This weekly newsletter highlights top developments and trends across Southeast Asia’s digital economy and ecosystem, without losing sight of the solid links between the online and offline worlds.
Executive Summary
- The game has changed for DANA
- Gains from GoTo is a welcome bonus for Astra
- GoTo: The synergistic journey continues
- Bank Raya and the march of digital banks
The game has changed for DANA
Indonesian media and digital conglomerate Emtek Group announced last week that it has sold a substantial stake in the digital payments platform DANA to the Sinar Mas Group and e-commerce major Lazada Group.
The combined investments from Sinar Mas and Lazada stood at $554.5 million.
Emtek, through its entity Kreatif Media Karya (KMK), will remain a shareholder in DANA but with a substantially diluted stake. KMK owned 49% of DANA’s parent Elang Andalan Nusantara (EAN) prior to the deal, which has reduced to 6.7% now.
The entry of Lazada as a shareholder could be a game changer for DANA, depending on how committed it is to integrating its business with DANA, much like GoPay-Tokopedia.
The Lazada Group should provide a rich seam of potential users for DANA, given the former’s e-commerce ecosystem in Southeast Asia with around 30 million monthly active users in Indonesia. Even without a major commitment to make DANA the preferred digital payments platform, it immediately expands the platform’s ecosystem. It seems unlikely that Lazada will not commit in some way to DANA.
The entry of Lazada Group also makes sense given that Alibaba is an indirect shareholder through Ant Financial. Through its entity API Investment Limited, Ant Financial owned 45% of DANA, which has fallen to 35.94% post the latest deal.
Alibaba has been looking for investments outside China as it faces increased scrutiny at home.
The Sinar Mas group also brings with it a rich ecosystem, with the potential for further collaboration across the group, especially in financial services.
DANA intends to expand its product offerings to include buy now pay later (BNPL), wealth, and insurance products besides other financial services.
It is also thinking about expanding its footprint beyond Indonesia to Southeast Asia, but this would likely take some time given the very different regulatory environments in different countries.
DANA is one of the leading e-wallet services after GoPay, OVO, and ShopeePay, and is popular in areas such as bill payments. It also works closely with the Indonesian government to improve financial inclusion. DANA also has a niche in the gaming space for buying various add-on features.
There is also a strong connection between DANA and Bukapalak since Emtek is a common shareholder. IDX-listed Bukapalak has a thriving marketplace business and is seeing strong growth in its Mitra Bukalapak business, which aims to digitalise warungs. The platform already has more than 14 million Mitra partners.
DANA has 115 million users in Indonesia, and daily transactions of over 10 million. This already provides a potentially rich user base to sell a wide variety of financial services.
From Emtek’s point of view, it is also a backer of OVO given its stake in Grab Indonesia and Grab’s stake in Emtek. It will maintain a strategic stake in DANA but has allowed itself to be diluted in this transaction.
Gains from GoTo investment are a welcome bonus for Astra
Indonesian conglomerate Astra International booked substantial gains in the value of its stake in Gojek, now GoTo, reflecting the rising importance of its digital exposure. The mark-to-market one-off gains were also on account of the fact that its investments in Gojek were made at an attractive entry level.
The company booked a gain of 3.7 trillion on its stake in GoTo and this was in part responsible for the headline growth of 106% YoY. The company did separate this gain out in the release of its results, declaring a still impressive net profit increase of 64% YoY.
This was driven by its core business lines including automotive, financial, agribusiness, infrastructure and logistics, IT, property plus mining, energy, and heavy equipment. This made the GoTo gain a welcome bonus, but not much more.
Astra International’s first major investment in the digital economy was into Gojek prior to its merger with Tokopedia. This investment was in two stages — $150 million in 2018 and a follow-on of $100 million in 2019.
The initial collaboration between Gojek and Astra took the shape of GoFleet which provides a rental fleet for GoCar drivers but there are plenty of other potential synergies to be had going forward in areas such as financial services.
Although its stake in GoTo is its largest exposure to the digital economy, Astra Digital has now invested in a number of different areas. In fact, its digital ambitions have been highlighted as strategically important for the company in the long term.
Astra has backed farm-to-table grocery startup Sayurbox, health tech platform Halodoc, local hospital operator Medikaloka Hermina, fintech player Mapan and logistics startup Paxel.
More recently Astra International acquired a 49.56% stake in small lender Bank Jasa for $259 million. This investment was in partnership with Hong Kong-based Welab which also holds a 49.56% stake. Astra already collaborates with WeLab for other financial ventures. The plan is to convert Bank Jasa into a digital bank to be managed by both companies.
Having a digital bank will enable Astra International to further extend its ecosystem by strengthening its retail financial services proposition.
The transaction came as a surprise for many, with Astra International investing in another bank after selling its stake in Bank Permata but given that the company continues to remain bullish on financial services and has a stated aim of increasing exposure to the digital economy, this should not be a concern.
Astra International has a significant war chest of funds available for investments following its earlier sale of Bank Permata to Bangkok Bank Public. The company has been eyeing investment opportunities across sectors such as auto and transport, SMEs, financial services, Web3, and sustainability-orientated sectors but prefers startups with a clear path to profitability.
Under Astra Financial, the company launched the digital payments platform AstraPay in September 2021 and already has more than 3.3 million registered users on the platform but targets 15 million users by 2024, according to the company.
Astra International has also set up AWDA, a JV between Astra and WeLab. AWDA has a P2P lending licence and offers small-sized, one-time payment loans and 3-6 month instalment loans through its MauCash app.
The company has already made significant inroads into various aspects of the digital economy following its initial foray with Gojek but it is still early days. As Astra International has the wherewithal to do a lot more, we can expect more initiatives within the financial and transport ecosystems.
GoTo: The synergistic journey continues
GoTo’s move to integrate Go Food into the Tokopedia app is yet another step in the ongoing synergistic journey across the platform, which is still in the early stages.
The integration of GoPay to the Tokopedia platform was an early and roaring success, given that now already 93% of digital payment transactions on Tokopedia are through GoPay when the majority previously used OVO. Tokopedia used to have a stake in OVO.
The integration of GoFood to Tokopedia will allow customers to order food without having to leave the app, as well as pay for those transactions with GoPay since it is already linked to Tokopedia. This move will also allow GoFood merchants to plug into Tokopedia customers, potentially opening up new revenue channels along with advertising opportunities.
During the last earnings, GoTo revealed that it was already seeing increased spending by monthly transacting users, especially those using more than one service. These users typically spend eight times the amount as those using only one feature.
The number of users using both Gojek and Tokopedia increased 37% YoY in FY2021. Another key aim is to make users within the GoTo ecosystem stickier by increasing the breadth of services on offer. There is already evidence that e-commerce customers also buy groceries on Tokopedia making food a natural addition to tapping the 100 million monthly active users on the platform.
Food delivery is a competitive space currently dominated by GoTo and Grab. Sea Ltd’s ShopeeFood is a potential challenger but, as a late entrant, its share remains relatively small at around 8%. Others such as Traveloka and AirAsia Food are likely to remain marginal players.
There are many more potential synergies to be had across the GoTo ecosystem, with recent developments around GoPay and now GoFood starting to scratch the surface. One, we see ecosystem play developing through Bank Jago, given that customers can open accounts through both the GoJek and Tokopedia apps.
Bank Jago is rapidly building its deposit customers but unlike others, it is not having to pay up for deposits with a CASA ratio of over 60%. This suggests that customers are joining the bank for reasons other than for a high-time deposit rate.
Another area that holds promise is the integration of a GoTo-wide rewards scheme under GoCoins, which already allows points generated through GoFood to be used elsewhere on the platform and vice-versa. This was launched in June and may take longer to develop but has the potential to cement customers to the wider platform in an even more meaningful way.
Bank Raya and the march of digital banks
Bank Raya – the neobank under Bank Rakyat Indonesia (BRI) that was rebranded as a standalone digital bank to better compete with the likes of GoTo-backed Bank Jago and Sea Ltd-backed SeaBank Indonesia – aims to unlock the economic power of Indonesia’s gig and service economy.
Bank Rakyat is the country’s largest microfinance institution and MSME lender by assets, with around 84% of its loans exposed to micro and ultra-micro lending. Bank Raya could tap the parent’s vast agent network to extend loans to small entrepreneurs and MSMEs.
BRILink, the agent banking arm of BRI Group, turns shop owners in the nation’s remote and rural areas into unofficial bankers who have the power to manage cash and payment transactions on the local level.
It does so by arming them with Bank Raya’s AI-powered suite of digital savings and lending solutions. Gig workers and small businesses can make a transaction by simply visiting their local BRILink agent.
Until very recently, BRILink agents could only access a small amount of capital for lending, with a waiting period for approval. With Bank Raya’s Pinang Paylater app, agents can now instantly access up to 25 million rupiah ($1,700) and offer borrowers multiple repayment periods from five, 15, to 30 days. By the end of 2022, Bank Raya aims to increase its total small loan disbursement via BRILink agents to 7.7 trillion ($525 million).
On the borrowers’ side, BRILink’s liquidity boost has sweeping implications for millions of freelancers, small entrepreneurs, and MSMEs across the nation.
Bank Rakyat Indonesia continues to double down on the growth of BRILink Agents to strengthen its retail business.
Fintech companies are also actively seeking exposure to Indonesia’s vast underbanked population. Bank Raya seems to have an edge over these players due to its existing network and relatively low cost of funds.
Its strength also lies in the bank’s track record in managing risk for smaller borrowers. The bank has been investing in tech for some time developing mobile banking for customers together with its BRISpot for bank agents.
Bank Raya’s stated strategy to target gig workers in Indonesia would put it in a direct faceoff with Bank Jago, SeaBank Indonesia and Allo Bank but given the size of the market, there is certainly room for a few players.
Similar to digital banks, Bank Raya also offers paylater, P2P lending, QRIS payments and digital savings.
The only challenge is to maintain a clear demarcation between the customer territory of Bank Rakyat Indonesia and Bank Raya as both are focused on the same market segment. Bank Raya, which is already plugged into a rich rural ecosystem with the backing of a market leader in microloans, does enjoy a unique advantage compared to many newcomers in the space.
Angus Mackintosh, a consulting editor with DealStreetAsia, is responsible for the publication’s Southeast Asia digital economy weekly newsletter and its monthly research reports. Angus is also the founder of CrossASEAN Research and publishes on Smartkarma.