Lazada in tie-up to offer loans to its online sellers in Singapore

Photo credit: Lazada

Lazada is on a mission to woo Singaporean merchants. The marketplace, together with fintech startup Finaxar, today started offering loans to online sellers in the city-state.

The move comes just weeks after the Alibaba-backed ecommerce company scrapped the commission charges it levied in Singapore.

Finaxar’s “merchant credit line” allows Lazada sellers to access any amount of capital online anytime they need it, rather than resorting to long-term loans.

The tie-up gives Finaxar access to new clients. It’s uncertain how many merchants Lazada has in Singapore, but there are at least 300,000 of them across Southeast Asia, according to Finaxar co-founder Sian Tan.

For Lazada, it’s another way to lure prospective sellers onboard amid tight industry competition.

Earlier this month, Lazada removed its commission fees of one to seven percent per sale in Singapore, mimicking a strategy adopted by other players. Its archrival Shopee, owned by listed internet giant Sea, does not charge seller commission fees in the city-state. It’s the same story for peer-to-peer marketplace Carousell.

Neither Lazada nor Shopee charge commission fees in Indonesia, another highly competitive market for the two. Shopee, however, takes a cut of sales in Taiwan – its other key market where Lazada is not present.

Removing the commission affects Lazada’s money-making efforts. The firm, though, still collects payment fees in Singapore – and that’s expected to get a boost as it widens its merchant base and gets more sales.

Over the years, Southeast Asia’s ecommerce firms have been burning piles of cash to attract both sellers and buyers to their platforms.

This week, Sea revealed that while its revenue hit record-high in the second quarter of 2018, its net loss widened mainly because of skyrocketing sales and marketing expenses related to Shopee.

Powering SMEs

Merchants who want to avail of the credit line may sign up on Finaxar, provide details about their business, link their Lazada accounts, and wait for their application to be assessed. The whole process, including approval, can be done within 30 minutes.

If approved, sellers can start using the app to draw down from their credit line, with an easy repayment schedule that can be synchronized with their receipt of customer payments from Lazada.

Finaxar charges an all-in fee of up to 1.5 percent of the loaned amount, doing away with the standard practice among financial institutions: offering low interest rates and then adding an array of charges, such as processing and facility setup fees. There’s no revenue-sharing with Lazada.