OxPay Financial’s share price has underperformed the market since 2021, sinking to a low of 4 cents before rebounding to 5.17 cents this year, which is down a modest 9.2% year-to-date. However, back in 2021, following a tussle for control of the board, OxPay stood at 33 cents.
OxPay is a payments facilitator for merchants, with payment licences in Singapore, Malaysia, Thailand and Indonesia. It was established in 2005 and known as MC Payment, but was renamed OxPay following the board tussle.
The company provides digital payment and commerce enabling services, offering online-to-offline solutions for businesses across various industries such as retail, transportation, food and beverage industries, charities, education and online malls. Its role as an enabler in the payments ecosystem gives merchants the ability to seamlessly manage payment collection, improving operation efficiency and increasing sales completion rate.
Its end-to-end payment platform offers solutions ranging from hardware and software to data analytics and other technology-driven, value-added services tailored to specific industries.
The company has two main businesses, merchant payment services (MPS) and digital commerce enabling solutions (DCES).
In its MPS division, OxPay provides payment processing services with its smart software that can be installed on smart devices (including mobile phones, tablets, and smart point-of-sale or POS terminals) for merchants with physical stores, or integrated into online merchants’ websites and applications.
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OxPay’s online payment processing services allow merchants to integrate their websites and mobile applications securely for customers to make payment via credit or debit cards, e-wallets or bank transfers. For in-store payment, merchants can install a smart software application, Smart App, onto smart devices to accept multiple payment methods. The cloud-based Smart App also allows for management of multiple POS terminals, products, customers, marketing (such as loyalty and reward schemes and coupons) and access to real-time sales data.
The DCES division provides ancillary services, such as the sale and lease of Smart POS terminals as well as both proprietary and licensed software-as-a-service (SaaS) which can be white-labelled.
For the MPS segment, charges are on a transactional basis for online payment processing services. Transaction processing fees are deducted from the monies collected from end-retail customers before disbursement to merchants. Other revenue from this segment includes revenue earned for authorisation, clearing, settlement, network access and other support services, which include setup fees, subscription fees and referral fees.
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For the DCES segment, revenue is generated from the sale or rental of the company’s POS terminals and monthly subscriptions from the SaaS developed for customers.
The past two years have been challenging, to say the least. In May 2023, its CFO Ng Kok Peng was under investigation by the Commercial Affairs Department relating to matters when he was employed by TEE International but he has not been charged. In the same month, Worldpay terminated its agreement with OxPay over an alleged breach of a clause in an agreement. This impacted OxPay’s financials materially.
Deputy chairman Shawn Ching recalls: “In May 2023, the group’s payment facilitator licence was terminated by Worldpay, which the company believes was due to issues arising from its merchants, and the termination created a significant challenge for the group as it impacted the group’s ability to process Visa and Mastercard payments.”
Additionally, OxPay’s managing director Koh Jin Kit resigned in November due to health reasons. In FY2023 for the 12 months to end-December, the company reported a net loss of $1.4 million.
Now, though, all these issues appear to be behind the company. “With the support of the new management team, the group is now rebuilding its business. We have also regained our ability to process Visa and Mastercard payments through the payment facilitator master agreement with DCS Card Centre (DCS). This is a significant milestone for OxPay as we aim to expand our merchant base and offer comprehensive payment solutions to them,” Ching explains.
New initiatives
OxPay has announced a number of new initiatives in the past six months. In September 2023, the company announced it has obtained approval from the Monetary Authority of Singapore to offer e-money and account issuance services under its major payment institution licence.
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In December, OxPay announced it has signed a memorandum of understanding (MOU) with Green Link Digital Bank, for the bank to provide financial products and services to OxPay’s merchants.
OxPay CEO Yick Li Tsin says: “Being a payment gateway company, where funds are held by OxPay and financial data is one of our key assets, the natural progression would be to partake in the financing business at some stage in the future, but always subject to shareholders’ prior approval (if applicable). OxPay is looking to address the funding gap for micro and small merchants where their credentials may not be enough to get funding from traditional financial institutions.”
In November last year, OxPay entered into a non-binding term sheet with PT Diners Payment Indonesia (PT DPI) in relation to the proposed investment by the company in PT DPI.
PT DPI is mainly engaged in being the sole agency for Discover and Diners Club network in Indonesia. The parties are still in the midst of performing due diligence checks and negotiating the definitive agreements for the proposed investment.
“In Singapore, we have a payment facilitator master agreement with DCS. OxPay works with the acquirer, in this case DCS, to acquire merchants directly under OxPay and provide them with the ability to process credit card payments with various schemes such as Visa, Mastercard, and China UnionPay,” Yick explains.
Following the November non-binding term sheet, OxPay would hold the franchise of Diners Club in Indonesia (through PT DPI) and become the direct acquirer and issuer of Discover and Diners cards in Indonesia.
“This would allow us to acquire merchants directly on our own and provide them with the solutions to process Diners card payments. In the near future, OxPay would be able to issue credit cards to individuals and companies in Indonesia, subject to obtaining the necessary licences from the Central Bank of Indonesia,” Yick says.
OxPay is proposing to take a 45% stake in the enlarged share capital of PT DPI (which would hold the Diners Club franchise in Indonesia) for US$1.08 million ($1.46 million). In connection with this investment, PT DPI will grant an option to Ox Capital, a private company held equally by Ching Chiat Kwong, OxPay’s chairman, and Ching, to subscribe for new shares of PT DPI that will constitute 5% of the enlarged share capital of PT DPI. OxPay’s investment in PT DPI would be at cost and be applied towards working capital purposes and licensing requirement costs.
Other than the licensing and working capital costs, OxPay would also look into investing another additional US$3 million in technology such as card management systems. Marketing costs and funding the float (giving credit to users) are variable costs and will depend on the number of users.
The credit card model
Although Indonesia is one of the largest markets in Southeast Asia with almost 300 million people and over 20 million merchants, the number of credit cards issued is approximately 16 million.
“This essentially highlights the substantial untapped market potential in Indonesia. Our objective is to promptly seize the market opportunity by establishing a substantial merchant base and expanding credit card usage in Indonesia upon securing the requisite approvals and licences for credit card issuance. In the absence of unforeseen circumstances and under an optimistic scenario, the group aims to capture 20% of the merchant base and distribute over two million cards in the forthcoming years. We anticipate that this strategic initiative will, in turn, enhance profitability for the group,” Yick says.
Assuming PT DPI receives all its licences, OxPay is expected to earn a 2% fee on all Diners card spend in Indonesia irrespective of whether it is issued in Indonesia or any other countries. This is termed the “acquire” model. OxPay would also expect to earn late fees on rollover debt of around 20% through its card issuance business, termed the “issue” model.
Revenue for a typical credit card business is usually calculated by the formula: (Number of users × card spend per year × 2%) + (% of card spend per year that is rollover debt × 20%).
“We aim to have both our business models of ‘acquire’ and ‘issue’ which work in parallel to each other through our expansion in Indonesia,” Yick says.
Challenging financials
In FY2023, OxPay’s revenues fell by 15.7% y-o-y to $8.32 million. This was caused by the decrease in revenue from the group’s Malaysian operations, which was mainly due to lower sales in prepaid cards as the group’s key supplier for prepaid cards in Malaysia had failed to obtain its re-certification of EMV (Europay, Mastercard, and Visa) chips, which are required for prepaid cards, from its payment partner.
“The significant decrease in revenue from the group’s Malaysian operations does not have a significant impact on the overall gross margin, as this business typically generates high revenue but low gross profit margin,” Yick explains.
The decrease in revenue from the group’s Thailand operations was mainly due to the termination of an acquirer bank, for which no specific reason was given. Yick is exploring various options to find a replacement for the acquirer bank. OxPay is also working with Razer Merchant Services Co, in Thailand, as an independent sales organisation that allows OxPay to refer merchants to Razer and earn recurring fees.
With two years of net losses, OxPay’s equity has shrunk because of accumulated losses. Ching points out that OxPay has already begun rebuilding the company under the guidance of the new management team.
“We have regained our payment facilitator status which enables us to now focus on acquisition of new merchants. While we are working with some of the renowned brands in Singapore, including but not limited to Q&M, Each A Cup, Beard Papa’s and Swee Lee, the group intends to focus on providing innovation and comprehensive payment solutions to merchants that banks tend to not focus on, such as neighbourhood-friendly shops, standalone cafés, and even vehicle repair shops,” Ching elaborates.
He indicates that OxPay’s next phase of growth will be the credit cards business. Upon completion of OxPay’s proposed investment in PT DPI, OxPay would have the franchise for Diners Club in Indonesia. The business model is based on getting transaction fees and late charges on credit card debts.
“We believe that we have put our best foot forward and taken the right strategic decisions to steer OxPay towards profitability. The group will announce quantitative targets via SGXNet as and when available,” Ching adds.
