Deal focus: SCPE backs MoMo’s online-offline payment offering

Picture the scenario: a young man who works part-time as a waiter while studying at university in Ho Chi Minh City wants to send some money back to his father, a farmer in the Mekong Delta. Using a mobile app, the man transfers the cash from his bank account to a MoMo account, and his father goes to the nearest brick-and-mortar agent and withdraws it.

Mechanisms like MoMo, which combine an online platform with offline infrastructure, are transforming basic financial services in Vietnam. Where once money had to be physically carried from urban to rural areas, now transfers can be made through a few clicks of a button and lot less time on the road.

"The reason why the OTC [over-the-counter] network is so powerful is that these agents already have credibility among the customers, many of whom are in rural areas of Vietnam that are even more underbanked and where smart phone penetration is low compared with that in the cities," says Bert Kwan, head of ASEAN at Standard Chartered Private Equity (SCPE). "For many years, these agents have supplied services, such as regular mobile phones or sim-card top-up services, to these customers."

M_Service, which operates MoMo, began building its OTC network in 2014 and now sits at the heart of a web comprising 4,000 independent agents across 45 provinces in Vietnam. The company's catchment includes about 1.5 million rural customers who have no bank accounts and perhaps no smart phones either, but can now use agents these agents to receive remittances and pay bills.

Last week, M_Service completed a funding round worth $28 million. SCPE put in $25 million as lead investor, while Goldman Sachs contributed $3 million. Goldman previously committed $5.75 million to the company in 2013.

Momo now has 2.5 million customers, and one million of those are using the e-wallet services - the company's second core business that targets young people living in major urban centers. It works with more than 100 service providers so that, in the absence of online payment systems in most offline retail outlets, consumers have a means of paying in advance for items such as movie tickets.

"It effectively helps address some of the user-related challenges in dealing with banks as well as the credit card system, which is under-penetrated in Vietnam. Think about MoMo as a smart phone application that is the front-end for the banking system as well as the front-end, payment collection point for customers and retailers," Kwan says.

As of year-end 2015, more than half of Vietnam's 90 million population was online, while the number of mobile phone users grew 26% to 124 million between 2009 and 2013. This rapid uptake is expected to support the adoption of mobile financial technology solutions. MoMo is already looking to launch new products and services as well working with agents to roll-out point-of-sale terminals more widely.

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• Topics
• Southeast Asia
• Financials
• Expansion
• Technology
• TMT
• Financial Services
• Vietnam
• Standard Chartered Private Equity