Payfazz invests $30M in Xfers as the two Southeast Asian fintechs form Fazz Financial Group

Payfazz and Xfers, two startups that want to increase financial inclusion in Southeast Asia, announced today they have joined forces to create a new holding entity called Fazz Financial Group. As part of the deal, Payfazz, an agent-based financial services network in Indonesia, invested $30 million into payments infrastructure provider Xfers.

Based in Singapore, Xfers will serve as the B2B and Southeast Asia arm of Fazz Financial Group, while Payfazz, which already uses Xfers’ payments infrastructure, will continue expanding in Indonesia. The two companies will retain their names while working together under the new holding entity.

Both Payfazz and Xfers are Y Combinator alums, and want to make financial services accessible to more Southeast Asians, even if they don’t have a bank account. Xfers co-founder Tianwei Liu told TechCrunch in an email he and Payfazz co-founder Hendra Kwik began talking about joining forces in early 2020 because of their startups’ shared goals.

“This is also coupled with the fact that last year, the COVID-19 pandemic has driven a significant increase in demand for digital payments and financial services across Indonesian rural areas, creating a huge growth opportunity for us,” Liu added.

Kwik will serve as Fazz Financial Group’s group CEO, while Liu will be the financial entity’s deputy CEO. Both will continue serving as CEOs of their respective companies. Fazz Financial Group also appointed as its chief financial officer Robert Polana, who previously held the same role at booking platform Tiket.com.

In Indonesia, Payfazz has built a network of 250,000 financial agents to reach people in rural areas where many banks don’t operate branches. Customers deposit cash with agents, and that balance can used to pay phone, electricity and other bills.

Payfazz, which announced a $53 million Series B in July from investors including Tiger Global and Y Combinator, also offers loans and payment services for offline retailers. As part of Fazz Financial Group, it will continue to build its agent banking network.

Payfazz uses payment infrastructure developed by Xfers to accept digital payments. Originally launched six years ago with an API for bank transfers, Xfers has since expanded its portfolio of software to include payment acceptance for businesses, tools for disbursing and transferring funds and a cryptocurrency wallet. In 2020, Xfers obtained a Major Payment Institution license for e-money issuance from the Monetary Authority of Singapore.

Xfers will continue to serve clients in Indonesia and Singapore with its payments infrastructure, which enables them to accept bank transfers, e-wallet funds and payments through convenience stores and agent banking networks (like Payfazz). Xfers says it has access to more than 10 million underbanked consumers in Indonesia through its work with agent banking services, and also plans to expand into Thailand, the Philippines, Malaysia and Vietnam.

Fazz Financial Group plans to launch two new products later this year: a zero-integration payment solution for Singapore-based merchants and a single-integration solution that will connect local payment methods across Southeast Asia.

Liu said that, unlike the United States, Southeast Asia “has a fragmented local payments landscape, even within each country,” meaning that consumers often use several payment methods. Creating a single-integration for payment methods in Southeast Asia gives brands a growth channel when entering new countries, allowing them to scale up more quickly, he added.

“The COVID-19 pandemic lockdown has also driven a big surge in online sales and transactions across Southeast Asia, so there is a huge need for online payments by businesses and merchants across the region,” Liu said. “The zero-integration and single-integration solution will help businesses and merchants start accepting online payments quickly and easily with a simple integration within minutes, without any need to deal with complex regulation/license handling and technology development.”

#asia, #financial-inclusion, #fintech, #fundings-exits, #indonesia, #payfazz, #payments, #singapore, #southeast-asia, #startups, #tc, #xfers

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Payfazz gets $53 million to give more Indonesians access to financial services

Indonesia is not only Southeast Asia’s most populated country, but also one of the world’s fastest-growing economies. But many people, especially outside of major cities, still lack access to basic financial services like bank accounts. Payfazz is one of several tech startups focused on solving that problem by finding innovative ways to give more Indonesians access to financial services. The company announced today that it has raised a $53 million Series B led by B Capital and Insignia Ventures Partners.

Previous investors, including Tiger Global, Y Combinator and ACE & Company, also returned for the round. New backers include BRI Ventures, the venture arm of BRI, one of Indonesia’s largest banks, which is coming on as a strategic investor. Indonesian Bank BRI. Payfazz’s last round of funding was a $21 million Series A announced in September 2018, led by Tiger Global. Its total raised to date is now more than $74 million.

There is a growing list of Indonesian financial tech startups, including Modalku, KoinWorks and Kredivo, that focus on consumer and small business financing, while larger and more diversified tech companies like Gojek and Grab are working their own online payment tools and other services. Payfazz differentiates with a portfolio of mobile services that make it easier for Indonesians to handle routine financial tasks, including bill payments and loans, even if they live in rural areas without banks. The company says it currently serves 10 million monthly active users, and plans to expand its offerings to include more digital financial products.

Founded in 2016 by Hendra Kwik, Jefriyanto and Ricky Winata, Payfazz is an alum of Y Combinator’s accelerator program.

The company uses a network of financial agents to reach customers because many banks don’t open branches in rural areas, Kwik told TechCrunch. “Due to high fixed costs, traditional banks find it economical to operate only in cities and urban areas with high density and foot traffic,” he said. “This leaves a huge unfulfilled and underserved banking need in rural areas where banking access is very difficult.”

Payfazz’s network currently includes about 250,000 agents, most of whom are located in small stores. Users deposit cash with the agents, who serve as go-betweens with banks. This allows Payfazz’s users to have a balance they can use to pay phone, electricity and other bills. Payfazz also recently launched loans and payments for offline retailers.

Kwik said Payfazz built an agent network because even though smartphone penetration is high in Indonesia, many people haven’t used direct digital banking services before, so talking to a Payfazz agent helps familiarize them with the process. Since most of its agents are based out of warung or kirana stores, or neighborhood shops that sell food and other necessities, they are easier for people in rural areas and small towns to access than banks, ATM machines or convenience store chains.

“Our agents are small businesses and people who have lots of traffic from rural areas’ populations in their places. It can be warung and kirana stores, telco stores, small restaurants or even someone’s house,” Kwik said. “They are the perfect profile to become our agents because they’re ubiquitously distributed and have high coverage in rural areas.”

He added that Payfazz also gives agents an opportunity to earn extra income. Payfazz takes a 0.5% to 1% commission on every transaction, and agents are allowed to set the margins they charge customers for transactions, usually between 5% to 9%. Before signing on an agent, Payfazz screens them using KYC (“know your customer”) and verification technology to gauge trustiworthiness, traffic and sales potential.

While Grab Financial and other Southeast Asian fintech companies may eventually become Payfazz’s competitors, Kwik said he currently sees them as potential partners.

“The reason is simply because most of these providers still focus their market and resources in the cities and urban areas, like many of the traditional banks. Meanwhile Payfazz focuses all its market and resources in rural areas,” he added. “Payfazz can help other banks and financial service providers to expand their reach to rural areas and capture hundreds of millions of users and billions of dollars of revenue opportunity there.”

In a statement about the funding, Insignia Ventures founding managing partner Yinglan Tan said “We have been privileged to have supported Payfazz since their early days. We believe that this path to taking their fintech ecosystem from Indonesia to the rest of the region will meet the pressing needs of many more of Southeast Asia’s digital consumers, and are excited to see how Hendra and the Payfazz team will build on top of the portfolio of services that millions of Indonesians are already using.”

#asia, #consumer-finance, #financial-tech, #fundings-exits, #indonesia, #payfazz, #southeast-asia, #startups, #tc

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