller of Visa subsidiary Cybersource’s payment management services.

When RDP first brought Alipay to the Singapore market in 2012, “not many people had heard of it,” Tan says. Mobile payments had not taken off at that point, and it was challenging to convince people to adopt the technology.

“Booming” verticals