Malaysian entrepreneur Joel Neoh co-founded a deals and vouchers marketplace platform called GroupsMore in Kuala Lumpur in 2011 before it was acquired by Groupon in the same year. Neoh then headed Groupon’s Asia Pacific business until 2015, but left the company to start fitness platform KFit. Realizing that his new venture didn’t have the right business model to become profitable, Neoh went on to acquire Groupon’s Malaysia, Singapore, and Indonesia operations, rebranding the app as Fave in 2016.
Today, Fave still distributes coupons for merchants and issues cashback rewards to customers, but it is also tapping into new verticals such as financial services. Its mobile payment service, FavePay, has so far done well, it is listed among the five most actively used e-wallet platforms in both Singapore and Malaysia, according to a recent iPrice ranking. In September 2018, the firm raised USD 20 million from undisclosed investors, bringing the company’s total funding to USD 32 million, according to Crunchbase.
KrASIA recently talked to Joel Neoh about his journey with Fave and how he is transforming a voucher deals platform into a “merchant super-app”.
KrASIA (Kr): What is a merchant super-app? How is Fave supporting merchants with its platform?
Joel Neoh (JN): There has been tremendous progress in the past few years on the consumer side with the digitization of payments, e-commerce, and so forth, and therefore, the merchants have to go through similar digital transformations in order to serve these consumers. While we offer a variety of voucher deals to customers, we provide merchants with a digital platform called FaveBiz to grow their business. It allows them to accept payments, create marketing campaigns, acquire new customers, and digitize operations. Moreover, we’re also starting to provide budget financing by partnering with banks and financial institutions that will use Fave and merchants’ data like transaction volumes and returning customers to assess their credit scores. These are the things that we want to focus going forward: helping merchants grow their business with comprehensive tools and services.
We work very well in high-density areas. If you go to Singapore, you’ll see that one of every four restaurants or retailers would be using Fave. We have around 35,000 merchants across three markets, and we have close to five million downloads now, with 70% of users regularly using the platform every month. Fave has helped SMEs to grow their revenue by over USD 300 million this year
Kr: In June this year, Fave launched a microloan pilot for SMEs, what has the progress been like so far?
JN: The pilot has been pretty good, 45% of our merchants in Malaysia and Singapore already have pre-approved loans from the financial institutions that we are working with, amounting to USD 100 million altogether. The pilot is taking longer because we have partnered with five financial institutions so far, and there’s compliance involved to get them on board so we need to make sure that our products and services comply with regulations. We are now working on the withdrawal process, and we want to make sure that it’s easy for merchants to do it. Right now, we do a lot of lending based on payments data. The pilot is currently in Singapore and Malaysia, and we aim to bring this service into Indonesia next year.
Kr: Fave launched new services like Fave Takeaway in Singapore and a partnership with PayNet in Malaysia to adopt DuitNow QR. What is the adoption rate for these two services?
JN: Fave Takeaway is only launched in Singapore, predominantly. We have a few merchants in Malaysia too, but Singapore is the strongest market for this. We focus on localization when launching a new product, and we see that restaurants in Singapore have the dual challenges of increasing cost of operations and hiring staff.
The feature allows customers to order meals in restaurant partners on the go, make payments with FavePay, and pick it up at the restaurant, all through the FavePay app. The Takeaway product has been quite successful as hundreds of merchants have adopted this service to reduce cost and increase productivity.
Meanwhile, we are the first merchant platform to adopt standardized QR codes in Malaysia, meaning you can use FavePay in over 15,000 places with DuitNow QR. I think this is a very good initiative by the central bank since mobile payments are really growing. The standardized QR really helps merchants to adopt digital payments easily, and it definitely helps us as well, because the challenge to approach a merchant today is that they might be reluctant to accept another payment platform as they already have multiple QR codes from different payments portals.
Kr: How do you view the difference in consumer behavior in Singapore, Malaysia, and Indonesia?
JN: In every country, there are three different groups. The first group is the banked population, the second group is underbanked, and the third group is unbanked. Indonesia has a larger segment of unbanked people compared to the other two markets, meanwhile, debit and credits cards have been adopted widely in Singapore and Malaysia. In terms of cashless advance, these two countries are more advanced. I think the more consumers adopt cashless payments, the more reasons for merchants to do so, and therefore our payment platform works very well in these two markets.
Singapore is the fastest-growing market for us because the consumers are ready, so we can focus to solve the problems from the merchants’ side, whereas Indonesia is taking a bit longer for us to penetrate because there’s still a big segment of society relying heavily on cash. We hope to see more consumers adopt cashless payments in the next couple of years so that we can also work with more merchants to provide value-added services in Indonesia.
Kr: What is your path to profitability?
JN: We are yet to be profitable, but we have a clear map to profitability and sustainability. In terms of the unit economics of every transaction, we have quite a high margin. Right now, we are investing a lot in the product and tech, because as we try to help partners market their businesses to grow, we need to develop different types of solutions.
We make money in three ways. First is through payment volume—there’s a small fee we charge merchants for every transaction. Second is that we help them get new customers, and retain the existing customers through vouchers and cashback rewards, and we take a commission in providing this service. Third is through financing, as we help to connect financial institutions with SMEs, we take a cut by facilitating lending.
Kr: What’s the biggest lesson you have learned from pivoting your business? What do entrepreneurs need to consider and do before deciding to change the direction of their business?
JN: The toughest part is the time before making a decision. At that point, there are a lot of discussions, speaking with customers, merchants, and team members, looking at data, and so on. Once that analysis is done and the decision is made, then the execution becomes more straightforward. There’s always good and bad in every pivot, so coming to the decision is probably the toughest. What we have learned is that when something’s not working, we have to address that problem quickly because the slower and the longer you sit on a decision, the worse it becomes, and you’ll have less motivation to move on. So, it is all about evolving quickly.
There are two steps you need to go through before making such a decision. First is an internal review where you talk to team members to figure out whether they have the relevant skills to pivot the business and the motivation to do it. You also need to discuss with investors and make sure that they are supportive of this decision. The second step is an external review where you talk to customers and merchants, to really understand whether there’s a need to pivot, and if the pivot is going to help them in the long run.
Kr: Please tell us about your plans going forward.
JN: We’ll have one or two more products for merchants next year. We also plan to enter new markets in Southeast Asia. We’re still discussing this with partners, but, certainly, we’ll enter a market where cashless adoption is growing consistently. We’re also currently fundraising and plan to close the deal sometime in the early part of next year. At this stage, it is important to find the right partners, so we’re taking our time to ensure that we get the right investors on board.
The interview has been edited for length and clarity.