Indonesian state-owned digital payments provider LinkAja is slowly getting back on its feet after the rude jolt from the COVID-19 pandemic, by tapping new revenue streams and user segments.
The e-wallet, launched in June 2019 by a consortium of state-owned enterprises (SOE) including railway operator PT Kereta Commuter Indonesia (KCI) and the toll road operator PT Jasa Marga Tbk, focused on transportation. With exclusive rights to provide payment services on public commuter lines and toll roads, LinkAja, it was felt, could challenge the domination of Go-Pay, owned by Gojek, and Grab-backed OVO.
However, with the COVID-induced lockdowns in April-June curbing commuter movement in Indonesia, the firm’s revenue tap ran dry. Moreover, LinkAja, an integrated e-wallet, was also one of the payment options for ride-hailing players Gojek and Grab, which also took a hit due to the lockdown.
“Our transactions from transportation and offline merchants dropped more than 50 per cent, particularly in April and May. It was the hardest moment for our merchants and us,” Edward Killian Suwignyo, chief marketing officer at LinkAja told DealStreetAsia. “Yet, we’ve slowly recovered since June with e-commerce transactions and cash-mitigation transactions in traditional markets,” Suwignyo added.
Aiding this recovery was LinkAja’s integration with e-commerce players, including SoftBank-backed Tokopedia and EMTEK group-backed Bukalapak. E-commerce transactions helped to boost LinkAja’s overall transactions by 50% from pre-pandemic levels.
With help from state-owned PT Bank Mandiri Tbk, shareholder, and the government, LinkAja also onboarded 44 traditional markets, selling daily groceries, to use Quick Response Indonesia Standard (QRIS) — a national standard QR code launched by the central bank, Bank Indonesia, in May last year. QRIS makes it possible for customers of one payment service provider to transfer funds to a rival service. This helped all players, including LinkAja, to acquire more users.
Aside from e-commerce and traditional market transactions, which helped offset the loss from transportation, LinkAja also doubled down on top-up phone credit and multi-bill transactions amid the pandemic, said Suwignyo.
It also launched a sharia payment service in April, with certification from the largest Islamic council Majelis Ulema Indonesia (MUI). It is the first digital payments firm to provide financial services compliant with Islamic law. The firm expects the service to attract more users in Indonesia, which is home to the world’s largest Muslim population.
In the future, LinkAja will have many sharia financial features, and integrate with sharia lenders, said Suwignyo.
A “daily-life wallet”
LinkAja is also exploring the untapped potential of customers beyond big cities to differentiate itself from rivals OVO and GoPay.
According to a 2019 joint report by Google, Temasek, and Bain & Co, Indonesia has 92 million unbanked and 47 million underbanked people, most of them in rural areas, among its 181 million adult population.
“Other e-wallet players have fulfilled customer needs in prominent cities and targeted the upper-class market. Our target is mid- to low-income segments and small and medium enterprises (SMEs), as our shareholders also have a big presence there. We want to fill in the blanks as e-wallets haven’t been strong there. We want to be a daily-life wallet for Indonesians,” Suwignyo said.
Currently, LinkAja has around 49 million registered users. While that’s up 22.5 per cent from 40 million in 2019, it’s still in fourth place mostly due to its late entry into the market.
In an interview to DealStreetAsia in August last year, LinkaAja’s then chief executive Danu Wicaksana had dismissed any challenges pertaining to the platform’s late foray into the market. “We think it is okay not to be the first in the market because, in the end, our mission is to provide solutions to the masses,” Wicaksana had said.
GoPay is the most used e-wallet app, accounting for almost 60% of organic users, according to a recent study by iPrice and AppAnnie for Q2 2019 to Q2 2020. Ovo and Dana were second and third respectively.
“We aren’t satisfied with our position today, we were not as aggressive as other players. We ensured that growth was sustainable. In the end, we believe people will choose “practicality”, which becomes our competitive edge compared to other e-money players,” Suwignyo said.
“Practicality” means LinkAja’s has acceptance across platforms, and across players like Grab and Gojek or e-commerce firms like Tokopedia, Bukalapak, and Blibli. Ultimately, people will choose a wallet that can access all ecosystems and players. LinkAja also has the pay-later service and offers lending facilities in tie-ups with third parties.
With ten state-owned companies as its backers, LinkAja has the potential to acquire more users from all cross sides compared to other e-money players.
Yet, there are some bottlenecks in the way of customer acquisition.
Besides rivalry with the big players, who offer cashbacks and promos, most rural people in Indonesia don’t see digital payments as essential. “Our typical competitor is still cash. We want to shift the customers’ habits from cash to cashless by being everywhere, and we still have a long journey ahead,” Suwignyo added.
LinkAja is working towards its Series B fundraising round, which will invite more investors in the company besides the SOEs. DealStreetAsia has learnt that Gojek and Grab could be potential investors in the Series B round.