THE PITCH

Fave sets sight on merchants as rivals grow

THE PITCH

Fave sets sight on merchants as rivals grow

5 -min read
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Retail rewards and payment startup launches pilot to help SMEs obtain micro-loans from financial institutions
5 -min read
Listen to this article

Singapore

IN the crowded space of mobile rewards and payment platforms, Singapore-based Fave is going hard after the merchants to set itself apart.

Fave's latest move has taken it into the margins of financial services, with an exploratory pilot to help small and medium enterprises (SMEs) obtain micro-loans from financial institutions.

"There are all these consumer super-apps, but then, actually we are like a merchant super-app platform," Fave's chief executive Joel Neoh told The Business Times.

"Whatever we can create to help merchants ... payments services, coupon services and financial services, it's just stacking different services for different merchants. We're not just trying to randomly do different things because of the trend."

Fave is commonly seen as a rebranded version of the US group deals platform Groupon. That is because after its launch in 2017, Fave acquired the Singapore, Malaysia and Indonesia units of Groupon.

Mr Neoh himself was the founder of Fave Malaysia (originally GroupsMore) and previously led Groupon's Asia-Pacific business.

Fave today counts more 25,000 merchants on its platform in Singapore, Malaysia and Indonesia, where the company had acquired the units of Groupon.

Fave distributes coupons for the merchants, while rewarding customers with cashback.

In September 2018, Fave raised US$20 million in Series B funds from existing investors Sequoia Capital India, SIG Asia Investments and venture capital firm Venturra Capital, which is backed by Indonesia's Lippo Group.

Fave could also explore fund-raising opportunities in the second half of this year, Mr Neoh said.

However, according to him, this would be for strategic reasons and not "needs-based".

"We don't mean to do a round this year, but there are quite a few strategic investors who are keen and feel it's a good fit; therefore, we are open to explore."

Strong investor backing helps in the cut-throat arena in which Fave battles for market share, with competing rewards platforms like ShopBack and RebateMango operating on similar business models.

The startup's recent moves reflect efforts to differentiate itself.

Under the new SME pilot, Fave is working with the merchants to compile operating data that can be used by potential lenders to assess their creditworthiness.

Fave's data include metrics such as transaction volume and returning customers, which a traditional mamak restaurant in Malaysia, for instance, may not have the capacity to compile, Mr Neoh said.

"We see that we've got a lot of data on our merchants, and we can use that data to create credit-score formats that could help bridge the gap with banks and financial institutions to lend to SMEs. That's an ongoing effort. We don't intend to be a bank, but we intend to work with them to provide access for SMEs," Mr Neoh said.

Beyond helping with data, Fave could also facilitate repayment schemes where lenders are paid out directly from a borrower's sales transactions, he said.

For instance, out of a S$10 payment made to the merchant via Fave, S$2 could be put aside to repay the lender before the merchant is able to spend it on other purposes.

For its role in facilitating credit scoring and repayment collection, Fave expects to earn revenue via fee-sharing arrangements with the lenders that are unique to each loan, Mr Neoh said.

But he also emphasised that the pilot is still exploratory, and may differ from the eventual moves Fave makes. "We are more conservative, we are always around incubating the service first, making sure we can get it right."

The financing facilitation pilot will add to a suite of products aimed at making life easier for the merchants.

In May, Fave added a table ordering service to its app - enabled by its acquisitions of startups CutQ and Foodtime - that lets restaurants save on manpower since patrons can order directly from the app instead of from service staff.

The company says that its FavePay payments service, which can be linked to credit and debit cards or Grab's wallet, is able to aggregate volumes from some 25,000 SMEs on the network to get bulk discounts on transaction fees from the third-party card and wallet operators; those bulk discounts are then passed on to FavePay merchants, who pay a flat fee to Fave.

Beyond that, there is also the proposition of building consumer loyalty through Fave's cashback component. The cashback feature is funded by the merchant, and unlike some of Fave's competitors, can only be used again at that specific merchant. Cashback rewards also cannot be cashed out.

Whether Fave can top stiff competition in both the rewards and e-payments scene remains to be seen. But Mr Neoh thinks that the merchant focus will be a differentiator. "Our principle is merchant-first; whatever can help them save costs will be of interest to us."


Fave at a glance:

  • Co-founder and CEO: Joel Neoh, founder of Groupon Malaysia and former international vice-president of Groupon Asia-Pacific
  • Business: Deals and rewards platform
  • HQ: Singapore
  • Backers: Sequoia Capital India, SIG Asia Investments and Venturra Capital (Series B, 2018); Sequoia, Venturra, SIG, Axiata Digital Innovation Fund, 500 Startups (Series A, 2016, under KFit, which Mr Neoh founded before Fave); Sequoia (Seed, 2015, under KFit)
  • Rounds: US$20 million (Series B); US$12 million (Series A); US$3.25 million (Seed)