Each Sunday, in Hong Kong, hundreds of Philippine migrant workers queue up outside remittance offices, the lines snaking around entire city blocks, to send money home. For most, it’s their only free day each week. Oftentimes the process takes four hours. Transfer fees cost between $20 and $25.
It was this 170,000-strong community that Max Liu, CEO and co-founder of Hong Kong-based fintech startup EMQ, chose to target when he opened the company in 2014. It would not be easy. But then, little about Liu’s life as a tech entrepreneur has been.
Born in Hawaii, Liu was set for a lucrative career in the financial sector. By 2014 he was a high-flying Wall Street merchant banker. Fintech was still something one might read an article about “once a week,” he tells Red Herring. “I felt a massive convergence was going to happen.”
Four years ago, the majority of headlines heralded fintechs that would take the big banks on in their backyards, aiming their slingshots at goliaths’ shares of financial markets that had remained stagnant throughout the digital revolution. Liu had another plan. His idea was to build a platform to work with the banks; “to co-exist,” he says. “We took the approach: Can we find a way to build with the regulations, build with the compliance, and partner with these banks?”
The global remittance market is worth an estimated $581bn, according to analyst Pew Global. For years it has been dominated by gigantic, slow-moving companies like Western Union and MoneyGram. In other words: it is ripe for disruption.
Liu and his team first wrote down the names of the countries they wanted to target. Southeast Asia was a huge opportunity. According to KPMG only 27% of people living in the region have a bank account. That leaves almost half a billion people unbanked – the majority of whom own smartphones. Little wonder Asian giants like Alibaba and Tencent are searching for mobile financial solutions.
Migrant workers total around 330,000 in Hong Kong, where EMQ is headquartered. Remittances sent to the Philippines totaled $30bn in 2017, the second largest destination for cash behind the $61bn sent to mainland China, according to the World Bank (China’s population is 13 times that of the Philippines). The ability for these people to send money fast and cheaply “was the low hanging fruit…the way for us to grease the wheel on our network,” says Liu.
But finance is a piranha pool of regulation and compliance. Liu’s plan to partner, rather than fight, was sage. But that created another problem: nobody knew who he was. And if there’s one thing banks are most certainly not, it is friendly to outsiders.
“We didn’t know anybody in those countries,” he says. “And what they said is, We don’t understand what you’re doing…At the end of the day, we are in the money movement business, it’s all about compliance, all about
regulations. These are the things we need to invest to first. Not only get those licenses, but maintaining the licenses.”
EMQ’s team spent days in the air hopping between regional capital cities, trying to explain their plan to offer low-cost remittances in real-time. The company’s first $15,000 paid a team of lawyers to study three countries. Their verdict? Don’t do this.
Liu spent long periods away from his young family. It was grueling. Almost two years after he began, it paid off.
EMQ’s first partnership arrived with Hong Kong’s Shanghai Commercial Bank, in 2015. A year later it paired with Cebuana Lhuillier, a Philippine financial services provider. In December 2017 the company won a $6.5m Series A funding round from “well-known Silicon Valley entrepreneurs and international venture capital (VC) firms,” according to a Deal Street Asia report. Since then it has forged deals with banks and financial firms in Indonesia, Hong Kong, India, Vietnam and mainland China.
Hong Kong’s Philippine community was the perfect petri dish for EMQ’s solution. It collaborated with Tencent’s WeChat, to offer Hong Kong-based Filipinos a “We Pay” remittance function through the WeChat app. Soon, a solution extant only in Max Liu’s mind, was having a huge impact on the streets of EMQ’s home base.
“People used to stand in line for hours on a Sunday to get something in the bank, but now it’s just a couple clicks on the buttons and people can get back to what they were doing,” says Liu. “This is a huge change in user experience.
“It would sound cliché, but it feels really good when you wake up and knowing you are building businesses that actually adds values to people,” he adds.
China is making huge strides in cashless payments. Southeast Asia is very different. Each of its 11 countries has different needs, controls, different ways of doing business – and different currency. Copy-pasting China’s cashless model simply isn’t workable, says Liu, who likens his role linking the region to that of a digital railroad builder. “It’s hard,” he admits. “Multiple currencies and countries. You need rails to put up all that together. And EMQ are trying to be the bridge between all those countries and cross boarder transactions.”
Last year EMQ made a deal with Philippine company GCash to remit cash through the company’s app. Last month EMQ signed with FOMO Pay, Singapore’s leading QR code payment solution provider, to enable real-time international settlements from the city-state to China. Ethnic Chinese comprise 74.3% of Singapore’s near-6m population.
It’s another step in EMQ’s complicated, but potentially lucrative, steamroll across southeast Asia. Little wonder, then, that when asked for some advice for fellow fintech potentates, Liu says, without hesitation, “Really think through the business.
“Solve difficult problems,” he adds, prosaically. “That’s our direction.”