Indonesian Traveloka doubles fintech ahead of IPO

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JAKARTA – Indonesian Online Travel Unicorn Traveloka steps up its stake in the financial services industry as it prepares a first public offering.

Primarily known as the Southeast Asian country’s equivalent to Expedia, the US travel reservation service, Traveloka has steadily grown into a booming fintech player in recent years and is now expanding its’ buy now, pay later ”beyond its ecosystem.

With travel slowly recovering in parts of the region, analysts say the later payment service could increase the unicorn’s valuation – a private company valued at over $ 1 billion – when it goes public, now scheduled for next year.

Fintech “is certainly very important … Fintech is one of the three [business] pillars, ”Traveloka President Caesar Indra told Nikkei Asia in a recent interview. The other two pillars are travel and lifestyle services, including reservation activities and food deliveries.

“We will continue to invest in the region and develop more products in the future, as the opportunity is quite large,” Indra added. Although he declined to share the amount of the investment for the company, he said the company “hopes this fintech [business] will become a major revenue driver. “

Buy Now, Pay Later is essentially a digital credit service primarily for e-commerce, allowing consumers to buy a product and pay at a later date, often in installments. It primarily targets the underbanked, a large Indonesian population with growing purchasing power but lacking in services such as credit cards. The industry has experienced accelerated growth with the biggest local tech players including GoPay, which is part of the country’s largest private tech company, GoTo, and Ovo, the Indonesian digital payments arm of Grab from Singapore, all joining the fray.

A 2019 report from Google, Temasek, Bain and e-Conomy SEA found that underbanked people in Indonesia totaled some 47 million people, or 26% of the adult population. The country is the fourth largest country in the world with around 270 million inhabitants.

Traveloka was one of the first startups to offer buy now, pay later in Indonesia when it launched the service in 2018. While confined within the Traveloka ecosystem, the travel startup is now expanding the service outside its platform. The latest move came in September, when it partnered with state-owned bank Bank Negara Indonesia and launched PayLater Virtual Card Number, a pseudo-virtual credit card, allowing customers to use Traveloka PayLater on websites. popular e-commerce companies like Tokopedia and Shopee.

Indra’s company also participated in a recent fundraiser by Sirclo, an e-commerce facilitator for micro, small and medium-sized businesses or MSMEs, and the Indonesian equivalent of Shopify, to introduce the PayLater option. for MSMEs selling their products online using Sirclo’s service.

“We want to extend [PayLater Virtual Number] to a greater number of users, ”said Indra. “During COVID, there is an acceleration in digital adoption. More transactions are done online, even food consumption, meals are ordered[ed] digitally … Those with virtual numbers deal 3 times more value than [regular PayLater users] without virtual numbers, “he added.” We don’t know if this trend will continue but it is a promising trend. “

Traveloka having a later payment service “makes sense given that consumers will often see vacations as an expensive item, where spreading the cost over a period of time would be quite attractive,” said Angus Mackintosh, founder of CrossASEAN Research. “Extending it to a credit card type arrangement also makes sense once you establish the customer’s creditworthiness. This means that you now have them on the hook for purchases on the Traveloka platform, which provides the opportunity to further improve returns. “

Leading a growing fintech company is a real transition for Traveloka, a startup that started life as an airline ticket search engine when it was founded in 2012. But Indra said from the start, the company realized that an underbanked population was a problem. in Indonesia.

“The most popular method at the time was wire transfer … A lot of people [booking travel] had a bank account[s] but no access to credit, “he said.” That explained [to us that] there was a big gap in [the] market with access to credit. Credit card penetration is 10% in Thailand, Vietnam and Indonesia, but many people had bank accounts[s], and we wanted to solve this problem. “

The move to credit services was “natural” as they have a “good synergy” with travel, Indra said, noting that those who can afford big-ticket items like overseas travel generally have good creditworthiness.

In addition, Indra said that a travel agency like Traveloka can “do well” in the area of ​​KYC, or “know your customer,” which is a crucial element in making decisions about granting credit. “For example, when you board a flight or check in at a hotel, you have to fill in the correct information and show your ID at the check-in counter,” he said. “We have an advantage by having a very precise profile. On our client.”

Passengers line up at Bali’s Ngurah Rai International Airport on October 9. The pandemic has hit the travel industry in Asia, but the situation is showing signs of improvement. © Reuters

Traveloka is also looking to expand its PayLater service outside of Indonesia, Indra said, with Thailand and Vietnam seen as the top markets. Together they have an underbanked population of 32 million, according to the 2019 Google report, and together with Indonesia, make up 80% of the underbanked population in Southeast Asia. “I think the market has a consumer characteristic, structural gap and similar challenges [to Indonesia] that we believe [we] may well be addressed, ”he said.

Tech companies getting into fintech businesses are not uncommon in the region, with major players like Gojek, Grab, and Singapore’s Sea all having payment arms. Nadiem Makarim, founder of Gojek and currently Indonesian Minister of Education, previously said that a payment service is “so important” because it is “the glue that binds” all services on a given platform and increases transactions within the ecosystem.

Traveloka PayLater has apparently achieved this goal. Indra said PayLater users have grown 7.5 times since its launch, and the startup has facilitated nearly 7 million loans through the service. “When you look at the whole transaction[s] on Traveloka, 8% is done through PayLater, “he said. A user who uses PayLater compared to those who do not make an average of 25% more transactions on our platform. The average value of transactions also increased by over 30% compared to those without PayLater. “

One area where other tech companies have been but Traveloka has not is banking, seen as a natural progression of payment services; GoTo owns just over 20% of Bank Jago, a local digital bank, while Sea now owns 100% of an Indonesian bank, renamed Bank SeaBank.

But Indra says Traveloka is taking a cautious approach at the moment. “We currently have no plan [to move into digital banking]”he said.” We believe in partnership and we are focused on building [our] fintech capability. “

With or without a bank, having a growing fintech service should be of great help to Traveloka during its IPO, especially when travel is slowly recovering. One reason for optimism is that Finaccel, a Singapore-based financial technology company with Indonesia as its primary market, was valued at $ 2.5 billion in a special purpose company acquisition deal. announced in August.

Traveloka originally planned to list in the United States through a merger with Bridgetown Holdings, a SPAC backed by billionaires Richard Li and Peter Thiel, but talks reportedly failed. A source familiar with the matter said Traveloka is now considering listing in the United States next year through a conventional IPO, adding that the Indonesian company “should be [valued] more “than the valuation of Finaccel.

“It’s probably not a bad time to list, consider a [travel] recovery and the fact that the company is probably looking to expand its other lifestyle businesses and buy now, pay later, which requires additional capital, ”said Mackintosh of CrossASEAN Research. “Adding these extra activities can add value, but it’s probably too early. say how much. “

Traveloka’s existing investors include Singapore sovereign wealth fund GIC, Qatar Investment Authority, Expedia and local venture capital firm East Ventures, among others.

Indra declined to comment on the IPO as well as the reported breakdown of Li and Thiel’s PSAC merger talks.

“What we’ve always said to the market is … the same thing [message]”said Indra.” We are using FinTech to empower Southeast Asian consumers to improve their lifestyles and this builds on our strong travel business, and with that, we hope to more and more consumers will have access to credit or modern financial products. “


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