Payments

Visa hedges bets by backing Gojek and Grab in SEAsia payments race

The global payments processor has invested in Gojek as well as earlier backing Grab.

Global payments processor Visa has invested in Indonesian ride-hailing app Gojek and the two said they will work together on spreading cashless payments across Southeast Asia.

The investment is part of the latter's ongoing series F fundraising round, the two partners said on Wednesday. Gojek is looking to raise close to $2.5 billion from this round of fundraising, a person familiar with the matter told FinanceAsia.

Gojek’s arch-rival Singapore-headquartered Grab also won investment from Visa earlier and it teamed up with Mastercard in October to issue prepaid cards tailored to Southeast Asian consumers.

For Visa and Mastercard, Southeast Asia represents a major growth opportunity. The vast majority of transactions in Indonesia are still cash-based and the adoption of digital payment services is as low as one in four users in markets like Vietnam, says a widely cited report by Google and Singapore’s Temasek.

Addressing this opportunity could increase Gross Domestic Product levels by between 9% and 14%, even in relatively large Southeast Asian economies, according to a report by the Asian Development Bank and consultancy Oliver Wyman. 

The partnership with Visa comes at an opportune time for Gojek, which has been looking to expand its payments arm Go-Pay across Southeast Asia. The Jakarta-headquartered startup acquired a majority stake in Philippine fintech company coins.ph, which operates as a mobile wallet provider.

"Having driven the adoption of digital payments in Indonesia to improve incomes and lives, we are delighted to work with Visa to collaborate on further expanding our solutions to consumers across Southeast Asia,” Go-Pay chief executive Aldi Haryopratomo said in a statement about the fundraising on Wednesday.

Gojek and Grab are ahead of their global ride-hailing peers such as Lyft and Uber in terms of seizing the opportunity to expand payments widely.

GO-PAY’S GROWTH

Go-Pay uses a QR code, a scannable matrix, which is a cheaper option for merchants than point-of-sale (POS) devices and quick to use for consumers.

Growth is no longer limited to that of Gojek’s platform and there are indications that its expansion was explosive in 2018.

Go-Pay started accepting payments for services beyond Gojek’s businesses in May last year after acquiring three payment businesses in December 2017: offline payments processing firm Kartuku, a Northstar portfolio company, community-based lender Mapan and payments gateway Midtrans.

That shift in strategy to an open-loop system gave the service firm a real fillip. As a result, Go-Pay offline has ballooned, generating close to $1 billion in terms of its GTV annualised run rate as of December, from virtually zero in 2017, according to industry sources and a document viewed by FinanceAsia.

More widely, Go-Pay handled almost three-quarters of all mobile payments made in Indonesia in the three months to September-end, according to a survey by FT Confidential Research. As of February 1, Go-Pay said it processes $6.3 billion of annualised GTV. This is up from $667 million as of 2017 according to a document viewed by FinanceAsia.

Investors might be underestimating this element of Gojek’s valuation, which glues the businesses within its ecosystem together, cuts down the friction in making a digital payment and gives it reach beyond its own branded services.

“In the long term, we expect Go-Pay to become Gojek’s most valuable business with Indonesia near-perfect market for e-wallet proliferation,” forecast brokerage CLSA in a report last year.

Payments is a lower-margin business than Gojek’s other core services but its reach, combined with data analytics, is increasingly attractive to other financial-service firms looking to piggyback on its network. Traditional banks are grappling with the steep costs of running bricks-and-mortar bank branches. As of January, 28 financial institutions were riding Go-Pay’s payment rails to reach consumers, including Indonesian state-run lender Bank Negara Indonesia.

Gojek provides financial services to its users ranging from loans to pay for smartphones, refinancing for motorbikes, working capital financing for merchants, to saving plans for a Haj Islamic pilgrimage. Gojek leans on the balance sheet of third parties to provide these products. 

One clear advantage Gojek has over Grab in Indonesia is that it has an e-money license that allows it to use its own in-house payments system rather than rely on a partner.

Indonesia’s central bank suspended Singapore’s GrabPay from operating within its jurisdiction in 2017 and capped foreign ownership in e-money firms at 49% in May last year. So, instead, Grab uses a payments platform deployed by Indonesian conglomerate Lippo Group called OVO.


 

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