On Track To Be Malaysia’s New Payments Leader – Merchantrade Asia

The dramatic digital transformation underway worldwide is fuelling a surge of technology innovation and sparking economic growth opportunities across global markets. Organisations leveraging on end-to-end, tech-driven strategies, with the ability to pivot and to respond quickly to evolving customer needs, emerging technologies, and shifting market conditions are the ones which have seen exponential growth within unprecedented times.

This digital resilience creates economic and competitive advantage and has enabled organisations not only to maintain seamless business continuity but also to see trajectory business growth. Malaysia’s prime payments leader Merchantrade Asia Sdn Bhd has proven that their strategic decision to venture to transform the company from brick and mortar to a digital player, which began over a decade ago, lays the foundation of business resiliency and how that move has put them ahead of the curve. The company is Malaysia’s largest money services business (MSB) operator and among the first to develop cross border multi-currency payment solutions, focusing on 3 core pillars – remittance, currency and payments. The company is constantly evolving and taking the lead in revolutionising the industry with an increased focus on digital offerings. Acumen and undenied understanding of the industry have propelled Merchantrade to gain traction in the Malaysian retail payments segment by processing transactions in the millions. Bank Negara Malaysia in its recently released annual report 2022 stated that total outward remittances grew by 10.5% to RM28.5 billion (2021: RM25.8 billion), attributed to higher remittance transactions by foreign workers as the economy began to pick up in 2022.

E-remittance services offered by licensed non-bank remittance service providers (RSPs) continued to grow with consumers increasing by 24.3% with transactions valued at RM12.8 billion in 2022 compared to RM10.3 billion the previous year. Digital outward remittance transactions by RSPs were recorded at 44.9% of the total international transactions as customers look for ways to send money abroad quickly, conveniently, and at a lower cost. The reopening of the economy also saw the gradual return of international tourists, leading to a significant rebound in the money changing and wholesale currency business segments. As Malaysia continues its inexorable march into the digital age, many have increasingly repudiated physical currency for its digital counterpart. E-wallets are fast becoming a norm with its acceptance being accelerated by the black swan event that was no other than the Covid-19 pandemic. According to Bank Negara Malaysia’s website, there are a total of 56 e-money issuers in the country, consisting of bank and non-bank players. In this light, it is hard not to mention the emerging player — Merchantrade Asia.

BusinessToday spoke to Merchantrade Founder & Managing Director Ramasamy K. Veeran recently on how Merchantrade has evolved over the years and its key success factors towards the next phase of its evolution – Malaysia’s Payments Leader. When asked on the company’s presence within the industry, he said, Merchantrade now transacts an average of US$2.4 Billion (RM10 Billion) in remittances in annually which includes outbound, inbound and international transfers while registering an average of over five million transactions on their remittance platforms annually. Merchantrade is also one of the largest players in the domestic remittance industry, boasting a 25% non-bank outbound remittance market share. Remittance comprises slightly over half of the entity’s revenue, with the rest of the transactions being made up from e-wallet, currency exchange, payment gateway, micro insurance and Mobile Virtual Network Operator (MVNO) business.

A HOME GROWN BRAND WITH AN INTERNATIONAL PRESENCE

The organisation is supported by 94 branches, 5 currency hubs, 440+ agent locations, 450+ cash-in cash-out (CICO) merchants and runs on its proprietary platforms, which collectively logs more than a thousand new customers on an average daily. The organisation is connected to extensive payout rails in foreign countries such as Nepal, Indonesia, Bangladesh, Philippines, India, Pakistan, Sri Lanka, Cambodia, Myanmar and more, facilitated by its partnership with over 110 banks and nonbanks worldwide. While the company built its proprietary remittance system and direct rails to these countries, Merchantrade also extends these rails to partners globally as well as some local banks. Their partners all over in Europe, USA, UK, Japan, Korea, Australia and other countries utilise these rails for their transactions. Over the years, it is this strong relationship with their partners which gives them a competitive edge and sets them apart from other players in the market, both locally and internationally. With the backing of notable shareholders Axiata, Sumitomo Corporation, Kenanga and MCIS, their network of partnerships has expanded to include reputable brands and institutions worldwide.

MERCHANTRADE’S GROWTH & DIGITAL TRANSFORMATION JOURNEY

Its humble beginnings in 1996, starting off as an equipment supplier in the telecommunication sector and then a voiceover-internet-protocol and IDD calling card business. The emergence of prepaid mobile phones in early 2000s, nudged the organisation to sunset its existing business. Merchantrade leveraged on its experience and distribution network to embark into the next phase of its evolution – the remittance and MVNO business. “We identified the gaps in the financial landscape and focused on areas the banks were not servicing. Our remittance services were catered mostly towards underserved migrant workers. We built an ecosystem to support their needs – retail outlets in the most rural areas, multi-lingual customer support,” said Ramasamy. The emergence of digital technology and the unavoidable disruption to the MSB industry in the latter part of 2015 fuelled Merchantrade’s digital transformation and brought about a paradigm shift in Ramasamy’s mind-set. In the span of just over a decade, the company transformed from homegrown brick and mortar MSB player into a digital player. This transformation also led to diversification from underserved migrant market into new market segments such as travellers, Malaysian SMEs, large corporates and multinational corporations (MNCs). In addition to its 3 core pillars, the company leveraged on the data captured in their systems to unlock value, create more innovative digital products and rolled out new businesses such as payment gateway, microinsurance, gradually transforming Merchantrade into the leading nonbank financial service operator it is today.

PURPOSE AND TRUST

Ramasamy added “Although we have grown significantly over the years and evolved strategically with changing times, the real measure of progress for us is having empowered the growing number of people from underserved communities around us – migrants, low-B40s, refugees, micro-enterprises, small businesses and more. As a business that is driven by passion, Merchantrade is proud to have not only served 5+ million individual customers, but to also have a seismic impact on millions of lives regionally as well as contributing to the growth of GDP in countries that receive remittances. “True to our purpose, we feel good that we able to deliver our services and enrich the lives of our customers and the communities around them,” said Ramasamy. Despite the stiff competition in the MSB and payments industry as well as the emergence of new players, Merchantrade remains steadfast in their philosophy that prioritizes their customers’ needs above all else. As the company operates in a business that revolves around customer trust and confidence, Ramasamy highlighted “We have been getting these numbers because of trust and confidence in the market. It’s not easy, as an entire ecosystem needs to be created, and it’s not something that can be done overnight.” With customers as the driving force behind everything they do, the company has invested heavily in product innovation, digital infrastructure, customer support, the right talent and made significant changes to its workplace culture. “Each new business we roll out is operated like mini startup within the organisation, with their own product owner and dedicated team who are accountable for the end-toend of the product,” Ramasamy shared. The company at present, boasts a workforce of over 1000+ employees, who are integral to the successful delivery of its products and services. Additionally, Merchantrade is proud to create sustainable employment opportunities for microentrepreneurs in underserved segments. With 700+ agents and CICO merchants in their ecosystem, Merchantrade’s efforts have impacted the growth of the local economy.

PRODUCT INNOVATION AND PARTNERSHIPS

One of the notable products offered by Merchantrade is eRemit, one of the first digital money transfer apps and web portal. Customers can easily transfer money overseas in real-time from the comfort of their homes or offices 24/7. The other service that has gained traction recently is its flexible no-frills payment gateway service, Ozopay, that provides e-commerce players with a solution to facilitate cashless payments conveniently. With Ozopay, customers can pay using various digital payment methods such as credit or debit cards and e-wallets. In 2018, Merchantrade launched Merchantrade Money Visa Prepaid Card, which comes with an innovative multi-currency wallet with 20 major foreign currencies. The solution saves users from the hassle of currency fluctuations by allowing them to lock in currencies directly from their mobile app. Merchantrade Money can be utilized when they travel for leisure or for work. Merchantrade Money Prepaid card also comes with a suite of services, digital remittance, micro-insurance, mobile prepaid reloads, international airtime transfers, card to card transfers and more. Their strategic collaboration with the world’s leader in digital payments, Visa, enables them to simultaneously offer these individuals access to over 80 million + merchant locations around the world. This digital wallet and card serve as a powerful combination, revolutionising the way the people transact and manage their spending.

Despite having 56 e-money issuers in the market, Merchantrade has been able identify niche segments and capture 5% of the e-wallet liabilities market share. In efforts to expand their customer base, Ramasamy is a strong believer in partnerships. Following the launch of Kenanga Money in 2020 with Kenanga Investment Bank which marked the arrival of Malaysia’s first stockbroker e-wallet, the company launched Affin Merchantrade Prepaid card last year and EnrichMoney this year. Merchantrade and Enrich, the travel and lifestyle loyalty programme of Malaysia Airlines, have collaborated to launch EnrichMoney, an essential travelers’ wallet that enables customers to earn and redeem Enrich points while making cashless payments and offers a digital onboarding experience. This partnership marks a significant milestone for Merchantrade, enabling them to extend their prepaid wallet services to a new market segment and cater to Enrich’s customers. Then there was the strategic collaboration with Ambank to establish the first of-its-kind – hybrid wallet. Customers were able to access a maximum limit of RM20,000 from their Merchantrade Money wallet and a limit of RM30,000 from a Hybrid Current Account-i (HCA-i) with Ambank Islamic, giving them a combined limit of RM50,000. With this they are able to attract and provide more use cases for customers who want a bigger limit and enhanced convenience.

As Merchantrade constantly looks for new areas of growth, they recently identified the student market as a huge opportunity. Merchantrade and Universiti Teknologi MARA (UiTM) recently signed a Memorandum of Understanding to provide digital wallet services to international and overseas students registered at the university as well as staff and members. Merchantrade also inked a partnership with Perbadanan Kota Buku (PKB), the country’s largest digital book platform provider to enable easy e-wallet payments for the purchase of reading materials. While building their ecosystem, the company realised a significant gap in the market when it came to affordable micro-insurance solutions and took it upon themselves to address their customer needs urgently. Together with partner MCIS, they created a unique offering that allows customers to purchase insurance for themselves as low as RM1 – which had earned them a place in the Malaysia Book of Records (MBR). While it is unfortunate that so many families were impacted amidst the pandemic, their efforts have led to the provision of protection for numerous families, providing a crucial social safety net.

MERGERS AND ACQUISITIONS

On the merger and acquisition front, in recent years the company has successfully undergone two major acquisitions. As part of their efforts to grow their currency business, in 2017 they acquired a local high-street money changer, which helped them expand their knowledge in currency management and tap on their existing customer base to launch their multi-currency wallet. Then, in 2020, during the peak of the pandemic, the company acquired Valyou from Norway’s Telenor Group to expand their offerings to include CICO merchants for customers and expand their omni channel network. This acquisition brought about a complete ecosystem that consists of branches, agent locations, and CICO merchants. Both acquisitions have given the company a competitive edge by increasing its brand presence and touchpoints in high street malls as well as in rural locations.

A FUTURE PROOF STRATEGY MOVING FORWARD

It’s evident that digitalisation has pushed the company forward. Merchantrade is now focused on developing an end-to-end ecosystem of digital products that caters to a diverse range of customers, including underserved individuals, SMEs, large corporates, financial institutions, and banks. According to Ramasamy, the company’s investment in digital infrastructure ahead of time paid off during the COVID-19 pandemic, with exponential growth seen in their digital platforms despite branch closures. The company now delivers close to 60% — from 2% initially in 2012 —of its transaction value through digital platforms. Ramasamy is confident this strategic move is one step in the right direction for the company’s future growth. With regards to the launching of digital banks in Malaysia, Ramasamy acknowledges that they will undoubtedly bring about changes in the financial services landscape. However, he believes that Merchantrade has built an ecosystem in a niche market that is different from the digital bank’s offering, and will continue to concentrate on its core – remittance and e-wallet.

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