This Malaysian FinTech startup has been getting funding from Japanese investors. What’s the plan ahead?

Malaysia-headquartered FinTech startup Soft Space, which has kicked off its Series C fundraising exercise, sees significant opportunities in Indonesia, Japan, Southeast Asia and Australia, as it expands its businesses.

“We have officially kick-off our Series C fundraising exercise, with the recent GMO capital alliance serving as a pivotal milestone. This strategic partnership marks the beginning of our Series C journey towards securing new investments from new investors and potentially from existing shareholders,” Soft Space Chief Strategy Officer Chris Leong told TNGlobal in an interview.

Founded in 2012, Soft Space is serving over 80 financial institutions and partners across 30 global markets. The firm offers both merchants and consumers a range of solutions, such as contactless payment through mobile devices as well as comprehensive white-label e-wallet services.

Soft Space’s investors include transcosmos, which invested $5 million in the company in 2017; Sumitomo Mitsui Card Company (SMCC), of which Soft Space closed a Series B investment with SMCC in April 2018.

In January 2022, JCB and Soft Space have also formed a strategic partnership which involves a combination of $5 million investment in Soft Space and a series of business collaborations that are aimed at capitalising on Soft Space’s fintech-as-a-service business model, technology and regulatory knowhow, and JCB’s global recognition, vast alliances and brand reach.

“We see significant opportunities in Indonesia, Japan, Southeast Asia, and Australia, and we would like to invest significantly in tapping into the opportunities in these markets while continuing to maintain and serve our global customers,” he said.

“We aim to acquire more customers via our partnership with card schemes in these markets and provide more innovative solutions to their merchants,” he added.

In the interview, Leong also shared Soft Space’s challenges, its path to profitability, competitive advantage, the trends he sees in the financial infrastructure space, among others.

Leong is also the Chief Executive Officer of Fass Payment (Fasspay), a wholly-owned subsidiary of Soft Space.

Which markets are Soft Space in? What other countries or markets are you eyeing? any market you would prioritize?

We are already a global company, with clients on every continent in the world. Our client base consists of financial institutions, neobanks, and fintechs – with more than 90 financial institutions (FIs) and ecosystem partners across 30 markets worldwide.

Our clients range from the largest acquirers in the world, such as JCB, Commonwealth Bank of Australia, CTBC Bank, and Kasikornbank, to fintechs/digital banks like PayMaya, Zettle by PayPal, and Tyro Payments.

We aim to expand our geographical reach extensively in the Asia Pacific, leveraging our advantage as the SoftPOS company with the most extensive network acceptance, which suits the Asia Pacific market.

While we serve clients globally, we plan to focus on key markets such as SEA, Japan, Indonesia, and Australia. In Japan, Indonesia, and Malaysia, we have been awarded patents for FasstapTM, a key advantage for us to monetize in the respective countries.

In Southeast Asia, a region with a population of more than 700 million, we have a presence in 80 percent of the countries. The cost of payment acceptance in this area is high, representing a significant opportunity for us to assist merchants of all sizes to accept card acceptance.

In Japan, apart from our shareholders SMCC and JCB, we have also secured another key partnership in terms of GMO Financial Gate. On March 25, GMO Financial Gate Inc (GMO-FG), one of Japan’s largest payment processing companies, further solidified its relationship with Soft Space by entering into a capital alliance with us, deepening an already trusted relationship that began in 2018.

With all our shareholders, we plan to reduce the use of cash in Japan by making cashless payments ubiquitous across various industries, including transportation, hospitality, and the extensive food and beverage (F&B) sector, by positioning SoftPOS as the centerpiece of transformation in Japan.

Soft Space’s customers include banks, financial institutions and various merchants. Do you have any targeted industries you would like to expand into? Where do you see opportunities?

To date, we have already established use cases in more than 15 industries including airlines, financial services, logistics, public transportation, food and beverage (F&B). Our strategic objective to expand in the airline, transit and retail verticals, building upon our successful and proven use cases in Japan, Australia and Malaysia.

Would you be able to share the company’s path to profitability? Any timeline?

Our clients are predominantly financial institutions with very stringent procurement processes. However, once they decide on a vendor, they adopt a long-term view in terms of maintaining the relationship. A good number of clients have been with us since the beginning, and we are happy to continue providing long-term value to them.

We operate a B2B2C business model, where our revenue model is based on subscriptions. This means that the more merchants of a financial institution use our services, the more our clients pay us. With this in mind, the levers to balance between growth and profitability are in place. However, the current focus for the company is to rapidly grow our bank customers as the payment industry is undergoing a transformation, which presents a great opportunity for Soft Space.

Hence, we anticipate some transitory impact on our profitability, but we expect to yield greater profits in the near future as a result of our market expansion, while retaining the option to scale down our customer acquisition efforts.

What is Soft Space’s competitive advantage against other companies which provide similar services?

We have a number of competitive advantages. Firstly, our SoftPOS solution, FasstapTM is completely MPoC certified, unlike other providers which may only have partial certification.

Solution providers that only have partial certifications will still require end-to-end certification to launch a complete live solution. This complete certification covers all of MPoC’s Domains from frontend to backend. Soft Space’s early attestation serves as a powerful competitive differentiator, giving the company a strategic advantage and time-to-market over our competitors.

Secondly, we offer the most complete SoftPOS ecosystem. We are connected to the largest international payment networks such as VISA, Mastercard, UPI, JCB, AMEX, Discover and we support all major mobile operating systems, including Google’ Android, Apple iOS and Huawei’s HarmonyOS.

Thirdly, we provide comprehensive solutions encompassing SoftPOS, MPOS hardware, issuing solutions, loyalty programs, and a range of additional features such as data analytics and e-KYC – all of which ensures a seamless end-to-end experience from merchants to consumers.

We have also been awarded patents in Japan, UK, Malaysia and in Indonesia, with more to come in the next few years. These patents protect our core products such as FasstapTM (SoftPOS) and Flite (Software-Based PIN Entry on COTS (SPoC) Solutions), and any future products that involves contactless payment on IoT device. This will significantly enhance our market position as we secure more patents on a global scale.

What are the challenges the company face and how do you plan to address these challenges?

The majority of our customers are financial institutions, which tend to hold conservative views on technology. Our challenge has always been overcoming this inertia among existing stakeholders and their willingness to maximize the innovative advantages of FasstapTM.
However, with many businesses today being more opened to transforming their payment needs and the way they conduct business, financial institutions are compelled to transform their traditional operations. This presents an advantage for us.

One of our core strengths is that our SoftPOS solutions (FasstapTM) offer flexibility in deployment and scalability because they rely on software/cloud applications that can be easily integrated into existing or third-party applications, thereby minimising the need for changes. Our subscription model also allows financial institutions to explore this technology with minimal upfront cost.

Any trends you have seen in the financial infrastructure space that we should take note of? How are you riding on such trend(s)?

Contactless payment adoption is growing around the world. In Japan, a traditionally cash-led country, there are signs that consumers are moving towards embracing cashless practices. Similarly in the US, there are similar signs of this trend.

The upward trajectory of growth and the significant surge in NFC-enabled devices, the introduction of Apple’s Tap-to-Pay on iPhone across diverse markets is poised to catalyze further adoption of contactless payments. This growing trend aligns seamlessly with our vision to promote cashless societies, particularly evident in our efforts in Japan, where we actively seize opportunities to drive this transformative shift.

Another big trend is as follows: Many large enterprises want to focus on innovation in a quest to diversify away from their core capabilities. These enterprises are not traditionally in the finance business but are embracing the concept of “embedded finance”.

For example, a healthcare provider or a shopping mall may want to offer finance options for its patients and shoppers respectively. These companies’ core expertise (healthcare and retail) will complement their core services with financial services and be offered in a holistic way to their customers. These so-called “neobanks”, require strong product fundamentals and Soft Space is in a position to support such businesses with our technology and expertise Soft Space can help these neobanks by offering our cost-effective fintech services to financial institutions (FIs) worldwide.

Like giant cloud providers of today providing infrastructure, platform, and software on a consumption-based model, we aim to provide “fintech as-a-service” (FaaS) model, thereby becoming the fintech platform provider of choice for global organizations.

Our aim is to help these financial institutions (FIs) move and innovate quickly so that they can not only ensure that their customers continue using their products but also help them localize and customize these products, depending on which markets they are in.

We also want to grow our FaaS platform and become a key provider to companies and ecosystems that want to embed financial services in their offerings such as with Stripe, Rapyd, and Adyen. We believe the growing need for convenience and efficient financial services will fuel the growth of this entire embedded finance model.

Finally, the growing prominence of embedded finance, which is revolutionizing the financial industry and businesses. Embedded finance seamlessly integrates financial services into non-financial platforms, transforming traditional businesses into fintech players.
Other trends include:
Mobile First: Businesses are strategically transitioning the customer contact and experience point to mobile applications, thereby focusing on mobile-centric approach;
Cloud Banking: Businesses, especially FIs exhibit greater confidence in migrating critical systems to the cloud and adopting modular services to support their in-house operations; and
Fintech Innovation: Non-FIs are increasingly adopting financial services such as insurance, payments, lending etc. The evolving landscape allows every company to potentially operate as a fintech company.

We are actively tracking these trends and will be able to support them with our FaaS model in time to come.

How soon would you need to raise funds? Would you be able to tell how Soft Space managed to get internationally renowned investors to invest?

We have officially kick-off our Series C fundraising exercise, with the recent GMO capital alliance serving as a pivotal milestone. This strategic partnership marks the beginning of our Series C journey towards securing new investments from new investors and potentially from existing shareholders.

We see significant opportunities in Indonesia, Japan, Southeast Asia, and Australia, and we would like to invest significantly in tapping into the opportunities in these markets while continuing to maintain and serve our global customers. We aim to acquire more customers via our partnership with card schemes in these markets and provide more innovative solutions to their merchants.
This future value of Soft Space is also rooted in our plans to reshape the countries’ payment landscape to become more cashless and drive the adoption of cashless society across diverse sectors. This value will continue to grow as we try to help other countries go cashless when opportunities present themselves.

Does the company have any exit plans for your investors? IPO? Any timeline?

Soft Space’s top most priority is to create value for the company at this juncture, primarily on gaining traction for revenue growth and market expansion. Specifically, we aim to bolster our market share in Japan, and Australia, while also penetrating key markets such as Indonesia.
An IPO exit or trade sale are undoubtedly options that we are actively exploring. However, based on the market size and our current opportunities, we believe that there is significant value for us to derive before considering an exit. The markets we are targeting have tremendous value, and our clients and shareholders would provide long-term value. We would like to maintain independence to seize this opportunity with as much speed as possible.

Inflight Dublin, Soft Space collaborate to enhance inflight passenger experience in Southeast Asia