Banking and FinanceInterviewIssue 03 - 2021MAGAZINE

The Subscription economy is growing amid Covid-19

The Subscription Economy has grown by more than 435 percent over the last 9 years

Last year was tumultuous for the whole world with the Covid-19 pushing the global economy into recession. However, it was also a catalyst for the fast acceleration of Malaysia’s fintech landscape. This was evident from the fact that the sector moved up 11 places to 67th on the 2021 Global Fintech Rankings. Growth was recorded in the different segments of fintech be it wealthtech, e-lending or e-remittances.

The small and medium enterprises (SMEs) in Malaysia play an important role when it comes to Malaysia’s economy. Data released by the Department of Statistics, Malaysia revealed that SME contribution to Malaysia’s GDP increased to 38.9 percent in 2019. In the previous year, SMEs contribution to GDP was 38.3 percent. However, in 2020, the figures dropped to 38.2 percent again due to the Covid-19 crisis. Yet, on contrary, the pandemic has changed how SMEs in Malaysia obtain their finances.

According to the Economic Census 2016, SMEs accounted for 98.5 percent of total business establishments in Malaysia in 2015. Malaysia formed the National SME Development Council (NSDC) in 2004 which continues to oversee the development of the SME sector in Malaysia. The council is directly involved in setting the strategic direction and formulating policies to promote the growth of the sector. In 2019, a survey conducted by the Malaysian central bank-Bank Negara revealed that more than 90 percent of the SMEs in Malaysia are engaged in the domestic market, whereas, around 7 percent are involved in exporting their products.

The subscription model is gaining popularity and more and more businesses are adopting the model to run their business. According to the ‘Subscription Economy Index (SEI)’ by Zoura, who is a leader in subscription management, noted that the Subscription Economy has grown by more than 435 percent over the last nine years. The pandemic has only accelerated that process. Asia, and more specifically Southeast Asia is expected to become a big contributor if not the center of this new, untapped economy.

A report by EY also revealed that maintaining cash flow has been a huge challenge for SMEs. Data further suggest that over 30 percent of businesses in Malaysia have less than one month of cash in the bank. What makes matters worse for them is that the time period to collect payments from invoices is around 90 days.

Curlec is a fintech company based in Malaysia that allows merchants to collect recurring payments and manage their cash flow in a much easier and efficient manner. Curlec makes it easy for businesses of all sizes to collect recurring payments and take control of their cash flow and enable them to enter the Subscription Economy. They do this by building technology on top of payment infrastructure. Global Business Outlook spoke to Zac Liew, chief executive and co-founder of Curlec. Having previously worked at Barclays Bank in London and as a Product Manager for two enterprise-tech companies, Zac is a qualified lawyer by education and was listed in Forbes 30 Under 30 Asia 2020.

Curlec is one of the leading fintech companies in Malaysia. How has 2021 been for you?
As with everyone else, 2021 has been a challenging year for us, having been under lockdown the majority of the year here in Malaysia. However, despite the challenges, it has been quite a breakthrough year for us as well. Our business has grown almost four times throughout the pandemic. We’ve seen a big shift as more and more businesses are enabling online payments, as well as making the transition to recurring revenue and subscription based models.

How does Curlec help businesses manage their cash flow? Can you stress a bit about your technology?
With many businesses having issues with late and failed payments, failure in controlling cash flow ultimately puts business continuity at risk. Due to the lack of suitable payment options, businesses have often relied on disjointed systems and manual processes have resulted in the inability to scale for businesses attempting to move to recurring revenue models.
Whilst enabling online Direct Debit was how we started, our product has evolved drastically since we launched in 2018. We now have added additional payment channels such as card payments and have built many features that enhance the whole recurring payment workflow. We are now in the process of building an entire Accounts Receivables platform that will help automate subscription billing and management processes. We are big believers in the Subscription Economy and building tools to help businesses access it.

The Covid-19 pandemic has been devastating for almost every sector, but fintech as a whole has been doing better even during the pandemic. What were some of the major changes faced by your company during the Covid-19 pandemic?
Of course, technology aside, our company is deeply rooted with an amazing set of people that work hard to disrupt the fintech industry, and take our place as one of the leading players when it comes to subscriptions.

One of the major changes we faced internally is having to work remotely as a collective throughout the duration of the lockdown. This means having our staff spread out across states, with less face-to-face interactions and meetings, and move all our internal and client interactions online.

However, we have come a long way since the pandemic started, and we can definitely say that we have become excellent adapters to weather the constant changes.
We believe that in order to succeed in the industry that we’re in, we need to have the ability to move and execute extremely quickly. From a growth perspective, we have allowed ourselves the ability to move fast amongst all the uncertainty throughout the pandemic.

Can you elaborate on your subscription management platform?
What we do here at Curlec goes beyond just payment processing. We provide the necessary tools to make it easier for businesses of all sizes to take control of their cash flow and enable them to enter the Subscription Economy. We do this by providing an end-to-end recurring revenue platform that covers payments, payouts as well as subscription management and billing features – an omnichannel platform that can be used for both online and offline businesses, targeted towards both B2B and B2C.
While our business continues to grow, we have taken measures to support our merchants more effectively especially through this pandemic, such as providing flexible payments plans, helping to preserve business continuity by automating their payment operations and streamlining their work processes seamlessly online. This includes key benefits such as the ability to schedule their payment collections online as well as expediting their account receivables and automatically reconcile their accounts via the cloud, all within a single platform.
Now, businesses can use our payments engine to let outstanding invoices be a thing of the past by pulling payments automatically whenever they are due without having to chase for late payments and invoices.

Curlec API is one of the most talked about features. Can you elaborate some more on that?
As a company, Curlec is serving the previously underbanked businesses by providing access to payment mechanisms such as Direct Debit which they never were able to do before.
Banks are usually not API ready. So, we partner up with these banks to provide software on top of their infrastructure so that, through us, our merchants and businesses of all sizes will be able to integrate with the banks directly with our API. Thus, making banking products available and super useful to a lot of companies, particularly in tech and the fintech industries.

What are some of the value propositions Curlec has to offer that differentiates it from its competitors in the market?
From a product perspective, we’ve invested in providing a more holistic experience; taking a value-based approach and deepened our products functionally in addition to expanding to immediate adjacencies to supercharge acquisition, retention and therefore growth.

In comparison to our competitors, our platform is built with recurring revenue in mind, whilst solving common pain points for Malaysian businesses. While we are currently the only company in Malaysia to provide recurring payment options through the domestic banking network as well as international card networks, our main focus is to build out direct adjacent products and services to serve the end-to-end subscription billing management system, covering the whole order to cash process for businesses.
What has set our products and services apart from the rest is the fact that we are going beyond just payments. We are creating a “Shopify” type experience for businesses looking to enter the Subscription Economy.

What do you think is the future of fintech in Malaysia? Do you believe that the pandemic has somehow contributed to the sector growing so fast?
The pandemic has definitely accelerated the growth of fintech, not just in Malaysia, but globally. We are seeing growth in financial and banking products, online payments, the proliferation of e-wallets and many more. Additionally, we are also seeing a lot more businesses and consumers being more receptive to this change and acquiring access to these products.
According to Businesswire, the subscription economy has grown more than 350 percent over the past seven years. And the pandemic has basically accelerated that process. We believe that Asia, and more specifically Southeast Asia will become a big contributor if not the center of this new, untapped economy.

As more and more businesses are shifting towards the subscription model – a trend that is seeing rapid adoption in most first world countries especially after Covid-19, our main focus is to educate and accelerate the adoption of recurring revenue models for local businesses.

What are your future plans for the company? Do you plan on expanding further?
Our long term goal for the company is to potentially transition into a more secure, defensible business model. We plan to expand regionally in Southeast Asia, as well as enabling various payment types that are also localised, whether it is through payments (money in) or payouts (money out).

The market for Subscriptions and Recurring Payments globally is growing extremely fast. With the global Subscription Economy estimated to be valued at $530 million, the Southeast Asian Subscription Economy is currently estimated to be valued at $40 billion. This is a sizable and fast growing market that Curlec is well positioned to penetrate in Southeast Asia – a region noted to be underpenetrated as of date due to lack of localised software companies serving recurring revenue business..

As we look to broaden our offerings further to serve the entire subscription billing process, this will set us apart even more as no other company in this region is doing this.

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