Singaporean startup iPaymy has raised US$1 million in a seed round led by Beenext and Digital Garage’s investment arm, DG Incubation.
Starting out as a consumer-focused platform, iPaymy has since pivoted towards serving small and medium-sized enterprises (SMEs), providing a platform for them to use their credit cards rather than cash to pay for expenses like invoices, salaries, and taxes.
The startup’s first product was a payments platform that allowed individuals to pay monthly expenses using their credit card.
It’s just like if you go to a restaurant and charge the meal to your credit card.
“We launched a consumer business to help consumers earn lots of air miles by paying their rent with their credit card,” iPaymy co-founder and CEO Ethan Dobson tells Tech in Asia. “Organically, after a few months, we started hearing feedback from some of those consumer customers who said they run a small business, and it would be great if they could use the same solution there.”
That’s when the startup began working on its new offering, named iPaymy for Business. This platform allows SMEs to add payees and make both one-time and recurring payments using a credit card – even to payees that don’t typically accept such payments.
More than air miles
Small businesses can struggle to access traditional financing products, such as bank loans, that they typically rely on to cover operating expenses. They might not meet the lender’s criteria, or they might have an unsatisfactory or non-existent credit record. Even if they have a decent credit score, they likely face a motherload of paperwork, the need to put up other assets as collateral, and a weeks-long approval process if they apply for a loan.
Something that most Singaporean SMEs do have access to, though, is a credit card. If they have the ability to pay everyday outgoings on credit card, they can free up working capital for spending or investing elsewhere.
The problem is that plenty of payees – in a broad sense, including employees and landlords – don’t accept credit cards. Realizing this, iPaymy co-founders Dobson and Chrystie Dao-Szabo set out to find a solution.
Within the rails
Explaining how the model works, Dobson says that he considers iPaymy to be a tech-driven payments platform, rather than a financial intermediary.
“We don’t actually touch the cash, by design,” he explains. “We want to work within the existing rails, so we work with various acquisition partners – Stripe being one of them.”
The startup charges an SME’s credit card with funds settled to an iPaymy trust account. Recipients are then paid directly via a bank transfer from the trust account within four business days, after iPaymy has claimed its one-time, per-transaction fee and completed know-your-customer checks. The SME pays its credit card provider back as normal when its statement arrives at the end of the month.
“We don’t lend, we don’t take on risk in that way,” says Dobson. “It’s just like if you go to a restaurant and charge the meal to your credit card.”
SMEs think that going to the banks is the only way to get capital.
For more complicated payments, such as monthly salaries for a number of employees, business owners can upload a CSV file containing tabulated employee data to the iPaymy platform. The credit card is then charged and the KYC process takes place before iPaymy transfers the funds to the employees’ bank accounts.
There are a few other startups around offering similar solutions to iPaymy, such as fellow Singaporean company CardUp. However, Dobson thinks the biggest challenge facing iPaymy is awareness.
“We’re partners with a number of banks, but other banks are in a way our competitors, because SMEs think that going to the banks is the only way to get capital,” he says. “One of our main goals is to educate SMEs, and that task varies along a pretty big spectrum, from the mom-and-pop shop which is lower on financial sophistication scale, to folks all the way up at the top.”
Dobson says that the startup still maintains an extensive portfolio of individual customers for its original consumer solution. However, it is now dedicating all of its development and R&D resources to iPaymy for Business, which it sees as having more growth and scale potential.
In terms of the US$1 million seed funding it has just raised, iPaymy will be spending in three areas – product development, its go-to-market strategy, and potential regional expansion beyond Singapore.
For Dobson, having the expertise and experience of VC firms Beenext and DG Incubation on board is at least as valuable as the capital they’ve injected into iPaymy.
“They are the premier payments VCs in the region,” he says. “These guys know payments – Digital Garage has Veritrans [the Indonesian payments provider now known as Midtrans]. Teru [Sato, founder] of Beenext built Beenos in Japan. Their network here is amazing, and in terms of series A and beyond, we’re very aligned on what our goals are. That’s such an enormous tailwind for the company.”
Dobson says that iPaymy is aiming to lock up a series A round by the middle of next year, with the next fundraise already attracting interest from “recognizable names.”