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SoCash is turning small shops in Singapore into ATMs: Startup Stories

The company believes that the future of fintech is a convergence between banks and retailers.

As digitization in the financial sphere progresses rapidly, it isn’t far-fetched to think that cash may become obsolete sometime within the coming decade. Nowadays, in some places, there are people who rely on their smartphones or cards to make payments, and rarely carry cash with them.

However, Singaporean fintech startup SoCash’s co-founder and CEO Hari Sivan holds a different view. He believes that cash will remain necessary, even in countries like Singapore that are undergoing fintech revolutions.

“There’s no need for a large amount of cash, but you still need a small amount of cash, for emergencies such as paying plumbers,” he told KrASIA in a recent interview. Thus, he believes that people will still need easy access to cash, which SoCash will provide.

The idea of SoCash came from Sivan’s wife, Rekha Hari, when they moved into a new house in 2016. The family usually made weekly cash withdrawals from an ATM near their previous home. However, at their new location, she struggled to find a cash machine nearby. The couple found that small stores, cafés, and restaurants were easier to find and easier to reach. They wondered whether they could turn these shops into ATMs.

It wasn’t an impossible dream. In some countries such as the United Kingdom, United States, and Australia, banks partner with merchants to provide a service called debit card cashback. Retail customers can add an amount to the total purchase of a transaction paid by debit card, and receive that amount in cash from the point of sale. One consequence is that this type of service reduces the amount of cash in the stores’ drawers.

“We were looking at these solutions and we thought we could create a business around it,” Sivan said. Combining the idea with his extensive knowledge in banking, in which he spent a decade building a career, SoCash launched in 2017.

Aside from facilitating debit card cashback services for banks, SoCash also makes it possible for customers to deposit cash or even apply for loans through small retailers like mini markets and cafés. For withdrawals, customers only need to enter the amount they want on the mobile app, select the shop, then scan the QR code at the shop’s machine to collect the cash.

“Our business logic is convenient access for customers to cash,” Sivan said. The company targets young people below 30 years old who are mostly underbanked in Singapore, Malaysia, and Indonesia.”

Turning merchants to bank agents

Digital transformation in the financial sphere is inevitable, but it won’t happen overnight. For now, people are adjusting to the changes it brings. Governments are formulating new regulations to accommodate and oversee digital payments and banking; shop owners are adopting the new inventions to upgrade their businesses and keep up with their consumers’ habits.

Those who fail to ride the wave will drown, and SoCash is determined to stay afloat. “We want to play a role at the intersection of cash and digital,” Sivan said.

SoCash enables people to withdraw cash from shops using its app, forgoing ATMs. Courtesy of SoCash.

Starting with stand-ins for ATMs makes SoCash attractive to banks, as maintaining ATMs is pricey. The equipment alone costs at least USD 2,000 apiece, and then there are yearly maintenance fees that can reach USD 10,000 per machine. There are security risks too, like skimming, phishing, and old-fashioned robbery.

Despite all the expenses involved, ATMs are inefficient. Customers who withdraw money from ATMs operated by banks outside of their network are charged fees for each transaction, usually around USD 0.30. SoCash claims that it eliminates those fees.

For retail partners, SoCash reduces the amount of cash that’s kept in stores. They also earn additional income—for each withdrawal, the shop receives a commission, although Sivan did not disclose the rate or amount.

Tie-ups with banks made it natural for SoCash to offer other types of services that conventional financial institutions typically carry. Right now, it’s funneling loans from banks to its users.

“We are converting our shops to sell banking products. So in the end, instead of ATM, our shops become small [bank] branches,” Sivan said. “This is very important because virtual bank licenses are coming up. In Singapore, Malaysia, across APAC—digital banks are coming and our shops can become [their] sales and distribution point.”

Right now, the company is teaming up with six banks, including DBS, Standard Chartered, and ICBC. It also claims a network of 1,500 shops across Singapore and at least 200,000 users. Even with the COVID-19 pandemic, since the beginning of the year, the company processed a total of SGD 6 million (USD 4.3 million) in withdrawals. Hari hopes to see higher aggregate transaction levels after Singapore reopens businesses.

Venture to a new market

In January this year, SoCash launched a pilot project in Indonesia, as a consequence of “high demand from local banks,” according to the firm.

“We found that the banks in Indonesia have a big problem in managing the cost of cash,” Sivan said.

Compared to Singapore, Indonesia’s reliance on cash is heavy. According to a report by global social media marketing firm We Are Social and Hootsuite, only 3.1% of the country’s population uses mobile wallets and only 2.4% have credit cards.

The SoCash app. People can choose where they want to withdraw money. Ccourtesy of SoCash.

However, locating ATMs is a hassle even in big cities such as Jakarta. SoCash found that 60% of cash withdrawal machines are in shopping centers and malls, which are usually far from residential areas. SoCash brings cash withdrawal services into the customers’ neighborhoods through the small shops that are nearby.

During this pilot phase, SoCash placed its cash machines in 2,200 shops in the capital and its outskirts. The company said it amassed 3,000 users and processed 5,000 transactions per month. SoCash also saw more sign-ups, especially from the suburbs, during the pandemic. As malls and shopping centers are closed, people from those areas who were mostly underbanked need an alternative to withdraw cash. SoCash’s network of agents, which are part of residential neighborhoods, was the answer. This resulted in a traffic spike since March, although Sivan didn’t disclose more details.

Complying with the country’s regulation, the firm is registered with the Indonesian central bank as a financial service provider under the name of PT Socash Software Service.

After the pandemic subsides, the company plans to expand into more cities while forming partnerships with local banks that already have a large customer base. However, in doing so, SoCash will have to compete with local startups such as e-commerce platform Bukalapak, which has teamed up with Indonesia’s largest bank, Mandiri, to turn warung (micro-retailers) into financial service agents. Also, state-owned Bank Rakyat Indonesia (BRI) tapped super app Grab, e-commerce platform Tokopedia, and online travel agent (OTA) Traveloka to provide services like opening new bank accounts and online lending.

However, the initiative to turn micro-sellers or tech startups into financial service agents is still relatively new, so SoCash still has ample opportunity to gain ground. “The future will look like more of a convergence between banks and retailers,” Sivan said, adding that fintech startups serve as a bridge, utilizing technology to connect the two.

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What’s next?

SoCash has not been spared during the economic downturn brought on by the COVID-19 pandemic. Some of its shop-partners in Singapore are closing permanently due to the circuit breaker measure, so the company needs to rebuild its network. Sivan also thought twice about its market expansion plans, as most countries are still limiting business activities.

“We will focus on diversifying our product,” he said. For the last six months, the company has been developing foreign exchange services and improving its loyalty programs. Small shops registered as SoCash’s partners can now offer coupons and discounts that are subsidized either by the startup itself or its bank partners.

For the next two quarters, when restrictions might be lifted, SoCash will resume its halted projects, such as forming partnerships with new banks. By the end of 2020, Sivan aims to have at least ten banks and financial institutions in tow.

As for funding, the company is currently talking to existing and potential investors. “You can say we’re in a new funding round,” he added.

Its latest funding was a Series B investment in 2019, when the company raised USD 6 million from Japan’s Glory Ltd., Vertex Ventures, and Standard Chartered Bank’s ventures arm, SC Ventures.

This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.