ZestMoney’s distress sale calls into question BNPL’s viability

In The Top Up this week, we look at the continued struggles of BNPL startups and MoneyHero’s earnings preannouncement that drew a lukewarm response. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every fortnight 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]( IN FOCUS In today's newsletter, we look at: - [Whether BNPL startups like ZestMoney and Pace fail because their business models were problematic]( - Why MoneyHero’s ‘pre-announcement’ of its sunny results was met with a dismal market reaction - [What Aspire needs to do to become a regional tech powerhouse]( --------------------------------------------------------------- Hello {NAME} It helps to have friends, whether in life or in business. Sam Altman, CEO of OpenAI, demonstrated this late last year after he was fired by the organization’s board. His supporters, who included Microsoft CEO Satya Nadella, sprang into action and openly voiced support for Altman, playing a pivotal role in [his reinstatement](. Ultimately, it was members of the OpenAI board who ended up being defenestrated. This is a lesson that the BNPL sector is learning the hard way. Over the past year, stand-alone players like ZestMoney and Pace have run into trouble, as my colleague Samreen recounts in this week’s Big Story. While the industry as a whole has suffered from higher interest rates and tighter regulations, bank partnerships have given firms like India’s Slice a lifeline. Ambitious founders are often tempted to go at it alone. However, the travails faced by BNPL startups show that sometimes, it doesn’t hurt to partner with someone else. -- Simon  --------------------------------------------------------------- THE BIG STORY [BNPL’s future on a knife-edge as ZestMoney averts shutdown]( BNPL startups will have to reinvent themselves amid chatter of the model’s fallout.  --------------------------------------------------------------- THE HOT TAKE Market shrugs even as MoneyHero announces “record-breaking” growth Here’s what happened: - Last week, MoneyHero Group [“preannounced”]( that its Q4 2023 revenue [increased by over 50% year on year](. - In Singapore, which the company considers a key growth market, revenue was up by more than 100% in the same period. - The company plans to make hires in engineering and tech, marketing and sales, finance, and operations to support further growth. Here’s our take: On January 24, personal finance aggregation and comparison platform MoneyHero, the parent company of personal finance portals SingSaver and Seedly in Singapore and MoneyMax in the Philippines, said it saw “record-breaking year-over-year growth.” Companies [typically]( preannounce news that is negative, as a way of ensuring that all material facts are made public and also to soften any bad news to investors. However, in this case, what MoneyHero preannounced was positive. It may be because the company wants to be seen as [transparent and credible](. While the Nasdaq-listed firm did not disclose exact revenue numbers for the quarter, it previously revealed that group revenue stood at US$17.2 million in the fourth quarter of 2022. This means the company recorded at least US$25.8 million in revenue for Q4 2023. This is higher than the US$20.3 million in revenue it posted for [Q3 2023](. Assuming Q4 2023 revenue was exactly US$25.8 million, this would mean that the full-year figure was at least US$81 million. These results were driven by an 80% surge in the number of product applications submitted by users for products featured across its platforms. Significantly, the group seems to be on a path to profitability. For the first nine months of 2023, adjusted losses of US$2.2 million marked an improvement from the previous year’s US$13.1 million. Yet, the market appears to be unmoved by these results. As of January 29, five days after the announcement, MoneyHero’s share price had suffered an overall decline of around 40%. What are the reasons for this discrepancy? Its first “fault” can be traced back to how MoneyHero came to trade publicly, by [merging with Bridgetown Holdings]( a special purpose acquisition company. With the SPAC craze having died down, there is now a [stigma]( associated with companies that listed via that route. Second, with a market capitalization of US$38 million as of January 29, MoneyHero is considered a [micro-cap]( stock in the US, which many investors may be unwilling to invest in due to the perception that such stocks are [more risky](. This, compounded by the company’s focus on markets in Southeast Asia that most US investors are unfamiliar with, may make it a hard sell. Third, while MoneyHero’s income statement looks good, the company’s balance sheet paints a less flattering picture. Between December 2022 and [September 2o23]( the firm’s [warrant liabilities]( ballooned by nearly 5x to US$60.8 million. Warrant liabilities refer to the fair value of all outstanding warrants that can be converted into redeemable preference shares in the company. An increase in such liabilities means a higher likelihood of existing shareholders being diluted in the future. Its interest-bearing borrowings also rose 61% to US$14.1 million between December 2022 and September 2023. As a result, MoneyHero’s total equity fell from US$15.8 million to negative US$58.3 million by September 2023. It pays to look behind the headline figures when investing.  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Indian financial services firm rolls out $25m innovation fund]( Equirus Group’s new fund will support seed-stage firms in the SaaS, deeptech, fintech, and other emerging sectors. 2️⃣ [SEAbridge execs launch new platform to bring M&As online]( Match.asia, an M&A marketplace, aims to tackle common challenges in traditional merger and acquisition processes through a data-driven matching system. 3️⃣ [Alipay+ extends Asia reach with Pakistan partnership]( The tie-up with NayaPay will see the two firms deploying QR codes compatible with Raast, Pakistan’s payment system, as well as the e-wallets and banking apps in the Alipay+ network. 4️⃣ [Xendit slashes workforce in bid for efficiency, growth]( With hundreds of employees affected, this marks the second round of job cuts for the fintech firm, following a retrenchment in August 2023.  --------------------------------------------------------------- FYI  [Aspire’s fintech solutions have earned SMEs’ trust. Now comes a loyalty test]( Latest financial filings show that the company generated about US$18.2 million in revenue in its 2022 fiscal year and incurred around US$21.2 million in losses.  --------------------------------------------------------------- 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 in a fortnight! 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 © 2024 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894