Loyalty and deal discovery segment expected to witness strong growth

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India-based merchant commerce solution provider Pine Labs has acquired its investee Malaysian-based payments and deal discovery platform Fave in a deal valued at US$45 million. This move is expected to enable the company get into the consumer payments segment. With this multi-million cash and stock deal, Fave is planning to launch its payments app in India later this year. This strategic partnership will thus allow Pine Labs to expand its services while providing consumers with the ability to use the payments platform across half a million retail points and merchants.

Pine Labs strategically acquired Fave to get into the highly competitive consumer payments space in India. The space is currently dominated by PhonePe, Paytm, and Google Pay. Fave has already started its process with the National Payment Corporation of India (NPCI) to get their UPI certification for the country-wide launch of its payment app. Along with the consumer payment segment, Pine Labs is also looking at e-commerce enablement space through this acquisition.

Strategic acquisition from Pine Labs

Both digital storefront and consumer payments space have gained strong momentum in the Indian market and are attracting significant attention from investors around the world. The global pandemic has forced several small and mid-sized businesses to go digital and with the second wave of the coronavirus outbreak hitting the country again, many businesses will have to have a digital storefront to survive the uncertain times.

On one end, Fave offers technology for merchants to have the digital storefront and provides other value-added services. Whereas, on the other end, Pine Labs has a strong position in the payments segment. Thus, making Pine Labs and Fave acquisition an all-in-one option for small merchants and retailers in the country to go digital. Together, both of these FinTech companies will offer rewards, NFC, and UPI-based payments to consumers across India.

With this acquisition, Pine Labs can jump into several segments including merchant discovery, digital storefront, and UPI P2M (peer to merchant) space. Being said that, this strategic acquisition of Pine Labs appears to be well-timed for two reasons. Firstly, the company is in fresh talks to raise another funding round at a US$3 billion valuation, and secondly, investors are quite bullish on the digital storefront technology and investing big in such segments. For instance, in March 2021, offline to online commerce and payment startup, Dot, raised over US$23 million in its Series B funding round.

Fave will be able to strengthen its position in the Southeast Asia market after this acquisition. However, Pine Labs stands to gain the most as it will be able to unlock massive consumer opportunities across fashion, F&B, retail, and FMCG markets.

Global theme: PayPal’s acquisition of Honey Science Corporation

Pine Labs acquisition is not the first time when a FinTech company has invested in a deal discovery platform. In January 2020, PayPal acquired Honey Science Corporation for US$ 4 billion – the maker of the deal discovery browser add-on and mobile application. Rather than competing only at the checkout page against Apple Pay, or Credit Cards, PayPal has now become a part of the consumer's deal discovery process with this acquisition.

After the acquisition, PayPal has integrated the functionality offered by Honey Science such as price tracking, product discovery, offers, and loyalty into the Venmo and PayPal experiences. With Honey Science, not only PayPal has revamped the customer shopping experience, it has upped e-commerce sales and increased shopper engagement for its merchants. Moreover, the acquisition has allowed PayPal's merchant partners to provide more personalized and targeted promotions to their consumers for driving increased sales. This is exactly what the Pine Labs merchants in India and Malaysia would be hoping to achieve through the acquisition of Fave.

More innovation and M&A expected over the medium term

With customer shopping journey along with rewards and loyalty programs becoming an integral part for mobile payment providers, more such acquisitions and investments are expected to follow suit in deal discovery and loyalty segment.

For instance, Facebook has been testing new options that allow users to connect their brand loyalty programs of different retailers with their social media account. It will allow users to track their brand loyalty using Facebook. However, they will also be able to earn reward points for their on-platform activity and will also receive discounts on purchases.