Colin Charles Agenda

There’s a chance that Malaysian payments will get shook up. From an online perspective, you’ve got the former nbepay becoming MOLPay. From an offline perspective, you’ve got a joint venture between softspace and MOL to form MOLCube (e27 cover it too). The center of all of this is MOL.

For me, I’ve been waiting for a softspace device for quite a few months. I was excited since April 2012. I was told a device would be coming my way from 18 June 2012, and never heard back; the presumption is that people are using this device according to their website. But it is not available for the “general population”.

I have never met Ganesh Kumar Bangah, the man behind MOL, but being a young CEO, I figure he’s got the chops & energy to pave the way. Besides, he’s backed by Berjaya tycoon Vincent Tan.

Ugliness begone, let there be better online & offline payments and this will pave the way for e-commerce as well as physical versions of e-commerce (pop-up stores, bazaars, heck, imagine your pasar malam vendor going online).

A lot of this will involve lobbying Bank Negara Malaysia (BNM). I don’t believe any payment gateway intentionally wants to provide terrible user experience, I believe its usually to feed regulatory requirements.

Looking forward to payments in 2013. It can only be better than today.

Today I tried to checkout RM450 using iPay88. They only accept Visa or MasterCard credit cards, so I pulled my wallet out.

I thought I would use the Citibank card today. I got sent to an error page. So I clicked the back button to head back and thankfully this worked.

I dug further and found a Direct Access card. I have to choose an issuing bank and now had to think a little harder to figure out that this card belongs to CIMB. I was sent a code via USSD verification which was valid for a mere 3 minutes. I had to run to my phone which was charging upstairs and run back down to make the transaction.

Later I see an SMS from Citibank giving me my OneTime PIN that is valid for 4 minutes. I never even got the chance to use it.

Now, lets say I was the average consumer.

1. What would I have done with the error page?
2. How would I have reacted to seeing one design then seeing the iPay88 page? Seems close to an attack. Stripe doesn’t have this problem.
3. How quickly would I have retried the same credit card before I gave up on the online purchase?

Anecdotal evidence from several online stores that I’ve been involved in suggests Malaysians are a patient bunch. They try up to three times for a credit card transaction before abandoning the cart. Some will email because its clear they really want the item. Most truly just give up.

E-commerce is slated to be big. But fixing payments should be crucial.

I know nothing about the African continent, having never stepped foot into it before (something I’m sure I will remedy within the next decade). I read a piece in the FT Weekend about Alan Knott Craig, Jr. (@alanknottcraig), an entrepreneur in South Africa that runs Mxit. Mxit is impressive: 750 million messages a day served, plus allowing 581 million mobile users in Africa to make electronic payments.

You have got to love Mxit’s mantra: help more Africans make more money.

This is a social entrepreneur at his best. I’ve already picked up his book titled: Mobinomics: Mxit and Africa’s Mobile Revolution, which I presume will be an interesting read.

He is also a workaholic with suggestions on how to improve his work-life balance with 3 simple rules:

1. no working after 6pm
2. no working on Sundays; and
3. no travelling for more than seven consecutive nights

I just subscribed to his blog and followed him on Twitter and am totally eager to learn more about this amazing continent.

I love competition and free markets. I read about Pirq coming to Malaysia via the webcampkl group. An interesting thread is brewing.

In Malaysia, I see three players (not including Foursquare for merchants which some establishments use to give mayor discounts, every 5th check-in, etc.): 

1. ChopChop is the pioneer in this space (bootstrapped around December 2011 by 3 passionate young entrepreneurs whom I’ve had the pleasure of meeting more than once). 
2. Shortly thereafter Voucheres came along and they picked up a nifty RM700,000 from MyEG & MDEC (newsclip, crunchbase). They’re a startup with 4 founders (January 2012), claiming 10 employees, and they seem to be relaunching 10 months into it. 
3. And the latest to the block? ChopInk (July 2012). Four young founders who were AllStars graduates (RM18,000 + mentorship for some 6-7% equity), which I’m told reliably is a pivot from a different unworkable idea. ChopInk has goals of a 1,000 merchants by year end and is supported by Cradle and possibly had some investment from Telekom Malaysia.

And today, you’ve got the fourth player: Pirq. Pirq’s take is different: you receive an immediate discount of 20-50% instantly. You don’t collect chops for later redemption. Pirq is a US-based company flush with cash – currently USD$3.2 million has been raised (yes, thats USD not Ringgit). Their first expansion country: Malaysia, then Singapore. Pirq is like collecting chops meets Groupon (20-50% discounts on a bill last I checked at most restaurants is unsustainable). 

The grapevine tells me that Pirq has four sales people on-board. From an execution perspective, I love how they focus on areas. My biggest problem with these digital loyalty card applications is that I generally never visit any of their merchants! From a tech perspective, Pirq needs work.

I see Pirq as competition with group buying sites, which is definitely seeing fatigue (in Singapore they’re dwindling; in Malaysia?). The verdict is still out there how digital loyalty is going to be managed between ChopChop, ChopInk, Voucheres. Maybe well-funded Singaporean Perx might arrive eventually.

As a consumer, while I may not have to collect loyalty cards in my wallet any longer, I’m going to be collecting smartphone apps. Good thing you have folders on iOS :)

Who’s going to win? The people that make the better product & with better execution. Not just for the consumer (location based alerts, geo-fencing, etc) but for the merchants as well (smart ad posting, etc.). 

In another post, we’ll talk about money. Foreign money is rolling into companies coming into Malaysia (Rocket Internet, now Pirq), mainly because the USD or Euro goes further in Ringgit Malaysia land. Most of the discussion at webcampkl is focused on this.

Me? I’m naturally rooting for the bootstrapped entrepreneurs – that’s ChopChop.

Today there were some incentives for angel investors announced in Malaysia as part of Budget 2013.

Who qualifies as an angel investor? Your annual income must exceed RM180,000 per annum and you must be a tax resident to qualify for the deduction.

What do you get? Total investment as an angel will be allowed as a deduction against all income.

When is this valid? From Jan 1 2013 to Dec 31 2017, and you need to apply via the Ministry of Finance.

Some details: as an angel, you must hold at least 30% of the shares in the company you’re investing in for 2 years, and you must pay up for the shares in cash. The company needs to have at least 51% Malaysian ownership.

What do I think?

Quite simply, the qualification income is something I see some people complain about, but this is similar to what America calls an accredited investor. I have no issue with the RM180,000/annum income. Feel free to hit up all those people you know with Visa Infinite, World MasterCard, Premier banking, etc. ;-)

Application via the Ministry of Finance (MoF) seems a little dodgy. The potential of red tape here is high. This is definitely a turn-off.

Does this benefit startups? Angel investors shouldn’t be making a 30% investment in a company. It is ridiculous. Consider giving away 20% of the company in an angel round, sure, but with just one angel walking away with 30% of the shares for 2 years?!?

Angels in Malaysia typically make RM20-50k investments (for up to 20% on the high side from what I’ve gathered). Very rarely do they hit the RM100k mark. Most accelerators are taking up an average of 6-8% for about RM15-18k investment already for 3 founders.

Startup founders are also not going to want to give away 30% of the company for a small sum of money. Many believe they are worth more. I guess you have to thank the media hype cycle for this.

Alas, it is a good start for Malaysia to be looking out for such things. Possibility to help boost the startup ecosystem.

Update: I thought about this a little more and realised that I applied a very myopic view to this piece. Reason is simple: I focus on tech startups & the angels that go with them. In this day and age, software (be it mobile or web-based) doesn’t take much in terms of cash to prove yourself. In other industries like manufacturing, biotechnology, film making, etc. you might look at much higher investments for 30% or more, but it isn’t something I know much about.

I’ve wanted to write about Rocket Internet ever since reading an article that appeared in SGEntrepreneurs, written by my friend Bernard Leong, titled Are the Samwer Brothers, a.k.a Rocket Internet really that bad for Southeast Asia? That article appeared towards the end of March 2012, and anyone that knows me closely knows that I’ve been having an epic year traveling for business (more on that later). What prompted me to write this today? Reading Bernard’s next article in the series titled Is there any method in Rocket Internet’s madness? That and I’m taking a much needed break, sitting in a venue older than the nation Malaysia itself, overlooking the place where Malaysia fought for independence from the British, and sipping a cold Hoegaarden from the tap.

If you haven’t read those links, consider it a pre-requisite. Go on, I’ll wait.

In the US-based media, Rocket Internet are looked at as copycats. Should we shun copycats that don’t improve on things? No. Very little uniqueness comes out of things, and its rare that true innovation happens. The iPhone, the iPad, the Macbook Air. Those are true innovations that every other manufacturer out there is trying to copy. Its very much similar in the software world where things get rehashed. Timing & execution play an important role to success, naturally.

Free market economics are also interesting. You can launch products that are clones of Pinterest, but if Pinterest is where it’s at, that’s where people are going to be. I remember in the early days of Twitter, there was many a clone, even one in Malaysia called Pacmee, funded by an investor friend of mine. They put 18-months of good work into it, added the local spin to it, and bam, Twitter won anyway. Welcome to free market economics.

This is similar to AirBnB clones like Wimdu (Rocket Internet). You might add your local spin to things, like my friend recently launched in Japan, homerent.jp, but in 18-24 months you’ll see if a local spin makes a business. I’m rooting for my friend, especially since the Japanese market is very closed, so here’s a cheers to them. Plus they have a great story to boot. (A friend is an investor at iBilik focused on the south-east asian market – I too wish them all the success).

At the end of the day, free market economics picks which service wins. What you do to make yourself a winner is down to creative smarts, growth hacking, and most importantly gaining user traction.

South-east Asia is unlike any other. We call ourselves ASEAN, but we have no single currency, we all speak different languages, we have no Schengen agreement and even though there may be free-trade-agreements in place, we all come with our own obscure laws. We don’t even have a beer you’ll call an Asian beer :-) As Bernard pointed out, we seem very much like Europe.

What is Rocket Internet getting right? Execution – at a great speed. Scale. With failing fast built-in.

The Next Web carried an article on this topic too. I quote:

These people don’t complain about payment gateway issues for their e-commerce sites, they just find ways to make it work. They won’t wait, and that’s a winning attitude.

I know the pain of dealing with Malaysian payment gateways. I guess I should say we should be thankful that we even have payment gateways. Most people don’t even bother dealing with these gateways and end up doing dodgy hacks like saying they’ll accept transfers from cash deposit machines, direct bank transfers, or worse, cash on delivery. This is not e-commerce. This may be commerce facilitated by electronic means, but it is in no way seamless or meets my standards of being called e-commerce.

That aside, I applaud the Samwer brothers doing this. Sure it isn’t very friendly to the smaller entrepreneur. Now you just have to learn to be more cunning. Execute better. Overall, I feel small entrepreneurs will do even better with this market as there’s lots of benefit to Rocket Internet spending the money to educate people about e-commerce (just see my thoughts on zalora & zalora II).

The one’s complaining were the ones already used to building copycats with a lot less money & execution flair. 

That’s not to say this model hasn’t got its issues. As Bernard points out, they’ve had executives come & go, lots of complaining employees, and they’ve even shut down services. I’ve been told by many that they’re also cheap. And customer service is generally terrible (this is anecdotal, like how an iPod hasn’t arrived in 73 days – I have never purchased anything from a Rocket Internet company). I’ve heard that seller relations aren’t all that awesome either.

Everything has hiccups. Its how quickly you learn from them and execute better. It’s not easy to build a Zappos culture overnight, and frankly speaking, South-East Asian customer service is in the doldrums overall. Many businesses can take to learning from how 5-star hotels run their operations in Asia (see service at InterContinental Bangkok, InterContinental Singapore, Grand Hyatt Singapore, Hyatt Regency Kuantan Resort and the like). The culture of Delivering Happiness is generally non-existent.

Bernard suggests this too:

The inconvenient truth is that the Samwer Brothers are excellent in cloning the operations and the IT platforms behind, but they are not good at cloning companies where the real strength is in the services part of the company.

Are operations cloned rather well? The IT platforms from my knowledge are all built within the market. This is why some markets have to deal with Google Spreadsheets and some markets have real built-in systems. 

Will there be a successful exit for one of these clones? Who’s to say. Anything is possible. It seems that JP Morgan has bet on Rocket Internet, but that’s not an underwriter that has much clout in general today. See where Facebook is.

If you’re a South East Asian entrepreneur, don’t look at Rocket Internet companies as competition. They’re cloners. If you’re planning on building something remotely original, or a mashup, good on you. Execute smarter. If you’re planning on doing a clone, make sure you excel in the local touch. There’s no shortage of advice and if money is tight, remember to do things in a lean fashion. Your buddies at Rocket Internet are well funded (yes, the Euro is declining, but its still better than any single south east asian currency out there), but have a different passion & goal in their execution. Passion will show in good customer service.

If you are Rocket Internet, good luck with the cloning. I’m never a fan of unoriginal copies, but you’ve brought clear execution to what was already happening in the space anyways. This is why I respect you. I wish you the best of luck, and congratulations with getting investment dollars. It means you’re here to stay. Continue ensuring that people are comfortable with e-commerce transactions. Lobby to improve it with governments. But please don’t turn people off with terrible customer service. Asian customers can take a lot of crap, just don’t go overboard.

If you’re a US-based company reeling as to what Rocket Internet is doing in South East Asia, remember that you caused this to happen. You chose not to expand here and now you’re paying the price. Plain and simple. I’ve had my fair share of conversations with US-based companies that seem to think Asia is the last place to expand to. That’s a mistaken notion people.

All in, there’s plenty that’s happening in the US that is still not available in South East Asia. Plenty more to clone. Much more to disrupt.