Aspire – An alternative take on SME banking

Think back to a time when you had to step into a bank branch, only to be greeted either by a sales agent inquiring if you have heard about the newest card on promotion, or by a self-service queuing machine that requires guesswork on which option best fits your objective when all you wanted to do was simply cash in a cheque.

Banking is one of the most relatable and relevant industries to many of us, and while there have been efforts to leverage technology to improve on the customer experience, archaic infrastructure and processes has hindered the progress, and it has thus far been more focused on the retail customer than on businesses. This is particularly jarring, given that, according to a research conducted by GrabFinance and Bloomberg Media Group, Micro, Small and Medium Enterprises (MSMEs) now account for 90% of establishments in the ASEAN region and contribute 30-50% of GDP among member countries. An overhaul of the banking experience was long due.

In the aforementioned research, it was also found that over the next 1-3 years, 58% of MSMEs will turn to non-traditional financing sources (including, for example, alternative lending platforms). In addition, with the increasing pervasiveness of tech devices and the number of business-friendly applications and functions that come with them, MSMEs are gradually adopting technology-led enablers to facilitate the completion of manual and operationally-heavy workflows or processes, allowing them to focus more on what they do best – spotting opportunities, executing on them, and building relationships.

However, largely because they do not represent a large enough opportunity to “legacy” banks, MSMEs are discriminated against and face a plethora of pain points centered around the lack of access to financial services and difficulty in managing their cash flows, such as:

The need to maintain a minimum balance on their bank accounts
A lack of transparency in fees and product construct (e.g. interest rate calculations on loans)
Lack of integration: Disparate business software/applications that do not “talk” to each other
Inflexible terms on financial products
No access to customer relationship management tools

This represents a huge opportunity for fintechs in the region. Aspire, with its purported ability to serve small business owners with ease, speed, and transparency (i.e. no long waits, paperwork, or hidden fees), would potentially address these issues.

Who are they?

Founded in 2018 by a team led by Andrea Baronchelli (CEO), Aspire is a SME-focused neobank that is hoping to solve the many banking pain-points that SMEs have by providing technology-led financial tools.

At present, they have three products across debit, credit and card:

Debit: Aspire Business Account
Credit: Aspire Line of Credit
Card: Aspire Visa Card

The Aspire Business Account is a simple, no-frills business account that facilitates the transfer of money (send and receive) and is open to any ACRA-registered business. It boasts to have no minimum deposit, no monthly fees (both of which are common of legacy banks), as well as the lowest FX fees, for which they are able to support 40+ currencies at the real exchange rate.

In addition, they offer 1% cashback on marketing (Facebook, Google and LinkedIn) and SaaS (e.g. AWS, Google Suite, Hubspot, Mailchimp, Salesforce, Shopify, Slack, Xero) spend (full list here), which is generated at the end of the month and returned as cash into the account. A caveat to this is that the cashback only applies to spend on their Aspire Visa Card, and not to spend (i.e. direct transfers) through the bank account. The Aspire Visa Card can only be obtained (although not mandatory) with a Business Account.

A key benefit is that they are integrated to accounting software Xero, which could be helpful for business owners to keep track of finances with greater convenience. Having to deal with multiple software/services that do not “speak to each other” is a pain point for businesses and this should be helpful for them.

Interestingly, different headlines on the website claim that an account can be opened “in minutes”, or “in 5 minutes”, while the FAQ states that accounts “are approved within 2 working hours”. Regardless of which standard we hold Aspire against, the time taken is still very short. Importantly, as prescribe by the Monetary Authority of Singapore (MAS) Payments Services Act, the funds are kept in a trust account of a tier-1 partner bank (in this case, DBS Bank Ltd) and insured under Singapore Deposit Insurance Scheme (SDIC).

A downside of their Business Account is that UEN (Unique Entity Numbers) PayNow/QR payments are not accepted, and for now, the other payment options are through direct bank transfer or by corporate entity name. To elaborate, PayNow is a funds transfer service that is available to customers of major banks in Singapore. It allows individuals and entities (businesses, government agencies) to pay and receive Singapore Dollar funds instantaneously by linking their mobile phone number / national ID (for individuals) or UEN (businesses) issued in Singapore to their Singapore bank account and users do not need to know the bank and account number of other entities when transferring funds. Although not as popular among businesses as compared to individuals, it is a convenient form of payment and gaining popularity.

Overview of Aspire Business Account. Source: Aspire website

The Aspire Line of Credit is an unsecured revolving loan which works like how a credit card would for a retail consumer. Aspire will extend a preset borrowing limit to SMEs, with which the SME (the borrower) can take money out as needed until the money is reached. As the money is being repaid, it can be borrowed again. With the credit limit, the SME can also pay vendors directly, interest-free for the first 60 days, although there is a 2.9% fee (i.e. the recipients receive less than the specified amount). If the amount used is not repaid within 60 days, , on the 61st day the whole amount will turn into a 6-month loan.

Aspire claims that applications take 2-3 business days to be reviewed and upon approval, a maximum of S$300K line of credit will be extended and can be drawn down immediately. There are no fees to open an account and maintain the line of credit (i.e. subscription fees), and fees are only charged on any amount used. Further, if the business has annual revenues greater than S$2M, “customised financing solutions” can be provided.

A quick comparison with Validus, a prominent SME lending start up is as follows. Aspire has a maximum amount of credit and greater flexibility as it is a revolving line (use what you need when you need it) and less stringent with the requirement on history of operations (6 months vs. 2 years).

	Aspire	Validus
Max Amount	S$300K	S$200K
Fees	Processing Fee: 1 – 4% on the amount withdrawn ‍Interest Rates: 1 – 3.9% simple monthly	Disbursement fee varies Interest from 1.5% monthly
Repayment period	Principal + interest every month for 6 months	Principal + interest every month for 6, 9 or 12 months
Response time	2 – 3 business days approval Immediate availability	48 hours approval Another 24 – 48 hours for crowdfunding and disbursal
Requirements	Business is incorporated in Singapore Minimum 6 months operations Applicant must be the director	Registered on ACRA Minimum 2 years operations Minimum annual revenue of at least $500K

Note: Validus Working Capital loan represented here (no collateral required)
Source: Aspire and Validus webpage

The Aspire Visa Card is a virtual Visa corporate debit card linked to the Aspire Business Account. The main draws of it are no foreign exchange fees and up to 1% cashback on marketing and SaaS spend as mentioned earlier. The amount of cashback earned is, however, split into tiers. Total card spend to S$5K will earn 0.25% and beyond that earning 1.00%.

Although it is a virtual card, it is earmarked to be Apple and Google wallet compatible by 4Q20. Further, at this point (Jul 2020), it seems that the card is tied to a primary (sole) cardholder, which is the applicant / director of the business, and employees can not yet be issued Aspire Cards? This capability would likely be very useful for SMEs, as it takes away the hassle of organizing, tracking and reimbursing employee spend. Through employee corporate cards, SMEs can also more easily offer benefits (e.g. transport).

What is the team and who are the investors?

Aspire was founded in 2018 by Andrea Baronchelli (CEO), Giovanni Casinelli (CTO), Joel Leong (Country Head, Singapore), Thibaud Chommeloux (GM, Thailand) and Stefan Hadjidetschev (GM Indonesia).

Andrea Baronchelli (CEO) – 4 years CMO at regional eCommerce platform Lazada (Alibaba)
Giovanni Casinelli (CTO) – 4 years as CTO at BonAppetour, a Singapore-based social dining marketplace (think Airbnb for home dining) which he founded, and was also founder at job marketplace CryptoJobs during the same period
Joel Leong (Country Head, Singapore) – 3 years as CEO at Grouphunt, a Singapore group-buying platform which he founded, and 2 years at HAYSTAKT, an online marketplace and crowdfunding platform for independent makers in Southeast Asia
Thibaud Chommeloux (GM, Thailand) – 5 years at Lazada where he was most recently Digital Goods Regional Director in Thailand, and held various roles across mobile, marketing and business intelligence.
Stefan Hadjidetschev (GM Indonesia) – 6 years at Lazada where he was most recently COO at Lazada Indonesia, and held various roles across country management, marketing and pricing.

Their most recent round was a $32.5M Series A in August 2019, led by MassMutual Ventures. Arc Labs and existing investors Y Combinator, Hummingbird and Picus Capital, according to an article by TechCrunch. These new funds were going to be used to expand their regional footprint.

Prior to its Series B, it had raised 3 rounds of investing – 2 seed rounds and one Series A. Its $3M Series A round was led by Franklin Templeton with Singapore family office Octava and Japanese Fintech investor Mamoru Taniya also joining the round. It also received investments from Wavemaker Partners, a prominent VC in Southeast Asia, and Fintech investor Robby Hilkowitz.

What is their value proposition?

Aspire claims that there are 78M SMEs in Southeast Asia, of which half of them are underserved by the current banking and financial system. As opposed to the Americas (e.g. Chime, Varo, Aspiration, Nubank) or Europe/U.K. (e.g. Revolut, N26, OakNorth, Monzo, Starling), digital banking has been slower to gain traction. These examples also mainly focus on the retail customers, with the exception being OakNorth (who has been relatively successful with serving MSMEs and one of few profitable digital banks).

While the challenges of a lack of access to financial services, credit, and cash flow management systems are common across the world, they are more acute in Southeast Asia, where the financial services industry is less developed, particularly for MSMEs. This, combined with the comparable or even greater uptake of digital-led solutions, represents a huge opportunity. Aspire, with its suite of products across debit, credit, and cards could address these pain points of the MSMEs.

Their products aim to make business banking more easily accessible, faster, and more transparent. By the quantitative metrics, as they claim, they are right on track to achieving that. Importantly, their products and services are most applicable to MSMEs. Large corporations have more complex financial needs (due in part to their complex capital and corporate structures) and hence bespoke, end-to-end solutions that are at present better managed by relationship managers. On the other end of the scale, and more specific to the aforementioned challenges, the needs of MSMEs are having a transparent overview of transactions, gaining access to financial services and capital when they need them, efficiently and at a reasonable cost. Hence, their value proposition is more closely aligned to MSMEs

What could the company branch out into and what similar companies are there?

Digital banking startups are gaining prominence of late, and quite rightfully so, given the opportunities. However, there are already examples of failures, such as zero (U.S.) and Bó (part of NatWest in the U.K.), the latter shuttering just six months after launch. Although these are retail customer-focused, some lessons do apply.

These banks did not have a clear customer value proposition that addresses pain points, and were not differentiating in an increasingly competitive and crowded field. Aspire is unique in that it is one of few players that offer MSME-focused digital banking solutions, and while their products are differentiating and relevant, there are still a lot of opportunities for them to value add and engage their customers.

Some other considerations of MSMEs are customer relationship management (marketing, loyalty etc.) and employee management (leave, benefits, payroll). A holistic, “business-in-a-box” solution would prove to be extremely useful, and hence companies who aim to serve MSMEs should aspire to address these top-of-mind needs, either by themselves or in collaboration with other (financial services) companies. Massmutual Ventures (investment subsidiary of MassMutual Life Insurance) being a key investor could help introduce insurance products (as ZhongAn did with Grab).

Taking an industry lens, Aspire could look to focus on industries that could benefit most from digital banking services. These are likely industries where cash conversion cycles are relatively more volatile (i.e. high variance of receivables and payables) and where there are many relationships to manage (both type and volume, e.g. with suppliers, distributors, customers). The retail and F&B industries are two such examples.

A trend that could both be a challenge and opportunity is the rise of the gig economy, most represented by individuals (freelancers) that run their own businesses. If there are already retail banking options that work for them, a business-focused one might not be much of a benefit if they can manage both personal and business banking in one app or account. Of course, this also means that Aspire could look to serve retail customers as well.

With regards to the digital banking landscape, one prominent example in Southeast Asia, is Singapore-based Tonik, which in June 2020 raised $21M in a Series A round, not long after a $6M raise in February 2020. It is reported to have already received approval (in the form of a rural banking license, as there is at the time of writing no separate digital banking framework in the Philippines, as opposed to, for example, Singapore) from the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, to provide digital banking services. In comparison to Aspire, they are targeting retail customers.

We can expect more focus on digital banking and in particular MSMEs, when the Monetary Authority of Singapore issues its In-Principle Approval (IPA) to up to 5 entities (2 digital full banks that can serve retail and SMEs, as well as 3 digital wholesale bank licenses specifically for SMEs) and commence operations in 12 months.

In conclusion…

As with many other tech-enabled financial services providers, some challenges are gaining the trust of customers (especially in the banking industry) and while businesses in the region are receptive to tech-led solutions, whether or not they will eventually take them up and use for the long term, or willing to pay for it, is another question altogether.

In the current COVID-19 climate, tech-led solutions are poised to have greater uptake, and especially in the financial services sector where MSMEs would benefit from agile and flexible solutions. Aspire can hopefully increase their outreach to serve them. Their partnership with eCommerce platform Lazada to provide online merchants that have at least 3 months of operation with working capital loans of up to S$100K within 3 hours of application is a great example.

Beyond that, Aspire announced multiple partnerships in June 2020. One of them is with UK-based open banking platform Railsbank, where they will use Railsbank’s Singapore Dollar (SGD) bank accounts in Southeast Asia. They also partnered with CREA Asia, a social-media and millennial-focused digital marketing startup founded by Lazada co-founders Aimone Ripa di Meana and Alessandro Piscini (note that Baronchelli is ex-Lazada), in a move to anchor both their presence in eCommerce.

Digital banking could bring about much benefits for MSMEs, and it will be extremely exciting to watch the development of companies such as Aspire, which could potentially be the unfolding of a David versus Goliath story as they take on the legacy banks.