Neat secures funding from PCG, Visa, MassMutual amid pandemic

April 17, 2020 12:26
CEO David Rosa (left) and CTO Igor Wos (right) cofounded Neat with an aim to enable the entrepreneur economy. Photo: Neat  Photo: Neat

Neat, a FinTech startup offering financial solutions to SMEs and startups, announced last week its US$11 million Series A funding round, led by Pacific Century Group (PCG), the investment business of billionaire Richard Li, with participation from Visa, and MassMutual Ventures Southeast Asia, among others.

Despite the coronavirus downturn, the Hong Kong-based FinTech company has recently opened a new office in London to kick off business in Western Europe, with plans to continue its international expansion with the fresh funding.

"This capital injection is going to power our growth in enabling young SMEs to operate smoothly between Europe and Asia," David Rosa, CEO and co-founder of Neat, told EJ Insight in an exclusive interview.

Targeting individuals and SMEs that have often been neglected by big banks, Neat's flagship product is its fully digital multi-currency accounts that can be opened online, a process that takes about 15 minutes. The service enables users to send and receive money globally at competitive exchange rates. Other capabilities include access to Neat corporate expense cards, expense tracking and security features.

Opening a business account for SMEs is Neat's step one, according to the firm. In the long run, Neat aims to make international trade nearly frictionless, by not only offering a way for customers to move money, but also making use of a wide ecosystem of tools that automates their business processes such as payroll, accounting, logistics, among others.

Rosa also hinted at Neat's new product offerings in the insurance field, with the support of the new heavyweight investors like PCG and MassMutual.

Following is an edited excerpt of the interview:

EJ Insight: What is Neat's expansion plan with the new US$11 million Series A funding round?

Rosa: Our mission statement is to enable the entrepreneur economy, and what it means is that we are making it easier for international businesses, particularly the B2B exporting type of business to conduct their own business across the different geographies. This is a pain point that has been there for a long, long time, because banks will not necessarily find it interesting to have these businesses as customers because they just don't make enough money for them.

I've been living in Hong Kong for 19 years, and I'm originally from Europe. We have very strong connections on both ends of the spectrum. The initial corridor [of businesses] clearly has been Europe to China. 60 percent of our customer base is originally from Europe. This is a customer base that basically does business with Asia, even in an environment where Europe is clearly very badly affected by the coronavirus. But then what we're seeing is that there's a lot more business to be done also with Southeast Asia.

Q: After opening an office in Shenzhen in 2019 targeting Chinese exporters, Neat has just opened a new office in London, what's the purpose of the London office, considering the backdrop of Brexit and the coronavirus downturn?

A: This is really a very extraordinary type of environment. But it's not put to a halt, at least so far, to the world of money moving around the world. If you look at the main centers in the world, where money is being transacted, London clearly continues to be a major financial center in the world.

I think one very big misconception, that I think people have misjudged, is the outcome of Brexit. The reality is that London is an offshore financial center, people don't realize that London is like Hong Kong, like Singapore. You don't need to be a UK resident to have an account in London to do business in London; the whole world is welcome to do business in London. So, the moment you look at London from that perspective, it becomes very strategically interesting.

Q: What is the business size of Neat?

A: We don't disclose these numbers, but let me give you an idea of the mix of the customers. So, three quarters of our customers are what we call B2B exporters. And this is something that we find very interesting as a space.

Q: What is the implication of Neat's latest funding round, in the midst of this pandemic?

A: I think it is more of our investors that want to make a message that basically, even in an environment like this, they nevertheless went ahead and invested in our business. Because they see the strategic importance of a purely digital solution to help other young companies, there is a complete gap in the market, and the pain point is so strong.

Times like this reinforce our solution actually as it is accelerating this need for digital services. People cannot travel to Hong Kong, they cannot go and meet the bank if they want to open a bank account. So they need a solution that's digital, and we're the only ones providing this type of solution to small businesses.

Q: As the press release suggested Neat would pursue relevant regulatory licences around the world; would you consider to apply for a virtual banking license in Hong Kong in the future?

A: Never say never, but it's been very clear that the virtual banking licenses are reserved for very large groups. I mean it's obvious right? [For] each licensee out there, all of them are very large.

We're going to be very clear: we are not a bank, and we have no aspiration, at least in the short and medium term, to become a bank. What we're more interested in doing is actually solving problems for this type of customer base. Let me give you some examples.

The first point is that they hate to deal with the bank, because sometimes they cannot even open a bank account. So this to us is the starting point. Once you have that, you can add a lot of services.

For example, we help companies incorporate in Hong Kong. We help with the accounting system integration. So, all the money coming in or going out of an account is automatically pushed to your accounting system. As a small company, you don't need to waste any more time doing any bookkeeping -- we automate that for you.

We are now working on integrations for automatic filing and refunding of taxes. For example when you're exporting to Europe, the VAT is a very very painful topic to deal with. This has nothing to do with payments or banking, it's got to do with taxes. And it's very fascinating to me to continue to develop the platform to help these customers, because there are many, many pain points.

So, [applying for a virtual banking license] doesn't make any sense for us right now. Never say never, but frankly I don't see it in the short term.

Q: With heavyweights like PCG, Visa, and MassMutual on board, what would be the synergy or collaboration that we can expect? Would it be related to the insurance field?

A: Yes, that is the answer you can tell, with the new investors in the insurance space, so yes, absolutely, that's definitely on the cards, but today I'm afraid I'm not at the liberty of talking about that just yet. With both PCG, MassMutual, as well as Visa, we have a strategic commercial plan on the back of the investments. There is a lot to come.

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EJ Insight writer