Indonesia is creating a standard matrix code for electronic payments. It's a powerful leg-up for startups as it will enable them to piggy-back on to the networks built at great expense by early movers such as Ovo and Go-Pay.
One of them is Dana, which means ‘funds’ in Bahasa Indonesian. It has some high-roller backers too.
Bank Indonesia launched the common payments standard known as QR Code Indonesian Standard (QRIS) in August and will make it compulsory from January 1, 2020. The move is part of government efforts to boost financial inclusion across the archipelago.
For latecomers to the market, it's a godsend that could enable to them to steal a march on the competition.
“I’m glad Ovo and Go-Pay are here because they spent so much money to educate the market. As a late entrant, it’s so much easier to convert users and merchants [to cashless payments],” Dana’s chief executive Vincent Iswara told FinanceAsia during an interview in Jakarta.
In addition, Dana can count on a bedrock of strong financial and technical backing from shareholders as it looks to scale up.
China’s huge online payments provider Ant Financial teamed up with Indonesian media conglomerate Emtek to create Dana in 2017. Ant Financial is a minority shareholder and the company is still majority-owned by Indonesians, Iswara said.
Dana launched its own payments app on December 5 last year following a soft launch in March, when it appeared embedded in other apps, including one developed by Indonesian ecommerce platform Bukalapak.
Among e-payment firms, Gojek’s payments arm Go-Pay is Indonesia’s most popular app followed by OVO, with Dana coming up fast in third position, based on monthly active users from both Google Play Store and iOs according to research by mobile data and analytics platform App Annie and consultancy iprice as of the second quarter ending June.
“We have nothing to worry about in terms of burning money to gain market share or scale in the first three years,” Iswara said.
A Dana spokeswoman subsequently declined to say when this three-year period might have started. Still, proving it is already a formidable competitor, the company had more than 20 million users by the end of June.
It also processed more than 1.5 million transactions daily as of August, ranging from ecommerce to bill payments.
And to super-charge its growth further, Dana is now looking for more investors who could crowd in greater numbers of customers via their own networks.
Not that Dana's bigger rivals are running scared, even if the government’s QRIS initiative has met with a mixed reaction and competition is fierce, with shop windows across Jakarta splattered with Go-Pay, Ovo and Dana signs offering discounts of 20% to 50% on merchandise.
At ride-hailing unicorn Gojek’s payments arm Go-Pay, one person suggested it was a bit premature to impose a common standard code on Indonesia’s still-budding payments market and that it risked crimping investment by other companies that could boost financial inclusion.
At Ovo, meanwhile, chief executive Jason Thompson told FinanceAsia that the government initiative is to be welcomed but wouldn't solve all problems.
“For a lot of the bigger merchants, it’s a lot more technical development in terms of the way you integrate,” he said during a separate interview.
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Given the intense competition and seemingly growing competition in the Indonesian online payments space, every differentiating factor could make a difference.
And for Dana, shareholder Ant Financial could provide just that.
The Chinese payments giant is one of the world’s most valuable private companies and is gradually knitting together its minority investments to create a payments platform that one day could rival the likes of Visa and Mastercard.
Ant Financial’s minority investments span markets including India, South Korea, Thailand, Philippines, Malaysia, Hong Kong, Bangladesh, and Pakistan, as well as in Latin America.
Each of these small but fast-growing companies are benefiting from Ant Financial’s technical knowledge and experience and adapting this know-how to their own markets.
“Even though we're not the same, we're similar,” Iswara said, explaining that it would be relatively easy to start accepting Dana customers in Hong Kong or Alipay Hong Kong customers in Indonesia “in the very short-term future.”
Iswara said if Dana did bring in other strategic investors, Ant Financial would likely buy more equity to maintain the percentage of shares it owns at roughly the same level. An Ant Financial spokesperson declined to comment on capital deployment plans or its current ownership level.
It’s not just capital that Ant Financial is bestowing on its protégé; Dana also has a proven path to profitability to follow.
Dana is looking to bolt on to its platform various other financial services such as insurance, micro-lending and wealth management – something Ant Financial knows plenty about.
“We're ready,” Iswara said, indicating that Dana is likely to launch some financial services by the end of this year.
Q&A WITH VINCENT ISWARA ON HOW TO ATTRACT IMPATIENT MILLENNIALS TO AN APP
As it is, the firm already has an e-money license, e-wallet license, remittance license and a license for agents to cash in and cash out.
Still, China isn't Indonesia, where there is less verifiable data and far fewer people have a bank account. So Dana needs to adapt Ant Financial’s experience to the Indonesian reality.
“They have given us the know-how and a benchmark for what is successful. But there is no such thing as copy and paste,” Iswara said.
Still, with powerful friends and native knowledge, Dana appears to have the necessary wherewithal to make that transition.
Its trendy office space is peppered with distinctly Indonesian touches. Cushioned pods lined with traditional batik fabric span a wall, staff sit in Balinese-style chairs while a conference room has layered seating, like a cross between a Roman amphitheatre and an Indonesian rice paddy field.
The company is expanding onto a second floor in a swanky office tower in central Jakarta. Money does not seem to be an issue.
With assistance from Elizabeth Utley
