Hit “checkout” when purchasing online and your phone pings with an SMS confirming your credit card expense. This simple yet secure mode of authentication has remained in use for more than a decade — a testament to its efficacy.
However, this crucial technology was licensed to a bank for the nominal sum of THB1.00 (4.2 cents), according to its developer, Aung Kyaw Moe, who also founded payments platform 2C2P.
In 2003, after he quit from a mobile games company in Bangkok, a contact from a Thai bank reached out and asked if he could develop software to authenticate cardholders, as the bank was already considering forking out a sum for a licence from a foreign company.
“I was like, ‘Okay, I think I can develop it.’ So, I downloaded the 3D Secure security protocol specification and started punching the keyboard day and night. Eventually, I got a solution certified by Visa and MasterCard,” says Aung, who hails from Myanmar.
When he returned to the bank, however, Aung found that his youth and that of his company worked against him when it came to getting paid. “They told me that it is the standard policy for the bank to work with companies older than two years, and it would be difficult to put the software inside their demilitarized zone (DMZ) [or a walled garden] as it was developed by a 26-year-old programmer from an underdeveloped nation.”
It took some convincing, but eventually, the bank agreed to put it up, but only if Aung gave it away for free. “I asked, ‘Can we at least invoice the bank?’” The bank accepted and that was how he licensed his first solution for a single baht.
The reluctant entrepreneur
Over an interview with The Edge Singapore, Aung tells the story of a reluctant entrepreneur. “18 years ago, I started the company five days after my son was born,” says Aung. “I started the company without any knowledge of payments or business. I was very naive, like a blind man who was not afraid of ghosts.”
Aung: Cash is still king but we still see it as an inefficient payment mode (Photo: 2C2P)
Armed only with his experience as a computer programmer in Bangkok, the Myanmar-born Aung started 2C2P as a way to support his family, especially with a newborn in tow. “I thought it would be better than continuing to work in a company, which is a ridiculous excuse if you look back in time. Fortunately, it turned out to be one of the best decisions I’ve made.”
The story of the one-baht software also ended on a happy note. “Eventually, the banker informed other banks in Thailand that this solution is viable to secure their cardholders’ [transactions],” says Aung.
Today, 2C2P’s 3D Secure authentication technology is employed by over 80% of card-issuing banking institutions across Thailand and Southeast Asia. “To date, we have licensed the solution that I wrote 18 years ago to about 40 banks across the region, including UOB in Singapore and every local bank in Thailand,” he claims.
2C2P has also grown into a full-suite payments platform helping businesses securely accept payments across online, mobile and offline channels, as well as providing issuing, payout, remittance and digital goods services.
2C2P accepts over 250 payment methods and has an alternative payments network that extends to over 400,000 locations across Asia. It provides customisable payment features such as card authentication, instalment payment options and currency converters.
The name, which stands for card and cash payment processor, is one of the earliest entrants in the payments field.
But even after years at the top, Aung still wishes he can dedicate all his time to coding. “Every time I meet my tech team or my CTO, I always tell them, ‘I’m very jealous [of your role].”
Aung’s technical know-how helps him run a tight ship at 2C2P. “I am more of a tech founder than a business founder. Because of that, I am still involved with my product design team,” he says. “As soon as they give me the wrong indication of a timeline for a specific function we want, I stare into their eyes and they know that they can’t bullshit their way around.”
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But running a regional business is vastly different from being a programming whiz. “In 2006, I realised I needed to talk the talk of a founder. I needed to talk about ebitda, revenue, gross profit and all of that stuff. So, I went to train myself to understand this side of the business,” says Aung. He enrolled for a Master of Business Administration at the Sasin Graduate Institute of Business Administration of Chulalongkorn University, “one of the leading business schools in Thailand”, and received his MBA two years later.
“In hindsight, it was a very good decision ... I met one of the professors, his name is Douglas Abrams. He was running an incubator in Singapore [and] he recommended that I set up this regional payments company in Singapore,” recounts Aung. “So, I landed in Singapore, received about $50,000 in grant money from various Singapore government organisations and became one of the first occupants of Block71,” says Aung.
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“I am glad that I have some sense of how technology or a product develops. I combine that with my business experience from my MBA and all the experience I have accumulated along the way, in all the false starts and all the suffering.”
Silver linings
The pandemic has accelerated the adoption of digital payments as convenience and technology have relegated cash to the sidelines. According to a McKinsey report, emerging markets in Asia have reported a 60% increase in contactless payments, double initial estimates. Paperless B2B payment flows, meanwhile, grew eightfold.
“Cash is still king but we still see it as an inefficient payment mode,” says Aung. “In developing economies like Thailand, Indonesia, Vietnam and the Philippines; you still see cash on delivery every time someone orders products. But usage of cash has lessened over time.”
With more players looking to cash in on the push for digitalisation, the process is exposing structural gaps in the Asian payments industry, including barriers such as fragmentation and limited digitalisation across different Southeast Asian countries. “If you look back about 10 years ago, you will see the evolution of the wallet. In every single country, every large enterprise wants to launch their own wallets,” says Aung. “I don’t want to name names, but there are so many wallets around the region till today.”
“The more payment options we have across the region, the more inefficiency we will see,” he warns. “That is one of the problems we are solving by aggregating these payment methods, from kiosk payment to credit card payments.”
India, in particular, oversaw a smooth convergence, says Aung, adding that the country accomplished this with three main policies.
Firstly, they developed a domestic solution: a unified payment interface. They even allowed foreign entities like Google Pay to adopt the open platform.
Secondly, India got rid of its large banknotes. In November 2016, India’s demonetisation removed all 500 and 1,000 rupee banknotes — or 86% of its cash in circulation — in a bid to curtail what Prime Minister Narendra Modi called the “shadow economy”. “From a regulation point of view, this is very important,” says Aung.
Finally, they changed the economic cost structure of using this new technology. “Basically, they set how much banks can charge for different types of transactions, or the merchant category code (MCC). Based on the MCC, they regulate the fees applicable for each transaction. That switched the behaviour of both the consumer and the company,” says Aung.
Paying it forward
In April 2020, 2C2P set up investment arm 2C2P.VC to make strategic investments in payments and related sectors. Through partnerships and investments in complementary businesses, the investor hopes to accelerate the growth of its omnichannel payments platform in Southeast Asia and beyond.
“Our venture arm plans to invest in startups that are aligned with our corporate strategy. We have a very active deal flow currently,” says Aung, adding that he hopes to provide an update with deals closed by end of the year.
2C2P is expanding outside of Asia next, and into Europe and the Middle East. In November 2019, the company raised US$52 million ($70 million) from investors including the World Bank’s International Finance Corp, Cento Ventures and Arbor Ventures to fund this expansion. “We have our European team exploring the opportunity there. But because of the limitation on flights, we will have to slow down a little bit. But that ambition remains unchanged,” says Aung.
2C2P is also brewing a “serious IPO ambition”, says Aung. “We are looking at possible pre-IPO fundraising, but at the moment we don’t have any clear indication yet. We are looking at all the possible exchanges; it could be beyond Southeast Asia. It really depends on the market and our advisers, how and where they want us to go public.”
Photo: 2C2P
