WHEN travellers seek refunds for value-added tax (VAT) or goods and services tax (GST) with travel rewards platform UTU, they can get up to 25 per cent more in value, thanks to the mobile app's partnerships.
In Europe - where about 70 per cent of the world's VAT refund business is conducted - about 40 per cent of tax refunds are taken as fees, such that travellers only get 60 per cent back, said UTU chief executive officer Asad Jumabhoy.
UTU works with tax refunding agencies and travel partners to give more back to travellers: not in cash, but in the form of points within hotel or airline loyalty programmes.
"Points and rewards are a collaborative effort to promote brands and, in our case, tourist shopping," said Jumabhoy. "We work with loyalty partners so that they have the opportunity to keep their customers more 'sticky' to them."
Asked who foots the bill for the additional rewards, Jumabhoy would not give details, instead saying: "(It is) not a matter of cost assignment, but more of an understanding of how to promote the interests of various parties in a joint mode within a shared cost model."
In its first 11 months of seeking partners, UTU has added 10 airline loyalty programmes, including Singapore Airlines' Krisflyer, Qatar Airways, Emirates Skywards, Thai Airways, Vietnam Airline's Lotusmiles, and Flying Blue, a loyalty programme that includes Air France and KLM. It has also added its first hotel partner, Accor, which has more than 5,000 hotels.
In the first quarter of 2023, UTU plans to work with retailers to offer rewards too. Added Jumabhoy: "We are looking to onboard more airlines, hotel groups, and retail groups as we go along."
To explain the UTU rewards structure, he gave the example of a traveller who would originally have received a tax refund of S$100, after deducting the refunding agency's fees. Using UTU's app, however, they can get up to 25 per cent more in airline or hotel rewards points.
To collect this, travellers must link an existing credit card to the utu Tax Free app, which generates a virtual UTU Visa credit card. They use this UTU card number when going through the usual tax refund claim process. UTU collects this S$100 refund, then gives travellers the equivalent of S$125 in airline or hotel rewards points.
In about 70 per cent of the markets where UTU operates, customers can choose to get the refund credited to their own credit card, instead of receiving points. In this case, they get an additional 5 per cent - which would mean S$105 in credit, extending the example.
UTU currently offers such upsized refunds to travellers in 50 countries that offer VAT or GST refunds.
Toughing out the pandemic
UTU started work in 2016, building and beta-testing a rewards platform in Thailand. It launched its first app, utu Rewards Thailand, in 2017. After that, it started developing a cross-border rewards platform that could "upsize" tax refunds with rewards.
"We started in Thailand because it is a big VAT refund centre and also a big tourist centre," said Jumabhoy. "Here, we wanted to get the concept and quality right."
"We looked at VAT refunding as part of the rewards industry, where governments actually reward you for shopping in the country," he added. The next step was to build a VAT refund platform, integrated with their rewards platform, which UTU completed around December 2019.
But luck was not on their side. After completing the platform and doing a successful beta test for about a month in Italy, they were about to launch worldwide - and then Covid-19 hit.
After the pandemic began, UTU had little to no commercial activity, up until this year. It was only when border restrictions started easing in the second quarter of 2022 that the company had the confidence to restart marketing campaigns and app promotions, Jumabhoy said.
"Now what we are seeing is a healthy resurgence in flight travel and overseas shopping. And as airlines are scrambling to get more aircrafts flying, we are a beneficiary of that process," he noted.
The company has about 60 staff, including about 20 in its Singapore head office. Even though the business was reliant on travel, the company did not lay off any staff during the Covid-affected period. Instead, it used the time to come up with ideas and build a better platform, Jumabhoy said.
"Everybody was involved in one way or the other in a productive capacity, and I think that was really important for people's sense of belonging and keeping the intellectual capital of the company in-house," he added.