In The Top Up this week, we look at a Malaysian e-walletâs troubles and examine a budding trend among fintech startups: venture debt. [Read from your browser]( The Top Up ðµ Welcome to The Top Up! Delivered every Wednesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If youâre not a subscriber, get access by [registering here](. Written by Putra Muskita
Journalist Hello {NAME} In the early days of Indonesiaâs digital payments scene, I - like many others - extensively used GoPay, Ovo, and Dana for food deliveries and other online transactions. Offline payments, though, were a different story. Unless the cashbacks were particularly mouth-watering, my immediate instinct had always been to take out my trusty BCA debit card - something I didnât have to continually top up. But then my behavior changed in late 2019, when Bank Indonesia launched its nationwide QRIS system, which lets consumers pay with any e-wallet through one unified QR code. I found myself paying for offline payments both with e-wallets as well as through BCAâs mobile banking app much more frequently. A similar thing happened in Malaysia. As my colleague Emmanuel writes in this weekâs Big Story, the state-linked TNG Digital e-wallet has struggled to turn a profit despite being one of Malaysiaâs top four players. Part of that reason is due to a national QR code system that has eroded the revenue streams of e-wallet operators in the country. But that has turned out to be just one of TNG Digitalâs many problems. Despite its links to Touch ân Go, CIMB Bank, Ant Group, and Lazada, bureaucratic influence and a mismatch of priorities between the e-wallet and its parent firm have become a key issue, insiders tell Tech in Asia. In this weekâs Hot Take, I also take a look at a seemingly burgeoning trend among fintech startups: debt financing. Itâs an attractive option for founders in the current macro environment, but does its benefits outweigh the risks? -- Putra
 --------------------------------------------------------------- THE BIG STORIES [Making sense of TNG Digital and Lazadaâs hefty investment in the firm](
The Malaysian companyâs parent firm may have a monopoly over key public services, but a staid bureaucracy stands in the way.
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--------------------------------------------------------------- THE HOT TAKE Move aside equity financing, venture debt is coming in hot Hereâs what happened: - Funding Societies announced this week that it raised [US$50 million]( in credit facilities from HSBC Singapore.
- Earlier this month, the same bank provided a [US$100 million debt facility]( to buy now, pay later company Atome.
- This year, [Lendable]( which provides capital to fintech firms in emerging markets, also extended US$20 million and US$30 million worth of debt financing to the Philippinesâ [BillEase]( and Indonesiaâs [Alami]( respectively.
- In India, fintech startups are [expected to lead]( in venture debt funding this year, continuing last yearâs trend where 111 deals totaling US$538 million were struck. Hereâs our take: Venture debt is on the rise. While its appeal has always been clear - it lets founders raise funds without diluting their equity stakes - itâs become particularly attractive in the current macroeconomic environment. Lower valuations have made equity financing less attractive to founders, with venture capitalists preferring more conservative deals. That said, the trend could also be born out of a desire to [avoid the VC trap](. While the US is [seeing a surge]( in venture debt, a similar trend is playing out here in Southeast Asia. InnoVen Capital SEA, a venture debt platform providing financing to startups and growth-stage companies in the region, tells Tech in Asia that it is seeing "strong interest" for venture debt from both early-stage and later-stage companies. But it's important to note that not all debt financing is the same. Lending firms typically partner with a bank or financial institution, which provides the source of funds, instead of extending credit from their own balance sheets. Take Funding Societiesâ HSBC Singapore deal, for instance: the funds will be disbursed as loan products for the neobankâs SME clients. But weâre talking about another type of debt financing here: venture debt that will be used for fueling operation and growth. In Atomeâs case, the firm plans to use the US$100 million in fresh funds for expansion efforts in Asia. Debt financing is by no means exclusive to fintech startups. Last year, at least two venture debt funds - from [Genesis Alternative Ventures]( and [Iris Capital Partners]( - were launched in Southeast Asia, and both of them professed to be sector agnostic. But a vast majority of this yearâs debt deals have involved fintech companies. Indeed, a [survey]( on Indian startups from venture debt provider Stride Ventures found that 45% of its respondents said that fintech startups will be most actively raising venture debt this year. They're followed by consumer startups (14.3%) and agritech firms (11.9%). According to Paul Ong, partner at InnoVen Capital SEA, there is a "natural business utility" for fintech startups and those with business models that are focused on lending to raise debt. But many use cases for venture debt - such as financing working capital, inventory, capital expenditure, or acquisitions - also apply to industries outside of fintech, he adds. Lendable, which connects investors to fintech companies, has provided debt financing to online lending platforms like BillEase and Alami. But it has also provided a [senior secured loan]( of up to US$10 million to Workmate, a workforce management platform, to support the startupâs worker marketplace. There may be multiple reasons why Lendable is drilling down on the fintech sector specifically. One may simply be the high demand for loans by online lending platforms. Given that its proprietary risk tech platform also helps assess potential deals involving fintech companies, it would make sense to continue focusing on that specific vertical. As attractive as venture debt may be in a downturn, it does come with its own set of risks, the biggest drawback being repayment pressure, Ong notes. In the US, the Federal Reserve is seeing [continued interest rate hikes]( as it fights inflation, which could, in turn, be passed on to firms in higher interest rates on their repayments. Would startups have the liquidity to withstand them? Meanwhile, Armando Argueta, vice president for early-stage ventures at Silicon Valley Bank, [wrote]( that venture debt is designed for companies who âprioritize growth over profitabilityâ - not necessarily a popular maxim in recent times. Still, the risks may outweigh the benefits for founders, especially now that down rounds are becoming more of a reality. Singapore-based FinAccel is but one example: Just last week, the firm is [reportedly]( raising funds at a US$1.5 billion valuation - a 25% drop compared to its US$2 billion valuation last year. â Putra
 --------------------------------------------------------------- NEWS YOU SHOULD KNOW Check out Tech in Asiaâs coverage of the fintech scene [here](. 1ï¸â£Â [PayMongo CEO goes on âvoluntary leaveâ]( COO Isabel Ridad has been appointed as acting CEO of the Philippine payment gateway. 2ï¸â£Â [PayMongoâs former CFO: âI never stole from any companyâ]( Jay Olos posted the statement on LinkedIn, where he also apologized for remarks made toward female colleagues. 3ï¸â£Â [Funding Societies scores $50m in debt funding from HSBC Singapore]( The fund will be disbursed through tailored loan products for SMEs across five countries. 4ï¸â£Â [Indonesian regulator halts new crypto exchange registrations]( It remains unclear if the new rule is permanent, but the circular could be amended at any time. 5ï¸â£Â [Vietnamâs Touchstone invests $1m in Credify]( The Singapore-headquartered fintech firm is building a platform that connects financial service companies with consumers through its ServiceX solution.
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