Deal focus: Fave wins endorsement for ecosystem pivot

When 500 Startups backed Malaysia-based Fave in 2005, it wanted to support expansion of the company’s nascent online-to-offline (O2O) services and mobile payments platform. But the landscape has since changed, forcing Fave to change with it.

“Southeast Asia's digital economy is dominated by a multitude of apps offering rebates, rewards, reservations, and payments. Merchants have too many options. These single-solutions make costs higher for merchants and they are hard to integrate with functions like financing and marketing,” says Khailee Ng, a managing partner at 500 Startups.

Fave is now an ecosystem player offering digital integration services. More than 35,000 small and medium-sized enterprises (SMEs) have signed up to its marketing, data, financing and operations suite. There is also a big data and analytics business as well as a microlending platform, which helps SMEs secure pre-approved loans based on their payments data.

Services can be tailored to meet the needs of individual merchants, but collectively they amount to a significant presence. “Fave serves as a fintech aggregator for the most popular cards and e-wallets helping fully digitalized payment acceptance. Merchants can focus on what they do best for their customers because Fave takes care of everything else," says Ng. 

This is not the company’s first pivot: it initially ran a gym membership app called KFit and then branched into Groupon-style promotions and loyalty programs, snapping up Groupon’s Malaysia, Indonesia and Singapore operations in the process. “The big picture was O2O. The team that founded and led Fave had the most O2O experience in the region,” says Ng.

However, the current business model seems likely to stick. Indeed, it has arguably vindicated through a recent investment by Pine Labs, an India-based point-of-sale (POS) technology start-up.

Fave has already raised more than $35 million across three funding rounds, with Venturra Capital, SIG Asia, Global Founders Capital, and Sequoia Capital India among its backers. Sequoia is the common denominator in the latest investment, having joined MasterCard and PayPal in a round for Pine Labs earlier this year.

As a result of this transaction, Fave’s QR code system will becoming interoperable with Pine Labs' POS terminals in Southeast Asia. Meanwhile, Fave’s merchant payment acceptance and loyalty cashback services will expand into debit and credit cards platforms via Pine Labs terminals. The goal is to offer a more comprehensive and streamlined service to the 50,000 SMEs that use both platforms. For example, data consolidation will lead to better analysis.

“Once you have depth in the merchant stack, it’s the foundation of many strong business models,” says Ng.

All this is taking place against a backdrop of rapidly rising demand. The most recent Southeast Asia digital economy report released by Google, Temasek Holdings, and Bain & Company describes digital financial services as having “reached an inflection point” in the region. Digital payment is expected to hit $1.1 billion by 2025, up from $600 billion in 2019, and account for $1 out of every $2 spent.

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• Topics
• Expansion
• Technology
• Southeast Asia
• TMT
• Malaysia
• 500 Startups
• Sequoia Capital