Xfers gets approval from Singapore gov’t to widen its e-wallet business

The Monetary Authority of Singapore (MAS) has approved fintech startup Xfers’ application to become a widely accepted stored value facility (SVF). It is the first startup to get this approval. It joins the ranks of four other SVFs: EZ-Link Card, Nets CashCard, Nets FlashPay, and CapitaVoucher.

SVFs are entities that hold money on behalf of their users. They can be used for storing currencies and processing online payments.

Currently, SVFs in Singapore can only hold up to US$30 million of customers’ cash. With government approval, Xfers can exceed this amount, allowing it to serve more customers. The approval also means that the startup is backed by a bank, which guarantees each dollar it holds. In the event that Xfers closes down, the bank will pay back customers the money that’s owed to them. This puts Xfers ahead of similar fintech startups in terms of the security it offers its clients.

“From our merchants’ perspective, I think that’s a great benefit,” says Xfers co-founder Tianwei Liu. “They know that the money they have in their wallet is going to be protected.”

But Liu sees one more advantage. “Our clients can now depend on this license [to set up their e-wallet],” he notes. “They do not need to be registered as an SVF anymore, nor do they have to get approval.” According to him, this enhances their startup as a one-stop solution.

Behind the startup

Launched in 2015, the Singapore-headquartered startup aims to create a digital financial ecosystem. It does this in two ways.

First, it allows individual users to make and receive payments online. Users can sign up for a personal Xfers account, top up their Xfers wallet, and pay merchants.

Second, it helps merchants set up their e-wallet services. Once merchants sign up for an Xfers account and go through compliance checks, they can access Xfers’ e-wallet application programming interfaces (APIs) and software development kits (SDKs). These tools help merchants set up their own Xfers wallets or set up wallets for their users. Merchants like marketplaces, for example, can use an Xfers wallet to hold funds in escrow, while a fintech company can create wallets for its users to store their funds.

Xfers’ APIs also help merchants set up their user onboarding procedures. This includes the know-your-customer process, which involves sending one-time passwords and collecting information from users, as well as customer verification.

It is this focus on e-wallets that Liu thinks sets Xfers apart from its competitors like Stripe which focuses on providing payment channels. “You can’t really say ‘I want to build an e-wallet with Stripe,” he notes. According to Liu, while Stripe lets merchants add payment methods and even top up e-wallets, it can’t be used to receive and deposit money.

For Liu, e-wallets are a necessity for some digital businesses, particularly those in fintech and those that do crowdfunding and P2P lending. Another factor that makes the functionality so important is user retention. If customers have a cash balance in their e-wallets in a merchant’s website, chances are these customers will become repeat users.

Challenges of getting approval

Xfers began the process of applying for government approval when the amount it was storing for clients reached the US$30 million cap in late 2017. It officially submitted its application in April 2018, but was only approved in January 14, 2019.

According to Liu, the time between application and approval was difficult for the startup. “It has been a pain,” he shares. “It hampered a bit of our growth in Singapore.” To keep within the cap, they had to take measures like limiting how much their users could deposit and telling merchants to cash out their funds earlier.