Corporate watch: Artivision’s acquisition of MC Payment approaches finish line
After seven extensions of the long stop date, the latest being Dec 31, Artivision Technologies appears ready to acquire MC Payment via a reverse takeover (RTO) which was first proposed in October 2017. On Sept 2, Artivision announced it had received a no-objection letter from the Singapore Exchange for a further six- month extension of time from Aug 31 to Feb 28, 2021, to complete the proposed acquisition and meet the requirements for a new listing and to appoint an additional independent director to make up the minimum number of three members for the audit committee of the company.
In Oct 2017, Artivision announced its plan to pay $80 million for MC Payment, mainly through the issuance of new shares to the shareholders of MC Payment. The announcement had stated that Artivision’s shares in issue would rise from 1,797.8 million to 9,512 million on completion of the deal.
MC Payment enables digital payments from different sources such as Fave Pay, Grabpay, PayNow, PayLah! credit cards, debit cards, PromptPay ( the equivalent of PayNow in Thailand), WeChat Pay, Alipay, and UnionPay. “We are agnostic to payment methods,” says Anthony Koh, CEO of MC Payment during a recent interview with The Edge Singapore.
Koh says the consideration is likely to still be around $80 million. After the completion of the transaction, Artivision’s major shareholder is still likely to be executive chairman of Oxley Holdings Ching Chiat Kwong, who currently owns around 14.4% of Artivision.
In 1HFY2020 ended June 30, MC Payment reported revenue of $6 million. More importantly, MC Payment had broken even, Koh claims, becoming net income positive for the first time. This represents a turnaround from FY2016 when MC Payment made a net loss of $1.46 million. On the other hand, Artivision, which did not have a revenue source in the past 12 months, made a net loss of $1.66 million in FY2020 ended March 31.
Regional penetration
Since Oct 2017, MC Payment’s strategy has undergone some tweaks geographically. For one, Cambodia is off the map. ”Cambodia was a drag on the due diligence, which took a long time and led to cost increases. It was, therefore, better to scale back,” Koh says.
Instead, the company has been given licences to operate in Malaysia, Thailand and Indonesia, says Koh. “For Malaysia, Indonesia and Thailand, we have obtained the payment licence in late 2018. We took quite some time to obtain those licences and set up the infrastructure. It’s now time to grow in these countries,” Koh says. In Malaysia, MC Payment processes payments for a large MLM (multi-level marketing) company. In Indonesia, the company processes payments for online businesses, including the third largest online shopping mall there.
“In Indonesia, we are helping small merchants with their payment infrastructure. We launched InstaPay Indonesian, an app to help small businesses accept payment,” Koh says. So far, some 1,000 merchants have signed up on Instapay in Indonesia. In the whole region, Koh claims the company has signed up close to 10,000 merchants. “We are in the process of onboarding more than 300 merchants in Thailand and 3,000–5,000 merchants in Malaysia,” Koh adds.
In Singapore, after the Payment Services Act came into force on Jan 28, MC Payment has received in-principle approval from the Monetary Authority of Singapore (MAS) to operate, Koh says.
One of Koh’s local customers is Yi Ji Hokkien Prawn Mee. “Altogether, Yi Ji has six outlets, including the ones at Old Airport Road, Hougang, Kovan and Albert Centre. Now, in the comfort of his home, the owner can see the sales in all his six locations. He doesn’t need to run around anymore,” Koh explains.
Other customers include limousine companies and individual drivers. “We provide customers with the software to use; they just have to download, turn it on and they’re ready to go. Our software also saves money because of the absence of a physical POS terminal. In fact, we’re cheaper than a physical POS because we only charge for a transaction and we don’t charge them monthly,” Koh says.
With MC Payment, the merchant does not require a POS (point of sale) terminal. In fact, for hawker stalls and F&B outlets, customers can scan a QR code using a mobile phone to pay the merchant. Through this payment, the merchant can also check the type of goods sold and who bought them, provide customers with discounts and let them redeem loyalty vouchers, among other features.
MC Payment enables all these functions through “Herohippo”, an enterprise software platform. “We differentiate ourselves by providing software- as- a- service ( SaaS), integrated with all the payment methods for a seamless experience for the consumer and it comes with security features. For example, we generate a new QR code every minute, so it is more secure. Dynamic QR is more secure than static QR,” Koh explains.
MC Payment counts brands like Zara, Watsons and Nike. “We also serve well-known shopping centres such as Robinsons, providing the digital infrastructure that enables merchants to offer instalment-based payments and loyalty programs,” Koh says.
Customers and competitors
Indeed, Singapore’s payment sector is fragmented and there are many payment companies that provide services similar to MC Payment.
Koh declines to name his competitors, saying, “Our competitors vary from market to market and solution to solution. We are the only ones providing the entire suite. There are competitors offering similar services either with POS or SaaS, or payments. However, we are the only company to offer an end-to-end solution, for both software and payment. There are software companies and payment companies but we offer the complete solution.”
As seen from MAS’s website, payment processing is becoming an increasingly crowded space here. Koh claims MC Payment’s main mission is to enable payments and help businesses to cope with digital transformation. Its customers are mainly retail merchants. “They are disrupted by technology and there are so many payment methods. Every payment method has costs and you need reconciliation which increases the merchant’s cost. Their core business is to sell their products and services, so they need an integrated payment solution,” Koh elaborates.
“Using our solution merchants can run their solutions online and remotely and there’s no need to spend money on a website. Once a customer scans and pays, that customer is in the database. I can push solutions and give the customer a discount. We are focused on helping businesses to reduce their costs and giving them value-added services,” Koh adds.
Margins likely to remain thin
At present, MC Payment’s main sources of revenue based on a percentage of transactions, and fee income from its software. Currently, the company gets more revenue from transactions. Koh says SaaS is taking off and in future, it will be a balance between percentage of transactions and SaaS.
For the time being, it is a numbers game for MC Payment, which implies thin margins. “We have other value- added services to offset the pressure on transactional costs which are falling. Going forward, transactional costs will continue to fall,” Koh says.
An additional source of revenue could be from foreign exchange in cross-border payments. For that, MC Payment needs to rampup its regional business though. “We are on a platform and we can roll out and duplicate our solutions across countries pretty fast,” Koh says.
Meanwhile, with the pandemic travelling ban still in place, cross-border transactions are muted. In addition, local merchants are only just recovering from the “circuit breaker” lockdown. “Covid- 19 affected a lot of businesses here. A lot of retailers were not doing well and we were also affected too,” acknowledges Koh, before pointing out that F&B transactions are rebounding.
Wirecard issue
In June, Wirecard’s auditor EY was unable to confirm the existence of EUR1.9 billion ($3 billion) in trust accounts, and hence was not able to sign off on the company’s FY2019 accounts. Subsequently, Wirecard filed for insolvency. Its customers in Singapore include M1, Starbucks, Comfort-Delgro, EZ-link and hundreds of F&B outlets. MAS had directed Wirecard Singapore to return all customers’ funds by Oct 14.
“Wirecard supported a lot of merchants and we hope to capture up to 1,000,” Koh says. “We can fill the void left by Wirecard, and with the backing of a regional bank. Many businesses using Wirecard’s services have been left in limbo as a result of the Wirecard incident. MC Payment has received many inquiries asking for help.”
Looking ahead, Koh hopes to continue developing a smart inventory management system for merchants and then move on to develop a blockchain- driven trade financing platform and a cross-border B2B money transfer solution. “We are also working on releasing our own card-issuing capabilities, backed by a reputable multinational bank,” Koh concludes.
All that is left is for Artivision is to issue the final circular with details of the RTO and this should be out very soon.