Digital payment startup Fazz aims to triple the number of businesses using its platform annually in Indonesia and Singapore, the company’s CEO told Nikkei Asia.
Fazz, previously known as Fazz Financial Group, offers integrated services including payments, savings and credit to improve management for the region’s small and mid-sized businesses, including Indonesia’s small, daily goods shops known locally as warung.
More than 300,000 businesses are currently using Fazz for payments, with 12 million customers across Singapore and Indonesia.
But CEO Hendra Kwik, whose family runs a cloth business in Jambi on the Indonesian island of Sumatra, sees potential for more growth.
“Assuming that 25% of these small-medium businesses will go digital, I think that’s the total market that we can address,” he said in a recent interview.
Kwik acknowledged what he called “a very long-term play” to sign up all small and mid-sized businesses. But he said, “We are optimistic that we can start to grow healthily. Typically, we grow two to three times every year [as regards number of users].”
Most of the businesses still spend too much time on paperwork, an inefficiency that hampers growth. In addition, limited access to capital makes it difficult for many of the companies to grow.
“There’s also a huge funding gap [of USD 300 billion] between what the small-medium business needs versus what the bank can provide,” Kwik said.
Kwik also said that obtaining financing is particularly difficult for businesses in small Indonesian towns. “If [a] bank doesn’t exist in the location of the small business, typically underwriting cannot happen,” he said, adding that investing in technology can bridge the gap.
Kwik said Fazz can assist businesses to become creditworthy by helping with payments and savings. “Through payment behaviors and saving behaviors, we try to identify creditworthiness,” he said. “Combined with the software elements that allow us to understand [the businesses] better, we match them with banks who [will] finally be convinced to underwrite capital to them,” he said. That, he added, “is how you make sure that they are safe and not risky.”
Fazz utilizes artificial intelligence-based machine learning to understand user behavior. “This endless learning will help banks to trust us more to underwrite capital to small businesses,” he said.
Indonesia is a hotbed of increasing competition in the digital finance sector. Fazz rival Bukalapak boasts its Mitra business, which focuses on helping warung operators to digitalize operations. But Kwik says all businesses are not the same.
It’s “different things, the way we compare ourselves with them,” he said, citing how Bukalapak allows warungs to purchase items via e-commerce, while Fazz is more focused on payment, savings and offering credit.
In the wake of the Ukraine war, the world is battling inflation due largely to increased food and energy prices. Asked about the impact of rising prices on Fazz, Kwik said: “We see it as an opportunity because to be able to survive this crisis, these small-medium businesses need to run their business more effectively. So the software that we provide is going to be useful as well.”
In September, Fazz received USD 100 million in funding from investors, including hedge fund Tiger Global. Kwik said the fresh funds will be spent to further develop new features for Fazz’s platform.
Besides payment functions, Kwik plans to add features such as inventory management software and tools for tracking billing and expenses. “Our philosophy is that we want to help these small-medium businesses to build, run and grow,” he said.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.