One cannot talk about startups in Indonesia without bringing up Bukalapak, arguably one of the biggest e-commerce platforms in the nation.
Bukalapak has graduated from its startup roots and gained the coveted title of Indonesian unicorn, and are now in the midst of an expansion exercise into other Asia Pacific markets.
Bukalapak has a robust history with the many e-wallet providers operating in Indonesia right now, and has also opened their platform up to more innovative fintech providers.
The e-commerce unicorn allows its e-commerce buyers to pay with Akulaku and Kredivo, both platforms which grants installment payment abilities to buyers without credit cards or a traditional credit history—a significant offering in a region where only about 4% of the population had a credit card in 2017.
Suffice to say, there seems to be a direct correlation between the rise of e-commerce with the rise of fintech in Indonesia.
The Ups and Downs of Bukalapak’s Fintech
It is not a stretch then, for Bukalapak themselves to dabble in fintech. Despite a slowdown on P2P lending in Indonesia, Bukalapak teamed up with P2P lending startups Amartha, Modalku and PohonDana to provide loans in their app under a program called Modal Mitra, geared towards their offline vendors part of the Mitra Bukalapak program.
A few months before that, another partnership with Investree allowed the platform to launch BukaModal, a feature to offer financing for its online sellers that hits a certain amount of sales.
Seemingly geared towards the company’s stated goal of financial inclusion meanwhile, Bukalapak has also has offerings in other fintech realms, like mutual funds (BukaReksa), credit (BukaCicilan), and most interestingly, a gold investment marketplace, BukaEmas, which the company claims is garnering traction.
There is also the platform’s e-wallet BukaDana, seemingly a tide-over wallet for the controversial BukaDompet. The original e-wallet has been frozen due to a Bank Indonesia crackdown that put a moratorium on a variety of e-money providers dealing with a large amount of funds, Bukalapak included.
Despite their difficulties so far dealing with the grey areas of a nascent scene, president and co-founder of Bukalapak, Fajrin Rasyid, has a surprisingly positive outlook on Bukalapak’s fintech journey.
“Fintech Will Potentially Grow Even Faster Than E-commerce Itself”
For now the fintech market on Bukalapak is small, but Fajrin is optimistic that it will become more important moving forward.
Fajrin’s opinion here is an observation of their own operation in Indonesia, but it is also part of the company’s vision towards its newly-launched BukaGlobal, which opens doors to customers from Singapore, Malaysia, Hong Kong, Taiwan and Brunei to receive purchases from Indonesian merchants within 6-11 days. For now, this is more of a logistics play, but it may also be an avenue for further fintech ambitions.
“We haven’t decided. But we are thinking of some (potential fintech offerings). For example, one that is relevant is remittance.”
“We don’t know how people here usually send money to Indonesia, and vice versa. If I send money from Indonesia to here, for example, how do people here take out the money, and one way is through the wallet. But the other way is to get it in cash. Recently we have this initiative called Mitra, which we partner with more than 800 thousand offline stores in Indonesia at the moment. And we’re thinking of using that as a cash-out point (for recipients).”
As Indonesia moves towards cashlessness, it seems like Fajrin still sees value in offering cash to Indonesians.
However, a big question remains. It’s all well and good for Bukalapak to offer a wide variety of fintech services to its consumers—be it via partnerships or via its own in-house driven initiatives—but how would it “grow even faster than e-commerce”?
Presenting E-Commerce and Fintech as One Unit
During our little chat, Fajrin painted a picture of integration between its e-commerce side and its fintech side.
Using its investment offerings as an example, Fajrin clarified that anyone can use the platforms to invest in mutual funds. However, through its escrow system, Bukalapak will prompt merchants with the option to either funnel their earnings into a mutual fund, instead of their bank account. Therefore, they have a specific set of promotions and campaigns targeted to the merchants on their platform, ostensibly offering a more convenient avenue for SMEs to grow their wealth.
Fajrin even claims that the returns are higher than putting the funds into a bank normally.
Creating an ecosystem around its offerings, be it in-house expansions or partnerships, is a strategy that has served China behemoths like Alipay, WeChat Pay and Ping An well. Alipay’s value accelerated when they began sewing a tapestry of services into its offerings, financial or otherwise, like investments, loans, crowdfunding, and etc. WeChat Pay meanwhile, was already a lifestyle app to begin with so it had this strategy in the bag.
With integrated services in mind, Bukalapak’s new fintech baby is an upcoming insurance offering. The obvious idea would be to provide a marketplace for insurance, like life or health insurance, and Bukalapak intends to do so. But Fajrin also said that:
“You could also get insurance for, let’s say buying a smartphone on Bukalapak. Now you can add insurance on top of (your purchase) to gain more coverage.”
Eventually, Bukalapak may get to a point where users can’t figure out where e-commerce ends and fintech begins—and that may be just the way they like it.
We also asked for hints on any future projects, and Fajrin complied:
“Maybe I can share about one we haven’t launched, which is equity investment. Hopefully in the near future, you can also buy stocks on Bukalapak, Indonesia’s Bank BCA or Telkom Indonesia, etc.”
Fajrin admits that the legality of that future offering is still in a grey area, so he concluded saying “that’s why I can’t share in regards to timeline yet, but in the near future”.
Avoiding Another BukaDompet Debacle
It is no surprise that the continuous freeze of BukaDompet continues to be a bane to its users, and this continues to plague the company today as consumers are still facing difficulties liquidating BukaDompet funds. There was apparently some issue with communicating the freeze to its users, and now many consumers have branded the platform thieves.
With a plethora of competition, any difficulties experienced by customers, especially pertaining to their money, could tank a brand’s entire reputation.
So Fajrin told us that Bukalapak has brought on two teams focused specifically on regulations.
“The first deals with legal compliance (with) regulations that already exist. If we want to launch fintech in Malaysia, for example, then this team will look at regulations (there we need) to comply with.”
(When) talking about fintech, there are regulations in grey areas, or regulations that just don’t exist yet. That’s why we have a public policy team, whose job is to discuss with the government regarding what we plan to do.”
The hope is that Bukalapak will be able to anticipate regulator movements moving forward, and plan its fintech products accordingly.
For now, Bukalapak’s fintech strategy veers towards partnerships, but signs point to them shifting gears.
“We didn’t have expertise when we started this. So if we do it ourselves using our own balance sheet money, if we lose it, then we lose our own money.With the partnership, it’s not our money. Yes we have to share the revenue, but at the same time, it also lowers the risk.”
“As we grow over time, then we’ll also build the expertise and database. We’ll know out of the loans given to our merchants, these are the characteristics of merchants that are good at returning the money.”
Fintech is pretty much a data game nowadays, so we do see some validity in Bukalapak’s fintech plans at this point. With more internal red-tape implemented in the company now though, will Bukalapak’s careful steps come at the price of innovation? Between its regulatory difficulties and BukaGlobal, we can at least say for sure that the company is in the midst of a transitional phase, and keen Indonesian observers will be keeping an eye on the company for the conclusion of their metamorphosis.
Featured image via Bukalapak