Indonesia’s youthful population is flocking to e-commerce websites, many of them discovering and experimenting with apps and transacting for the first time.
As a result, digital payments are starting to take off. Indonesian financial technology start-ups like Dana, Go-Pay and Ovo are growing fast as they look to build apps that satisfy customers across the archipelago who have a median age of just 30.5 years.
More than half of Indonesians were unbanked in 2018, according to the World Bank, but as competition increases to attract new users to payment platforms, this figure is expected to drop.
“We are focused on millennials. We truly believe that millennials look for an experience,” Dana’s chief executive Vincent Iswara told FinanceAsia during an interview in Jakarta.
To hold the attention of its millennial users, Dana’s target is that every user transaction should take no more than five seconds.
Dana also pushes hard on security. Its fraud rate is 0.003 to 0.004 basis points, “You can ask every other payment service in the market, none of them have that,” said Iswara. In the US, the Federal Reserve reported a fraud loss rate of 0.46 basis points at deposit-taking institutions in 2015.
The people building Dana’s app are also young, with an average age of just 27. There is a PlayStation in one of the meeting rooms and a ping-pong table in a break-out area in Dana’s Jakarta office.
“We have a young energy,” said Iswara said, who is 44 years old, born in Jakarta and educated in both the US and Japan.
Of the 520 people at Dana more than 270 are engineers he said. “I truly hope that we can grow the local talent pool.”
He has had to entice Indonesian tech graduates away from lucrative job markets in Bangalore and Singapore where average software developer salaries are three to six times bigger than those in Jakarta, according to a recruitment consultancy GetLinks 2019 report.
The flip-side to working at such a dynamic, young startup is often long hours. Weary staffers can be found napping in the cushioned sleeping pods lined with traditional batik fabric.
The following wide-ranging interview with Iswara has been edited for brevity and clarity
Q Does the first-mover advantage hold true in Indonesia’s mobile banking sector?
A First-mover advantage is not an actual advantage.
I say to everyone that 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.
And here's the thing: first-mover advantage is just giving you a bit of time to build your brand first. Google was not the first search engine. Apple was not the first smartphone. Facebook was not the first social media.
Q What makes Dana different?
A We’re not trying to compete with exactly the same thing.
If you try to compete against the exact same thing, then you’re really competing against the price. Our competitors have a lot of promotions because as a commodity product that’s the only way you can get ahead.
How do we differentiate ourselves? We’re actually trying to improve the concept.
[With] other wallets like Go-Pay you still need to carry your wallet because you need to top up your balance.
Q How has Ant Financial helped Dana?
A Ant has been valuable in terms of two things. One, they really believe in our mission. Two, they have given us the know-how and a benchmark for what is successful. But there is no such thing as copy and paste.
Alipay is great for China, but I don’t think we are going to follow that. There are so many things that we think we can improve on for Indonesia. In Alipay, you have to click and then you scan or you show. For us, you just click. That’s it.
Q What is Dana’s path to profitability?
A Fortunately, we can look at how Ant Financial makes money. We have access to their technical know-how and business models in India, China, South Korea, Thailand and other countries. We can cherry-pick which ones we believe will work for us.
Here’s the thing. While everyone else is building what we call a closed-garden system, we’re building an infrastructure of financial transaction payment platforms on which you can immediately view financial services.
While everyone else is learning on-the-go, and eating [through] money, everything is already in place for us. On day one, we already have the best risk management in place, the best fraud-detection system in place.
The kind of system that we are building is ready to do any sort of financial services: insurance services, micro-lending, investment. We're ready. That's the kind of thing that differentiates us from the others, I already know how to make money.
We have an e-money licence, e-wallet licence, remittance license and a licence for agents to cash in and cash out.
Q How did you win your licences?
A [A licence] needs to be approved by the Bank of Indonesia, and if they find anyone with a complaint you will never get it.
A lot of people have asked me how we got four licences from Bank of Indonesia in the past year and a half. That’s very simple. We comply.
Our fraud rate is 0.003 to 0.004 [basis points]. It’s tiny. That’s better than most banks. We’re the first in Indonesia to launch a campaign that any loss, as long as it’s authenticated by Dana, has 100% money-back guarantee.
Our data centres are all in Indonesia; the main, the backup and the redundancy. Our system, our processing, our management, and even our developers are all in Indonesia. This is not a requirement, but we don’t want to have any issues later on.
Of the 520 people that we have, more than 270 are engineers. I truly hope that we can grow the local talent pool.
Q How do you handle onboarding of customers?
A The idea of Dana is to create an open platform and to make sure this has the best and easiest onboarding process for all customers. One of the things that we pride ourselves on is that we are the first company in Indonesia to do fully digital KYC [know your customer checks].
It is face-recognition, which is verified with the national database.
I believe we are the first to have this application.
We do 20 to 30 thousand KYC [operations] a day.
Q What is the KYC process like for merchants?
A Anyone with a local telephone number or a national ID can be a merchant within a day.
This will help more than 60 million SMEs [small to medium-sized enterprises] in Indonesia.
Q How do you protect users’ privacy in an open ecosystem?
A When you talk about financial services, people have concerns about their privacy. And that’s very important because they don’t want that data to be shared.
But here’s the thing. It is safer to use your Dana card than your actual credit card. In Indonesia, the biggest [information] leak happens when you give your cards to someone to swipe.
We tokenise [your credit card] number so even we don’t know your number. Once we educate them more, I think people will want to be in the digital payment space.
Q Which demographic in Indonesia uses Dana most?
A [The gender division] is very balanced. About 51% of our users are female. But every segment has different demographics, so some are female-heavy and others are male-heavy. [For instance], malls might be female-heavy, but the spender is usually the man.
As you can see in the way we market our products, we are focused on millennials. We truly believe that millennials look for an experience, and we always position ourselves as a user experience-centric company. That’s why if you look at how Dana operates, we have a target that every user transaction should be no more than five seconds.
Q Are you actively fundraising at the moment?
A We have what we consider to be an ideal board structure right now. They are very supportive, believe in our mission and because of this trust we are able to grow fast.
But even though we have a good runway, we always believe that we can’t do everything ourselves. We’re open to strategic partnerships and investors who can ... grow the ecosystem.
Q What did you learn from founding a gaming payment app?
A If our focus is driven by growth without building proper infrastructures and making sure our users are using our services because of value proposition not promotion, then we’re not building the right segment.
You know how loyal users are? They're not.
