Among sectors with post-COVID tailwinds, a number of ASX-listed fintechs have become investor favourites over the past 12 months.

While BNPL (buy now, pay later) has the highest profile, there are now multiple competitors building out their business models across B2B payments, consumer finance and investing.

In view of that, assessing which companies have the capacity to stand out means cutting through the noise to look for unique attributes that provide a durable competitive advantage.

To help, Stockhead caught up this week Terence Clee, who’s had a front row seat to some of the latest activity in the space in his role as an advisor to several ASX fintechs.

A lawyer by trade, Clee has also been working in capital markets for the last 10 years and in 2020, he struck out on his own with the launch of Clee Capital.

As a corporate advisor, one of Clee’s big wins in the sector is Malaysia-based BNPL platform IOUpay (ASX:IOU).

With the company laying its platform for growth last year, Clee got clients involved in the business when it was trading at just 1.5c per share.

Skip forward to February this year, and with momentum building IOUpay closed a huge $50m share placement at 50c per share – representing a gain of more than 3,000 per cent from June 2020 trading levels.

A key part of IOUpay’s value proposition is that it has boots on the ground in its core Malaysian market, where key members of its executive team are leveraging their long-term client relationships in the local banking and finance sector

To Clee, that kind of competitive advantage will be crucial as the sector matures.

“We spotted an opportunity in BNPL, but in my view there’s just too many players in the market,” he told Stockhead.

“The sector needs to consolidate. Some companies are doing great things but some aren’t doing much at all.”

“I think the big guys like Afterpay (ASX:APT) will continue to do well. It’s the mid-tier guys in no man’s land with high valuations that aren’t really doing anything – that’s where the risk is.

Clee contrasted that against IOUpay, which he says has a “unique selling proposition in south-east Asia”.

Clee said it’s a similar story for Peppermint Innovation (ASX:PIL), the multi-channel payments platform operating in its core target market of the Philippines.

PIL relisted on the ASX in February and is currently trading above 4c per share, after Clee Capital advised on an off-market $2.5m share placement in December priced at 1c.

And more broadly, Clee said south-east Asia represents a huge addressable market for ASX fintechs in the years ahead.

Taken in aggregate, the six largest companies in the region have a combined population of almost 600 million people.

In addition, research from consultant group Bain shows banking rates in the region are still only at 50 per cent, compared to around 95 per cent for the US and UK.

With an addressable market of around 300m underbanked consumers, digital services in the region are forecast to generate at least $US38bn in annual revenues by 2025.

“It’s a huge market, so as an investor you have to ask – who’s really establishing a dominant market footprint there?”, Clee says.

“If you take a company like IOUpay, they’ve got a razor sharp focus on that (Malaysian) market and that’s where you’ve got to have something like actual connections on the ground.”

And after showing the ‘Midas touch’ with some of its recent fintech investments, Clee Capital is focused on more sector opportunities in the months and years ahead.
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