Go-Jek buys fintech trio to boost its digital wallet

Tencent-backed Indonesian unicorn, best known as a ride-sharing platform, looks to extend use of Go-Pay wallet to meet more daily needs in a country where few have credit cards.

Indonesia's first home-grown unicorn, Go-Jek, is buying three up-and-coming fintech companies in the country to reinforce its leading position in the payments market.

The start-up, backed by KKR, Warburg Pincus and Tencent, has entered into definitive agreements to acquire offline payments processing operator Kartuku, online payments provider Midtrans, and Mapan, a community-based saving and lending network, for undisclosed terms, Go-Jek announced on Friday.

The deal is intended to expand the use of its Go-Pay digital wallet to plug daily needs as Southeast Asia's most populous country moves towards a cashless society.

Go-Jek is trying to build an inclusive payment ecosystem for financial institutions, corporates, small to medium-sized enterprises, as well as retail customers, many of whom are unbanked. Its vision is in line with Indonesian government’s plan for the country to become the largest digital economy in Southeast Asia by 2020, and the company hopes to follow the model set by India and China, where backer Tencent's WeChat pay is near-ubiquitous.

Collectively, Go-Jek and the compaines it is acquiring now process close to $5 billion worth of debit card, credit card and digital wallet transactions, according to Go-Jek.

Although often referred to as Uber or Grab’s local ride-sharing rival, Go-Jek has transferred into an on-demand multi-platform services provider that goes far beyond ride-sharing. It now operates food ordering, grocery shopping delivery, pick-up trucks service, instant courier service, and event and movie ticketing, among others. And the Go-Pay platform is plugged into every segment of the Go-Jek ecosystem.

It also recently launched Go-Bills, where customers can use Go-Pay to pay for bill payments. And in August, Go-Jek acquired event management and analytics platform Loket, which now manages Go-Tix, Go-Jek’s own ticket and entertainment platform.

Today, Go-Jek is Indonesia’s largest ride-hailing, food delivery and instant logistics business and a leading digital wallet provider, with 15 million weekly active users and 900,000 drivers, more than 125,000 merchants and over 100 million transactions processed through its platform per month.

And the acquisitions will help expand Go-Pay acceptance out of Go-Jek platforms into the offline space through Kartuku as well as online through Midtrans, while increasing financial inclusion for the unbanked population through Mapan.

“2018 will be the year that Go-Pay moves beyond the Go-Jek ecosystem, providing convenient, secure and reliable payments both offline and online,” Go-Jek’s president Andre Soelistyo said in a statement.

“Year for Go-Pay”

Kartuku, for example, will focus on Go-Pay’s offline use by integrating acceptance of the mobile wallet into its existing enterprise merchant network, Kartuku CEO Thomas Husted said in the statement. As Indonesia’s largest offline payments company, Kartuku now serves almost all the top 100 enterprise retailers in the country, operates 150,000 point-of-sales payment devices and has partnerships with nine acquiring banks.

“We want to be the largest consumer-based on-demand platform,” Soelistyo told FinanceAsia in an interview on Friday.

That explains “the heavy emphasis at the beginning to provide consumers with transport and food services, as that’s probably the couple of largest use cases for a lot of Indonesians,” Soelistyo said of Go-Jek’s platforms Go-Ride, Go-Car and Go-Food. “That also allowed us to build a large consumer base for us to start doing payments,” said Soelistyo.  

Using China and India as a reference, Soelistyo said these markets – where the use of digital wallets is very popular nowadays – started with its use for a particular activity where consumers get hooked into the wallet, and then provided reasons for consumers to continue using the wallet.

“I think transport and food is our hook, and now we are building bigger use cases outside [Go-Jek's] ecosystem, such as offline and online payments, to be able to continue providing our users with convenient payments,” Soelistyo said.

“The day consumers don’t need to bring their physical wallet any more is the day Go-Jek achieves its objective,” Soelistyo said.

He declined to comment on the size of the acquisitions, or Go-Jek’s valuation post the deals. The company is valued $1.8 billion post the investment by Tencent and JD.com in May, according to unicorn data provider CB Insights.

By 2030, Indonesia will add another 90 million people to its consumer base, which is more than any other Southeast Asian country, according to McKinsey Global Institute. Still, 96% of the country's 262 million citizens has had no access to credit cards and 64% no access to the formal banking sector for more than 15 years, a January report by KMPG Siddharta Advisory shows. But the potential to tap the unbanked population is there as more Indonesians use the internet; the country will have 145 million internet users by 2020, consultancy McKinsey & Company estimates.

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