Mortgage fintech has taken off in Indonesia. Will it fly?

In The Top Up this week, we dive into Indonesia’s rising mortgage fintech players and examine the JiPay shutdown. [Read from your browser]( The Top Up 💵 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 you’re not a subscriber, get access by [registering here](. Written by Samreen Ahmad Journalist Hello {NAME} Moving between four houses in 10 years doesn’t seem so bad, but back in the early 2010s, house hunting in Delhi - where I started my career - was a horror for me every time I had to do it. There were no proptech startups in sight at the time, so I used to scroll for hours on Facebook groups searching for decent flats that would fit my budget. Now, life as a house hunter is much easier. Proptech startups can help you - from searching for a house all the way to filling up paperwork. But in Indonesia, a new trend seems to be emerging: Several startups are focusing specifically on mortgages. These firms demystify the tedious mortgage process via digital solutions, and VCs have taken notice. But for now, these companies still have to prove that they can be profitable, sustainable businesses in the long term. My colleague Melissa analyzes the opportunities and challenges of these rising mortgage fintech players in this week’s Big Story. Meanwhile, in the Hot Take, I look at the factors that led to Singapore-based fintech startup JiPay’s shutdown. Read on to know more. – Samreen  --------------------------------------------------------------- THE BIG STORY [Mortgage fintech: Indonesia’s next big consumer lending space]( The sector has drawn various players - from full-stack property platforms, specialist mortgage solutions, to pre-mortgage solutions.  --------------------------------------------------------------- THE HOT TAKE  What went wrong at JiPay? Here’s what happened: - JiPay, a Singapore-based fintech firm focused on domestic workers, will shut shop, founder Dayana Yermolayeva said in a [LinkedIn post]( last week. - The startup offered a prepaid Mastercard service that domestic helpers could use to buy groceries and supplies for their employers. - The company had [raised]( more than a million US dollars in a seed round led by East Ventures earlier this year. Here’s our take: According to JiPay’s founder, Yermolayeva, the company was not struggling to grow - its August revenue and remittance volume rose 3x year on year. But she says that the company wasn’t able to make enough revenue in Singapore to raise its series A funding round and expand to the United Arab Emirates. There are certainly macro factors in play. While last year’s market conditions were perhaps more forgiving, investors now demand a much higher bar for capital raises than ever before. Several VC-backed startups such as quick commerce firm Bananas, proptech startup Propzy, and ecommerce enabler ShopX have shut shop in the last couple of months. But JiPay has also found issues with its business model. While its prepaid card was the hook, its model hinged on offering an expense management solution to households. Doing so would bring users to the app, where JiPay would then offer personal finance products. But this did not take. Only 3% of helpers using the JiPay card were converted to using JiPay Personal, its expense management platform. Meanwhile, the company was earning its main revenue stream from [interchange fees]( it got from each transaction made using its card. But these can be tiny amounts: just 0.3% to 0.4% of the transaction amount in Europe and 2% in the US. In Singapore, it is a little higher, going up to 5%. As Yermolayeva said in her LinkedIn post, it “is a bad monetization strategy.” Perhaps the company’s last ditch attempt to stay afloat was to cut its employer product altogether and scale up on migrant worker financing. This meant it would become “just a remittance app,” helping these domestic helpers send money home to their families in countries like Indonesia and the Philippines. But remittances are also a highly competitive space. Bigger players such as traditional or digital banks often already offer remittance as an add-on service. “It is largely a low-margin business in itself,” an industry analyst told Tech in Asia on condition of anonymity. “Having it stand alone and adding to that is more of an uphill battle given potential conflicts.” Remittance is also just a feature and not a product, Siddarth Pai, founding partner of 3one4 Capital, told Tech in Asia. “Fintech has often suffered from this struggle between products and features,” he said. “Initial traction for certain features isn’t always enough to raise resources to flesh out a full-fledged product.” Companies like [Nium]( learned this early in their journeys. The billion-dollar player rolled out as a remittance app but pivoted to provide a full suite of services for ecommerce players that handle payments locally or globally. The company is eyeing a global revenue of nearly [US$150 million]( this year. According to Yermolayeva, cashbacks had been the primary driver behind JiPay’s growth. But this meant there was little loyalty to the brand, and there were too many users who banked on cashbacks instead of its wider product. Cash-burning strategies like cashbacks and discounts are popular when there are cheap capital costs. But amid the rising interest rate era, investors won’t look so kindly upon such tools, according to Pai. “No company can grow by losing more money than it earns - it's often astonishing that this needs to be said aloud,” he said. Of course, burning cash in the name of market share is a common strategy for tech players. Perhaps the industry would benefit if more companies choose prudence - like JiPay - rather than a race to the bottom. – Samreen --------------------------------------------------------------- NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Ex-Lazada director's fintech firm raises $13m more for series B round]( The additional funds increase Ayoconnect's total capital raised this year to US$28 million. 2️⃣ [Insurtech unicorn Bolttech to close series B round at $1.5b valuation]( The Singapore-based firm currently processes US$50 billion worth of annualized premiums. 3️⃣ [Endowus acquires HK wealth manager amid expansion plans]( With the acquisition of Carret Private, Endowus aims to bring its advisory services and investment solutions to the private wealth market in Hong Kong. 4️⃣ [East Ventures leads pre-seed round of Indonesian fintech firmÂ]( Pocket offers trackable and separable digital accounts, catering to young families. 5️⃣ [BNPL startup Snapmint raises $21m funding]( The startup will use the funds to expand its merchant network, both online and offline.  --------------------------------------------------------------- FYI [Funding winter hits fintech sector in India]( The average funding ticket size in the sector has gone down over 50% year on year to US$15.3 million from US$31 million in the September quarter.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preferences center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you next week! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2022 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894