Fintech Advance.AI riding wave of buy-now pay-later online shopping

Singapore

LOCAL fintech Advance.AI has seen rising demand from younger shoppers in taking up instalment plans for online retail spending - a service it is selling to retailers now forced by the pandemic-linked measures to digitalise their sales.

With Covid-19 measures leading to physical stores being shuttered and people stuck at home, the fintech - which is part of a consortium gunning for a digital bank licence here - has seen a surge in demand for its buy-now pay-later checkout financing solution.

The service, launched by its consumer arm Atome Financial, aided a more than tripling in online transactions for its 500-odd merchants. Gross merchandise volume posted by the merchants it works with - a key metric in retail - has grown 11 times, even with the relatively subdued consumer spending in Singapore on the back of a deepening recession. Its service is now available at malls under Singapore's largest mall operator CapitaLand, such as Raffles City, Bugis Junction, Funan and Plaza Singapura.

Launched right before the Covid-19 outbreak, the buy-now pay-later solution is sold as helping merchants improve their sales conversion by splitting bills into instalments. It also helps consumers with cashflow management. No fees are charged to the consumers, but merchants are charged commissions.

It is not alone. Others such as hoolah and Rely are also offering pay-it-later services here.

Demand is up from retailers, said CEO and co-founder Jefferson Chen, as they "need all the help they can get" in their offline-to-online strategy, and in reaching younger shoppers. "This is true in usual circumstances but even more so as the retail sector makes a long, protracted recovery from the pandemic," he said.

He also pointed out that the buy-now pay-later service is particularly popular among Gen Z and millennials, who are "rightly concerned about jobs, career and the tension between spending and saving".

While its retail offering may seem poles apart from the fintech's original hunting ground in the banking sector, it is still essentially grounded in artificial intelligence (AI) technology.

What underpins the buy-now pay-later solution is its credit risk assessment, he noted. The technology can assess whether a customer will have good or bad payment behaviour by analysing a range of sources such as mobile phone type, data and roaming usage, past spending behaviour.

While Atome will receive payments from customers over time, the fintech pays the merchant the full price in three working days. "We need to be reasonably well capitalised to be able to support a large volume of transactions," he said. "Your risk assessment technology needs to be really accurate so that only the right customers with good payment behaviour are provided this financing and the business is sustainable."

The fintech, which is backed by well-known names such as Temasek's unit Pavilion Capital, GSR Ventures, Vision Plus Capital, Gaorong Capital and Provident Capital, is not looking to raise further rounds of funding this year, having last raised US$80 million last September. Mr Chen is also a partner in GSR Ventures.

Advance.AI started out working with the financial services sector, offering services such as its electronic know-your-customer (e-KYC), fraud detection and credit scoring solutions. It is now part of a consortium seeking a digital wholesale bank licence here, together with Sheng Ye Capital and Phillip Capital.

Mr Chen sees untapped opportunity in working with small and medium-sized enterprises (SMEs). "We felt that there are a lot of things you can do with AI and technology to better price the credit risk and provide more seamless end-to-end services for SMEs in Singapore," he said.

The fintech has experience with technology that can detect and understand granular data from multiple sources and feed it into a model that can standardise the process to price the risk for consumers and SMEs - something that traditional banks have difficulty doing, he said.

Since it started in 2016, the enterprise-solutions business has over 500 clients across the Asia Pacific, most of them banks and fintech players, said Mr Chen.

Last year, revenue more than quadrupled from a year ago, driven by a surge in application programming interface (API) call volumes as both their client pool and their clients' business grew. APIs are software intermediaries that allow two applications to "talk" to each other. In Advance.AI's case, clients will "call" for its solution through the API whenever there is new customer onboarding or credit scoring needed.

The fintech intends to invest more in its research and development capabilities, as well as to hire more engineers and data scientists.

Mr Chen does not have specific targets, but estimated that the investments - including the hiring of staff - amount to "tens of millions" of dollars annually. The company has more than 1,000 employees to date.