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Abu Dhabi, UAETuesday 11 December 2018

Generation start-up: The UAE discount voucher firm scoring big with Samsung Pay

VoucherSkout now offers its coupon deals via the smartphone maker's mobile wallet

David Tobias, founder of VoucherSkout, says the platform is now focused on growing its merchant numbers and expanding overseas. Razan Alzayani for The National
David Tobias, founder of VoucherSkout, says the platform is now focused on growing its merchant numbers and expanding overseas. Razan Alzayani for The National

When David Tobias, the founder of the UAE discount platform VoucherSkout, received an email from Samsung's headquarters, he thought it was a “wind up".

“It’s not every day you get the largest smartphone manufacturer in the world calling to ask you if you can integrate your technology into their flagship tech payments wallet,” says the British entrepreneur, 49, who has lived in the UAE since the early 1990s.

The partnership allows Samsung Pay to deliver a voucher savings service via its mobile wallet using VoucherSkout’s vouchering technology and merchant network.

The service went live four weeks ago and has propelled VoucherSkout’s UAE reach to a whole new level.

While it previously had 50,000 subscribers to its app - which offers users 50 per cent discounts on up to 500 dining, wellness and leisure venues – the tie up with Samsung Pay has extended that to a seven-figure audience.

Mohammad Gharaibeh, head of enterprise, mobile business at Samsung Gulf Electronics, says the company is “excited” to offer Samsung Pay vouchers in the UAE as a value-added incentive for its users.

“The UAE has experienced amazing growth in the e-commerce sector, driven by superior levels of internet penetration and higher number of online conversations," he says.

The objective with the new discount vouchers "is to encourage accelerated growth towards a cashless society", adds Mr Gharaibeh.

Discount vouchers are on the rise globally with the value of redemptions set to surge to $91 billion by 2022, up from $47bn in 2017, according to Juniper Research. In the UAE, a market saturated with F&B options, two for one vouchers have become the norm in recent years with multiple daily deal websites cropping up and the growth of the sector's market leader, The Entertainer. In May, Bahrain's GFH Financial Group acquired 85 per cent of the UAE-based retail app.

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This makes fledgling start-up VoucherSkout’s partnership with Samsung Pay even more significant. The company was first set up in November 2016 by Mr Tobias after he grew tired of the UAE's traditional discount voucher options because he often waited a full year to secure another voucher to revisit the same venue.

Instead, he created a concept that required no subscription fee, where users downloaded the app for free and only paid when they redeem a voucher.

Payments for the voucher are made via a credit system with each credit worth an average Dh5, depending on how many credits a consumer buys. Credit bundles can cost Dh395 at the top end which equates to Dh3.95 a credit or Dh65 for 10 credits, equal to Dh6.50 a credit.

With merchants signing up for free to the concept, VoucherSkout earns revenue from the sale of credit bundles.

The offers are then priced at different credit values with 50 per cent off a meal for two worth one credit, while 50 per cent off at a five-star restaurant on Palm Jumeirah costs two credits.

“We give 50 per cent off the whole food bill – starters, mains, desserts – rather than just a main course, for example, so you can order as much as you like and you are still getting a full 50 per cent off,” says Mr Tobias. “And you can refresh the voucher at the cost of a single credit – you don’t have to wait until you renew a subscription before you can go back to the same place.”

Mr Tobias felt his model offered something different for value-seeking customers as it allows them to only pay for the vouchers they use. Plus, he says, it benefits the merchant too as it encourages users to spend more.

“Value seekers armed with a buy one, get one free deal on a main course, typically focus on the offer, leaving less opportunity for the merchant to upsell," he says. “They won’t look at the starters or desserts because they are not on offer. They typically just look at the main course and try to make sure the meal they are being given for free is close in value to the one they are paying for. “

Give someone a discount on the full menu, he says, and merchants will end up with 30 to 35 per cent more dirhams in their bill folder at the end of business.

Despite the positives, Mr Tobias says it was harder to grow his merchant base than he anticipated because many were put off by the idea of awarding 50 per cent off across a full menu or range of services at a beauty salon.

So when Samsung Pay came knocking on their door in March 2017, it was a milestone moment for the firm.

“They’ve been looking globally for somebody to do pay as you go vouchering and that’s how they found us,” says Mr Tobias. “It was a validation of where we felt the market could go - we are really trying to re-engineer the business as footfall driving.”

The deal was signed after a 12-month due diligence period.

While the company already had 50,000 registered users, by integrating VoucherSkout’s technology directly into Samsung’s FinTech payments wallet – it opened up its services to all Samsung Pay compliant devices in the UAE.

“There has been a massive increase in redemptions” says Mr Tobias, who did not want to disclose the exact figure.

But it also increased the attractiveness for merchants to sign up with VoucherSkout.

“Now if you want to be inside Samsung Pay as a merchant you have to be on our platform because the entire technology that powers their vouchering technology is ours," says Mr Tobias. “For the merchant it means a great deal more footfall than we were able to provide them from acquiring users from our app."

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The vouchering firm now plans to harness that partnership in its global expansion efforts set to kick off next year.

To finance that process, the firm is gearing up for a Series A funding round in the first quarter of 2019 to raise $5 million, offering a 20 per cent stake in the business.

The company has been self-funded to date by Mr Tobias, who sold 50 per cent of the advertising agency he set up 24 years ago to fund the start-up. “We put in a lot – in the millions of dollars,” he says.

The international expansion will focus on cities in Russia, such as Moscow and St Petersburg, as well as Mumbai and Singapore – cities where mobile payments have already taken off, and where Samsung Pay is already present.

“We fully intend to have another market open before the end of the second quarter of next year and a third by the end of 2019,” says Mr Tobias.

The company is already focused on merchant scaling to offer its customers more voucher options.

While it started with 75 merchants two years ago, it will hit 500 by the end of the year, and hopes to have 1,000 by the end of the first quarter.

“If we can get 1,000 good quality outlets – that might be enough to start influencing whether people make those annual subscription commitments," he says.

He stressed that the company does not see itself as competing with The Entertainer.

They have their model and there’s nothing to stop people from having both, he says.

"What they have done is make it easier for companies like ours to start because they opened the market up to the idea of discounting,” he adds.

And Mr Tobias says life in the UAE can be very expensive.

“We have all of those fantastic places to go out and most people can’t afford to do it as often as they’d like to at the prices levied," he says. "We don’t position ourselves as a company that wants to help people save money but as one that wants to help people go out twice as often for the same amount.”