Name: Eastworld Spotlight: Southeast Asia is too diverse for a ‘one-size-fits-all’ approach to digital transformation
Uploaded: 2021-06-29
Duration: 14 min 57 s
Description: Xendit’s COO Tessa Wijaya on challenges operating in the region.

Xendit’s COO Tessa Wijaya on challenges operating in the region.

Eastworld Spotlight: Southeast Asia is too diverse for a ‘one-size-fits-all’ approach to digital transformation

Commentary

Southeast Asia needs a diverse approach to digitization

Eastworld Spotlight: Southeast Asia needs a diverse approach to digitization

Yeah, welcome to East World spotlight. Series of online conversations in which the editors of Fortune talk with leaders from the worlds of tech, trade and Finance in Asia. Our guest today is Tessa Wijaya, co founder and chief operations officer of sending one of Indonesia's leading Fintech startups. Before we began a quick reminder, you can get East World fortunes newsletter on asian business delivered to your inbox every Tuesday and thursday by signing up on the lead link featured in the article below this video. But Tasha welcome, Thank you for joining us. Thank you for having me. So, um, let's talk a little bit about Send it Send. It is based in Jakarta, although you're joining us today from from bali, which is nice um, and it was was launched in 2015 as a peer to peer payments provider and was the first Indonesian company accepted into the seed stage accelerator y Combinator Midway through the program. As I understand it, your startup pivoted to become a payment gateway, which enables businesses to collect and transfer payment data from buyer to seller. You've raised $88 million accel and you have offices in Indonesia and the Philippines. So, uh, congratulations on this promising start. Um, maybe you could start by just explain these people a little bit about what a payment gateway is and what you do for customers. Sure. Thanks. So what's the payment gateway? I like to use, um, the analogy, uh, logistics company, but we actually move money so we accept funds and we deliver funds on behalf of our merchants so that they can transact online with us. Um, so basically reflect the stripe of Asia. So, okay, so like describe from Asia? That's very interesting. Um, tell us a little bit about the type of merchants that you would work for. I mean, are they large? Are they small? Uh, what's the spectrum? So we work with both large and small merchants. Um One of our bigger customers, for example, is travel Loca, so we help those guys help help them accept payments online. Um through our platform, we also have a bunch of smes that we've been helping uh to really move to become a digital player. So what this means is, hey, if someone, someone wants to sell something online, stay through a platform like Shopify, we can also help them accept payments in that way. Uh And just maybe I'll explain a little bit more what what we mean by accepting payments or sending money because I think um in people's minds when they go to website and, and they go shopping for example, for something, um they think, hey, it's actually the merchants who are providing the payment rails, but in reality is payment gateways like us that provide the piping essentially to link your bank account to the merchants bank account and or to the likes of Visa, Mastercard. We help both e commerce players as well as other fintech players. Uh for example, if you're a peer to peer lender, you're coming into market in Indonesia, you need to accept payments um for repayment of loans or need to disburse loans. We can help provide those piping for you as well. Um So it's not just about e commerce, it's about other, other types of fintech or anybody really who wants to come online and accept payments uh online with us, many of these e commerce companies obviously have very sophisticated platforms themselves, uh and are to varying degrees. They have fintech capabilities. Why would they turn to you and what is it that you can provide for them, that they can't do for themselves? Yeah. Look, I always say building a payment platform is extremely hard. You have to knock on the door of basically each of the banks in Indonesia or in the market, you have to knock on the on the doors of the e wallet players in market to be able to provide those payment message. So for the likes of e commerce players, you know, they already have to build a whole platform, they already have to figure out algorithm to make sure that the right products are in place or that the right merchant, it would be really distracting for them to be figuring out how to manage payments themselves. And just as a reminder here in in market, in Southeast ASIA payment method, um that are very prevalent here are very different than in the developed world. Uh it's very much non card face, what this means is a lot of people are still paying through bank transfers or e wallet payment. So what this means is that you must be able to integrate multiple players. You must be able to figure out hey which bank transfer um which bank accounts wanted to open to be able to accept payments from certain end users. So I think for these guys for whom payments is not their core product, it would be a whole other businesses they're trying to set up which will distract them from their core business lines. So that's why we're here. So that's really interesting. You made this comparison which which many people do to send it and and stripe. But in fact the environment that you operate in is much different than the environment that strike operation for the life of strike who operate in the Western world payments is mostly about credit card. So it's about connecting to Visa and Mastercard and then it's about, you know, payment security, uh, fraud guard for us payments is a lot more varied. You have to understand that in markets in Southeast Asia, a lot of people are not even back. So we have to provide many many different options so that they can access payments online. Uh, let me give you an example. A lot of people in Indonesia. They have smartphones. I think about 70% of the population of smartphones, but many of them, many of these guys who have smartphones, some of them might not even have bank accounts. So what we would provide is things like, hey, you can go to your 7 11 several, you can, You can still shop online and then you can make that payment under 7:11 and therefore you don't even need a bank account. So that's really that market different as to why. Um, we we are here specifically for Southeast Asia. That's really extraordinary. Um you mentioned that you're operating in Indonesia and the Philippines. And um, that struck me as very uh interesting because you also talked about the complexity and the different banks and the regulatory issues. Um, I mean, obviously, Southeast Asia itself is one of the most diverse, complicated regional market uh, in the world. But it's interesting that you also describe the complexities of just trying to operate so far only in these two countries. Why why would it be so difficult to figure out only to regulatory system? Look, I mean, uh, people love to swap southeast Asia as kind of one market when in reality we have about 25,000 island in the whole southeast Asia Indonesia itself has about 17,000 islands. Can you imagine the complexity of payments? Um I analogize payments to, you know, moving money in trucks. Can you imagine moving all that through different islands where maybe the infrastructure? Um it's not exactly um, you know, top of the line yet. Um so I think, I think we have to understand that because of such varied cultural, such varied amount of people and as well as the vast number of islands payments can be super duper complex. Um What may be a pain point in Indonesia may not be one in the Philippines and then vice versa. So we're seeing, for example, in Indonesia, uh most people are already trained to sort of do bank transfers because you know, we've been trying to do so because a lot of these ride hailing apps have common market in the Philippines. What we see is that people are still predominantly paying by cash. So again, that behavior is completely different. So I think when people say, hey, let's go to south East Asia, let's tackle payments there and they sort of underestimate and think the whole Southeast Asia the same, I think that's a big mistake and really, you know, that's why we're here because we're able to understand the differences in each of these markets. Yeah, and again, this is really a key difference with a market like Indonesia or the Philippines is that there's, you know, such a substantial population, part of the population that is, that has no access to banking services at all. And this is also a big difference between even even china where, you know, you can go to fairly remote local villages and people still have bank accounts, but in Indonesia, large percentage of the population not only has no bank account, they've never even seen an ATM machine and so to figure out how to serve them is a challenge. Yes. But ironically we have the highest, I think facebook or instagram user in the world. Um, so I think we're fascinating that we're all online, we all have mobile phones, we have a way to access the digital economy, but yeah, we don't have bank accounts. It's a really amusing behavior there. Uh Well, I mean, in that sense, I mean, I find Southeast Asia to be one of the most interesting Texans in the world right now because uh there is no none of this kind of legacy finance technology. Southeast asian firms like yours are leapfrogging to do things that are really harder and more challenging than anything that's going on not only in the United States, but even in markets that are perceived as kind of cutting edge internet leaders, like, like china, I was just gonna ask a little bit about your plans for regional expansion. I mean, do you feel like these, I mean, these are two very big complicated market Indonesia and the Philippines, but that's kind of enough to be dealing with for now. Or are you looking at expanding soon into other markets? I think definitely we have bigger ambitions. Um, we'd love to be in, you know, expanding out into the likes of, you know, Malaysia Thailand Vietnam. We definitely have our eyes set on those markets. And the reason again, is this on the, on the, from the outside, you could probably say, hey, you know, the likes of Malaysia payments already set, um, multiple, probably on credit cards and there are no issues there. But when you're listening to the demand from the customers, they're saying, hey, it's still really difficult to make payments instantly or to accept payments instantly. It's still really difficult to figure out in some settlements And you know, in today's world 2021, everyone wants something instantly when it comes to doing stuff online or when when it comes to transacting online. So I think for us, definitely the ambition is there. And the reason is that I think we have been so good at being hyper localized. It's just in our D. N. A. To be able to go deep into the text back of payment players in that market to connect to the bank to connect to the wallet. It's in our DNA to be able to figure out local life systems of payment and then be able to translate that to world class apps that global players can use. Let me ask you just quickly about uh the last year, obviously the pandemic has offended a lot of different business models. How has it affected your business model? Has it been a positive or has it been a setup? Yeah, that's a really good question. I think. Look, we've been the really lucky ones. The pandemic has really accelerated the move For both markets to go digital. So basically the digital economy, uh the economy 4.0, as the president of Indonesia calls it, um that growth has been really accelerated just because, you know, you can no longer just be offline shops had to close. Um you couldn't walk outside. Um everyone was stuck at home. Um So super duper interesting for us because uh before the pandemic were predominantly serving a lot of enterprises through the pandemic, we're seeing a massive influx of smes, the mom and pop shop um that are coming online with us. Um and and let me ask you about your staff. Uh you started with, I don't know, something like 10 people. How how big is the, how many workers do you have employees do you have now? Yeah, I mean I remembered um four or five years ago. We, you know, we were we start out at a house which is the garage version of Indonesia, right? Most startups has been started in garages. Um we started about 10 people and now we're at more than 500 and a lot of us are not even based in Indonesia anymore. So um yeah, we have offices in Jakarta and Singapore as well as Philippine. It's been a super exciting time for us. Um One really interesting fact as well as we basically almost doubled and workforce and Covid started. Um so that's been a super exciting time for us. And it's all the bizarre actually because some of these guys are a lot of these guys I've never met in person. So very exciting times again. What about you? You were educated in the U. S. Uh and and then later in Australia came back to Indonesia, you were working for a private equity firm. I mean you could have stayed in a stable financial job. What prompted you to abandon all that uh to leap into being an entrepreneur and and take a chance on a fly by night, you know, start up that was just getting going. That's a really good question. I sometimes ask myself the same thing. I'm kidding. Um So I mean look a lot of people in my family um have been entrepreneurs and a lot of them have had to do it, you know, not by choice but by necessity because they have to uh to put food on the table. But also during my private equity time, I met a lot of entrepreneurs here in market, that's just got some really amazing story. I remembered one person, she was like, she was manufacturing packaging for SMP G. And she told a story about how her father started the business and when he started out, he was picking cardboard and landfill and it became this massive enterprise, and she was looking for private equity investment. And I thought, you know what, I've been looking at a lot of companies and it's been super interesting, maybe it's time to take the leap and do it the other way around. Um and really, I was really uh super lucky with timing, because right about 2015, 2016, that was when the startup scene was starting to really happen in Indonesia. A lot of Fintech was starting to pop up and it was just a really exciting time to be, uh, to be in the tech space. So I decided, okay, this is my time, this is my moment. Why not? Let's give it a try. If things don't work out, I can always go back to the investment world and yes, so I did that and never looked back then. Well, it seems to have worked out very well for you, um, and we appreciate you taking the time to tell us a little bit about the growth, attend it and I hope you'll uh, enlighten us again as your growth continues. Thank you so much for having me.