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The newly minted EM fintech unicorns, and what sets them apart

  • The fintech funding scene has undergone a sea change. Investors are more cautious, but unicorns continue to be born

  • Newly created EM fintech unicorns are serving bigger-ticket customers in large markets and expanding geographically

  • New EM fintech unicorns include: Babel Finance (Hong Kong), Dock (Brazil), Open and Oxyzo (India) and Opn (Thailand)

The newly minted EM fintech unicorns, and what sets them apart
Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Contributors
Rabail Adwani
Rahul Shah
Tellimer Research
25 June 2022
Published by

The fintech investment and operational climate has taken a sharp turn this year; funding amounts are declining, lay-offs have become widespread, and valuations have tumbled. But despite the challenging macro environment, there are some fintechs that still managed to achieve unicorn status (US$1bn+ valuation).

There have been around 45 net additions to the fintech unicorns list this year (as of end-May); most of these companies are based in developed markets, but there are a handful from emerging markets too. In this note, we highlight the key common features these new EM fintech unicorns share, and that investors appear to value in these tougher times. We also profile five EM fintechs that have joined the unicorn club recently.

Key themes

Based on the business models and strategies of these newly created fintech unicorns, we have identified three key factors that investors like in these challenging times.

  1. Serving big-ticket customers. These newly minted fintech unicorns are mainly focused on serving bigger-ticket customers like SMEs and e-commerce merchants rather than individuals. We think investors’ preference towards these customer segments is due to their higher revenue and profitability potential, as well as lower maintenance costs and less cash burn required to keep users on the platform.

  2. Operating in large fintech hubs. These companies are operating in large markets like India, Brazil and China that have a strong and growing penetration of fintech products. The total addressable market size in these countries is high and customer adoption patterns are also encouraging, which likely supports investor confidence.

  3. Expanding geographically. Most of these new fintech unicorns are already operating across multiple markets and are looking to expand their footprints further. We think investors are favouring companies that have proven business models in their core markets and are now looking to expand elsewhere. 

5 newly created EM fintech unicorns

Babel Finance (Hong Kong)

Babel Finance is a leading wholesale crypto financial services provider. It offers crypto-based lending and other products to institutional investors. The company limits its business to Bitcoin, Ethereum and Stablecoins and serves around 500 customers globally. At the end of 2021, the firm had an outstanding loan balance of more than US$3bn with an average monthly trading volume of US$800mn in derivatives. It had also structured and traded more than US$20bn in options products. In May 2022, the company joined the unicorn club by raising US$80mn at a valuation of US$2bn. Its investors include Dragonfly Capital, Jeneration Capital, 10T Holdings, Circle Ventures. The company intends to use these funds for global expansion and investment in its compliance efforts.

However, more recently, Babel is facing significant liquidity issues due to the crypto crash. It had to halt large withdrawals from its platform earlier this month. The company subsequently reached a deal with counterparties for debt repayment to improve its short-term liquidity.

Dock (Brazil)

Dock is a banking-as-a-service company headquartered in Brazil with operations in various Latin American markets. The company has a comprehensive platform for financial industry disruptors (payment processors, digital banks etc.) providing solutions such as card issuing and processing, digital banking, acquiring and compliance.

Dock has various high-profile innovative clients including Mercado Pago, Pagseguro and Bees Bank. Dock raised 110mn in May 2022 at a valuation of US$1.5bn, giving the company unicorn status. Investors in the company include Riverwood Capital, Viking Global Investors, Sunley House Capital, Lightrock and Silver Lake Waterman.

Open (India)

Open, founded in 2017, is an India-based neo-banking platform for SMEs, startups and freelancers. Open offers several products including current accounts, payments gateway and payroll services to its clients. Open raised US$50mn in May 2023,  at a valuation of over US$1bn, becoming India’s 100th unicorn. The company is backed by high-profile investors including Google, Temasek, Visa and SoftBank.

Open is launching new products including revenue-based financing products for ecommerce, an early settlement credit platform and working capital financing. It is also planning to expand its operations to Southeast Asia, Europe and the US. Open is growing fast and adding over 20,000 SMEs every month.

Opn (Thailand/Japan)

Opn (previously known as Synqa) has its registered headquarters in Japan and operational headquarters in Thailand. It also has a presence in Singapore, Malaysia, Indonesia, the Philippines and Vietnam. Opn started in 2013 with a payments gateway business but has transformed into a one-stop solution for enterprises, by offering them consulting on fintech products, developing customised solutions, and creating platform infrastructures.

The company has four main products: 1) Opn Payments (accepting and managing payments); 2) Opn Tag (creating customer digital touchpoints); 3) Opn Store (building e-commerce websites); and 4) Opn Mint (creating branded NFTs). Opn raised US$120mn in May 2022 at a valuation of more than US$1bn, giving it unicorn status. Its investors include JIC Venture Growth Investments, MUFG Bank, and Mars Growth Capital. Opn plans to use the recently raised funds to broaden its product suite and expand further into Southeast Asia.

Oxyzo (India)

Oxyzo is a digital lender to SMEs in India offering credit at affordable rates with quick processing times of about 72 hours. Oxyzo serves 3,000+ SMEs across India, disbursing over US$500mn each year, and has US$250mn+ in AUM. The company has managed to keep delinquencies under control with an NPL ratio of just 1.2% at December 2021.

Oxyzo is also classified as a systemically important non-deposit accepting NBFC (Non-Banking Financial Corporation) in India. Oxyzo was earlier part of SoftBank-backed Ofbusiness, a B2B ecommerce startup, but it has recently spun off as a separate entity and raised US$200mn in March 2022 at a valuation of US$1bn. The recent funding round was led by Alpha Wave Global and Tiger Global.

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