Indonesian state-owned digital wallet LinkAja shifts focus to lending

Indonesian digital wallet LinkAja, which is backed by several of the country’s state-owned enterprises (SOEs), is shifting its focus to lending, amid competition from unicorns such as OVO and GoPay in the retail payments segment.

The firm sees opportunities in “supply chain financing” — or lending to merchants — in the SOE ecosystem, said LinkAja’s chief marketing officer Wibawa Prasetyawan in an exclusive chat with DealStreetAsia. “If we restrict ourselves to being a payments provider, the margins are thin, therefore we will enter into lending, which is quite secure and has visibility from the supply side of agents, retailers, and end-users,” Prasetyawan added.

The company acquired the P2P lender iGrow in May 2021 as part of the shift to lending, he added.

Since then, LinkAja has been providing lending facilities to merchants of PT Telekomunikasi Selular (Telkomsel), a state-owned telecom firm that is also its shareholder.

“We have been successful in participating in Telkomsel’s supply chain ecosystem. LinkAja has become the e-wallet used by Telkomsel’s voucher distributors when they sell to retailers, and retailers when they sell the vouchers to end-users. We also disburse loans to Telkomsel’s retailers and distributors,” said Prasetyawan. “We will replicate this in the ecosystems of our other state-owned shareholders.”

As a next step, LinkAja targets to enter the ecosystem of its investor Pertamina, a state energy company that produces crude oil and lubricants. While LinkAja has already implemented digital payment options at fuel stations, it now plans to provide financing to oil & gas distributors, vendors, and merchants.

Besides Telkomsel and Pertamina, LinkAja counts BRI Ventures and Mandiri Capital, the investment arm of Bank Mandiri Tbk, among its top shareholders. It is also backed by the lender BNI, investment manager PT Danareksa, toll operator PT Jasa Marga Tbk, railway operator PT Kereta Api Indonesia, insurer Jiwasraya, and cement maker Semen Indonesia.

In November 2020, Southeast Asian superapp Grab became the first private entity to back LinkAja by leading a $100 million investment as part of a Series B round. This was followed by an investment from Indonesian ride-hailing giant Gojek in March 2021.

LinkAja was expected to benefit from the backing of the two tech giants. “LinkAja can have access to millions of Grab and Gojek users and their ecosystems, which will complement and expand the use case for LinkAja. Meanwhile, Grab and Gojek can also target users in Tier-I and Tier-II cities. LinkAja also has a strong ecosystem among the SOE companies, including the public transportation sector and gas stations,” MDI Ventures vice-president Aldi Adrian Hartanto had said at the time.

Profitability in 5-6 years

Despite the backing of several big investors, LinkAja does not figure among Indonesia’s top digital payments firms.

According to a market survey by Kadence International in August 2021, OVO has become the top digital wallet in Indonesia with a penetration of about 31% of total e-wallet users. It is followed by GoPay (25%), ShopeePay (20%), DANA (19%), and LinkAja (4%).  

Souce: Kadence International

While LinkAja, which started operations in 2019, has a lower penetration compared to other digital wallets, Prasetyawan says the company will be one of the fastest e-wallets to achieve profitability.

“We believe we can get to profitability faster, compared with others. While other e-wallets won’t be profitable in another 10 years, we target profitability after 5-6 years of operations,” he said.

Focusing on SOEs does not require much investment and is lucrative, according to Prasetyawan.

“The use case for LinkAja includes bill payments for [state-owned electricity distributor] PLN and other state-linked billing. In that sense, it has a captive customer base. LinkAja has not been aggressive in providing discounts like OVO, Dana, GoPay, and ShopeePay, but this [lending] may represent an interesting opportunity,” said DealStreetAsia consulting editor Angus Mackintosh.

LinkAja can tap 300,000 Telkomsel distributors and merchants across the archipelago. Moreover, Pertamina has around 250,000 merchants, including distributors, retailers, and stations.

Meanwhile, from the non-SOE ecosystem, LinkAja is present in over 1,200 traditional kiosks in the Sampoerna Retail Community (SRC), which is also a target for lending.

Widjayanto Djaenudin, chief operating officer (COO) at LinkAja said the firm is trying to reduce its marketing costs while increasing the unit economics.

Currently, LinkAja is in the fundraising process for the subsequent tranches of its Series B round. Prasetyawan declined to comment further on the potential investors and when it targets to close.

Unicorn status

The company also expects to become a unicorn faster than its peers.

For comparison, Gojek’s e-wallet GoPay had achieved the coveted $1-billion valuation in 2020, or about four years after it was launched. “We are two-and-a-half years old, and we are a ‘soonicorn’ [soon to be unicorn]. We will be faster compared to others in achieving unicorn status,” Prasetyawan added.

LinkAja was identified as one of Southeast Asia’s soonicorns by DealStreetAsia in its recent Private Capital Markets Report 2021.

Grab-backed OVO, meanwhile, had achieved unicorn status in 2019, two years after it was established in 2017.

According to the ‘Boku: 2021 Mobile Wallets Report’ survey, LinkAja was the third-largest e-wallet in terms of Gross Transaction Value (GTV) in 2020. Its GTV stood at $3.9 million in 2020, ahead of OVO and ShopeePay, which recorded $10.7 million and $4.3 million GTVs respectively.

In 2021, LinkAja’s GTV grew 50% with more than 80 million registered users, said Djaenudin.

The Boku: 2021 Mobile Wallets Report survey also estimated the number of e-wallet users in Indonesia will grow to 202 million, or 76.5% of the total population, by 2025.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.