With just over $3 million in venture capital funding, wealthtech app Tanamduit has managed to become a prominent player in the retail of mutual funds, government bonds, and gold in Indonesia within four years of operations.
On top of its existing asset classes, Tanamduit is now exploring adding stocks, corporate bonds, and P2P lending as part of the product offering on its app, co-founder and managing director Rini Hapsari told DealStreetAsia.
In a market crowded with more than a hundred investment management firms, and commercial banks serving as outlets to retail curated investment products, Tanamduit claims to serve roughly 8% of the country’s 4.7 million mutual fund investors as of May.
Key to Tanamduit’s growth strategy is its partnerships with major players in Indonesia’s tech ecosystem. As of today, the company has the largest number of retail partners among wealthtech startups, including the online marketplace Bukalapak, P2P lending players Akseleran and Investree, and financial planning app Halofina.
Like other wealthtech players in the market, Hapsari said her company had benefitted from the big shift in savings and consumption during the COVID-19 pandemic period, to which Tanamduit responded by stepping up market education programmes to promote investment in mutual fund products.
“We estimate that in the next 10 years, the total assets under management [in Indonesia’s mutual fund industry] will double and the number of accounts will reach 25-30 million,” she said, adding that her company expects to turn profitable by 2024.
Tanamduit had raised $3 million in seed funding from local venture capital firm RND Capital in 2018.
Hapsari was among the co-founders of wealthtech apps interviewed for our latest report The State of Wealthtech in Indonesia.
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Edited excerpts of the interview with Tanamduit co-founder and managing director Rini Hapsari:-
What are your projections for the development of Indonesia’s mutual fund industry, and what are some of the emerging trends that we will see?
The Indonesian mutual fund industry currently has 600 trillion rupiah ($42 billion) in total assets under management. Most of the total value is dominated by institutional clients. We estimate that, in the next 10 years, the total AUM will double and the number of retail investors will reach 25-30 million accounts from around 4.7 million today.
Digital investment platforms have become a major driving force behind the growth of investor accounts and AUM. In Indonesia, the number of investors has increased at least 10 times since 2016, when it was around 450,000.
Retail customers will dominate the number of accounts and AUM in the future as well. Customers have access to transact and can find information about mutual funds through financial technology applications. Investment managers will concentrate on portfolio management, while sales will rely heavily on selling agents backed by digital technology.
Investment products will be more diverse. Apart from the plain vanilla or traditional mutual funds, exchange-traded funds will also grow.
Of the 4.7 million mutual fund investors, what is your market share?
We estimate that our market share is around 8% [of the Indonesian market]. The underlying factors that contributed to the growth during the pandemic include active education programmes, attractive products such as gold, and effective marketing and promotion campaigns through collaborations.
What distinct features does Tanamduit offer compared to other wealthtech apps?
We offer curated mutual fund products. We have an internal selection to ensure that only good-performing products from reputable fund managers are sold on the Tanamduit app. Our gold products are sold and packaged with attractive collection cards. We also offer the most comprehensive payment channels, which includes the option to pay through virtual bank accounts and “one-click” direct debit. We launched a new gold offering called “Emas Suka-suka” in June that can be purchased for a minimum of 10,000 rupiah. We work with all major payment channels. They are already on our apps.
Tanamduit is servicing a number of platforms such as Bukalapak, Akseleran, Investree and Halofina. Can you explain the rationale for this and how these partnerships contribute to your revenues and growth?
Big e-commerce platforms have millions of customers, which becomes a very lucrative market to serve financial products such as mutual funds. Many e-commerce platforms do not have a mutual fund selling agent licence, thus they are keen to cooperate with licensed technology-based investment platforms like Tanamduit.
We have also established cooperation with several P2P lending platforms to optimise idle funds, before they are disbursed to the next borrower, by investing into money market funds, whose returns are comparable to time deposits. These P2P platforms are keen to cooperate with Tanamduit as they typically do not have a licence to sell mutual funds.
Can you explain your monetisation model, and when do you expect to start recording profits?
As a wealthtech application that aims to become a super financial app, we provide multiple asset classes in a single app, which currently includes mutual funds, government retail bonds, digital gold as well as micro-insurance — health and gadget.
In terms of monetisation, for mutual funds, we receive a shared management fee from fund managers. The typical management fee range, before splitting, is 0.5-4% depending on the type of mutual fund. We also charge an additional 1% subscription fee only to priority clients.
For government retail bonds, we receive 0.35% to 0.4% sales commission from the ministry of finance. When customers buy gold, we receive a net margin of 72.5% of 3-4% of the spread of gold bid and offer price. When customers sell gold, we receive 75% of 1% of the spread. We also receive 75% of Rp15,000 to Rp60,000 for printed gold. As for insurance, we receive 60- 70% of the insurance commission of 20-25% of the insurance premium.
We aim to have a positive bottom line by 2024-25.
What is your view on the emergence of closed-ecosystems in Indonesia, led by e-commerce giants and ride-hailing firms? How do you think this will affect Tanamduit?
Based on our data, the characteristic of our clients is different in the case of ecommerce clients. Our [assets under management] per active users is four times higher than users from our ecommerce distributions partners [$400/Active Users vs $100/Active Users]. This shows that our organic clients are focusing only on investment activities thus they prefer to do transactions in standalone investment or wealth management platform like Tanamduit. On the other hand, investment product and feature in ecommerce platform is only complementary to their existing products and services.
There has been a crypto-craze lately, are you considering expanding to other asset classes?
We continue to explore new asset classes. Right now we are exploring stock, bond as well as P2P lending aggregator as new products in our app.
Who are your major investors and how much private capital funding has Tanamduit raised so far?
Local family offices. They invested $3 million in a pre-seed round in September 2018. Before that, we had a number of angel investors.