Buy now, pay later: This Singapore-based Pace founder wants to make shopping convenient
Indonesia-born, Singapore-based businessman Turochas Fuad and his year-old company Pace, a “buy now pay later” (BNPL) fintech firm, is rapidly expanding across Asia, giving consumers and merchants more flexible payment options.
If you’ve noticed a proliferation of “buy now pay later” (BNPL) options at retail stores, you are not alone. This mode of payment is growing in popularity and its tremendous revenue potential is being tapped by several players.
Case in point: Pace, a BNPL fintech company, recently secured US$40 million (S$54 million) in Series A investment funding from established investors such as UOB Venture Management (Singapore), Appworks (Taiwan) and Marubeni Venture (Japan).
Launched barely a year ago, Pace now has over 3,000 points of sale across Singapore, Malaysia, Hong Kong and Thailand and it is now targeted to hit one million users before the end of 2022. It is swiftly expanding into Japan, South Korea and Taiwan, and looks set to achieve US$1 billion in Gross Merchandise Value for 2022.
The man spearheading the company, Turochas Fuad, is a successful serial entrepreneur who has sold three start-ups, including co-working space Spacemob to WeWork and home vacation rental site Travelmob to Nasdaq-listed HomeAway (now called Vrbo). In between dreaming up the next big idea, Fuad held senior management roles, such as managing director of WeWork Southeast Asia and Korea, as well as that of Skype Asia Pacific.
Fuad, better known as “T” in the industry, is clear about his ambitions for Pace, which is represented by the logo of a horse denoting strength, stability and advancement. He said: “People know us today as a BNPL company but we're definitely more than that. We're actually a fintech company that wants to democratise finance in a way where we empower traditional financial institutions all the way to neobanks.”
For the uninitiated, a BNPL payment is similar to instalment purchase plans (IPP), where banks and credit cards break up the payment for a large-ticket item into smaller monthly repayments, with or without interest. The difference? The repayment period for a BNPL tends to be shorter (within three to four months versus six to 12 months for an IPP); consumers do not need to have a credit card nor are restricted to a particular bank or card, and it can be used on lower priced items such as cosmetics, apparel and other lifestyle goods.
In Asian markets such as India, Vietnam and Thailand, where credit card penetration rates are low, BNPL payments represent a huge potential. According to American fintech solution provider FIS’s 2021 Global Payments Report, they accounted for only 2.1 per cent of global e-commerce transactions in 2020. That figure is expected to double by 2024. Closer home, a 2021 study showed that 38 per cent of Singaporeans, an estimated 1.1 million, have used a BNPL service, with those from 25 to 44 years being the most likely ones to have done so (43 to 44 per cent).
Which is why Fuad is unfazed by the existing competition, despite Pace being a relative latecomer. “There’s always this perception that it is a crowded market, that there are a lot of different players out there. The reality is that BNPL is still a very nascent product. If you ask anyone walking around, maybe not all of them are aware of what BNPL is, it’s a market where education is still being done,” said the Indonesian-born and Singapore-based businessman, who is banking on the company’s ability to “optimise and fully ultra-localise” the customer experience in the respective Asian markets to gain a competitive edge.
He explained: “We are familiar with the businesses that are favoured in the different local markets. In Japan, for example, we will support different types of local payments that are familiar to the Japanese, such as cash transactions through the convenience stores located at every corner.”
In Singapore, Pace started off with merchants such as Sincere Watch and Goldheart, based on the assumption that consumers would only opt for instalment payments on higher priced items like luxury watches and jewellery.
The millennials and Gen Zs now make up 72 per cent of their shoppers, which explains the company’s recent 80s-vibes brand campaigns. “One of the biggest drivers for this age group and segment is alternative payments. They’re all using different types of digital wallets. Whenever they open a bank account, they’re issued debit cards, which have never been offered IPP before,” Fuad shared.
Pace’s merchant partners now include mass-market and mid-tier lifestyle brands such as Bath & Body Works, motherswork and Owndays, where the average transaction value is between S$50 and S$100. Pace users are allowed to split their purchases into three interest-free payments over 60 days and there is a spending limit depending on whether you use a credit or debit card for payment. Miss a payment deadline and you will be charged a late fee of S$10 with additional charges incurred for every additional overdue day. You can pay in full anytime and your ability to purchase is halted if you reach the spending limit or default on a payment.
A survey conducted by Pace of over 260 Gen Zs found that more than 55 per cent of them are “a huge fan of BNPL” and many of them do not use credit cards. Fuad share: “They believe that BNPL allows them to manage their cash flow better. It doesn't really put them in debt because it's typically smaller amounts of transactions.”
He added: “Every consumer that signs up with us, behind the scenes, we evaluate them in terms of what they can or cannot spend, based on the information that we can gather. We then assign different sets of buying limits on our consumers. This ensures that shoppers practise sustainable spending, while also enabling split payments in a safe manner no matter which payment method is being used.”
Despite witnessing the power of technology in all his ventures, Fuad believes that a company’s success still boils down to its people. He said: “There’re members in the Pace team that have worked with me for six to seven, 12 to 15 years. I think it’s something unique that we’re still sticking around, building and scaling businesses together.”
He is excited about the good that Pace can do for society in terms of financial inclusion, despite public misgivings about BNPL.
He said: “BNPL is a great starting point for us to build credit scoring capabilities with the consumers and the businesses that we have. We can then democratise finance for those who might not have access to financing tools, such as debit card holders, independent professionals and gig workers, by offering Web3-based financing products like alternative currencies and new forms of wallets.”
Meantime, he is keeping calm with the rapid expansion through baking – “sourdough, brioche, French bread” – and spending quality time with his wife and two young daughters. But of course, the mind of an entrepreneur is never far from the business.
Fuad quipped: “Baking is like growing a company. The yeast is the secret ingredient that makes the dough rise, and you need to be patient. In any business, there’re certain ingredients that will make it successful and you just have to keep at it.”