Vantage Point: Bukalapak’s Bank Allo deal to be a game changer and other updates

The first edition of this weekly newsletter highlights top developments and trends across Southeast Asia’s digital economy and ecosystem, without losing sight of the solid links between the online and offline worlds.

Executive Summary

  • Bukalapak taking up the reins of finance
  • Offline going online
  • OVO’s ecosystem is officially open
  • Troubled waters in Thailand

Bukalapak taking up the reins of finance

Bukalapak’s acquisition of a stake in digital bank Bank Allo is set to be a key game-changer for the Indonesia-listed e-commerce major as the deal marks its first direct investment into the financial services space.

Prior to the Bank Allo deal, Bukalapak was pursuing partnerships with a host of lenders including StanChart, Bank Mandiri, among others. A direct stake in Bank Allo is likely to give shape to a partnership akin to GoTo-Bank Jago, where both Gojek and Tokopedia are offering account opening through their apps.

Bank Allo is backed by Indonesian conglomerates Salim Group and CT Group, whose interests span from consumer segment to hypermarkets and media.

Consequently, the deal opens up a diverse ecosystem for Bukalapak to tap into. For instance, Salim Group, which owns the largest mini-market operator in Indonesia in Indomaret, could potentially provide a virtual offline branch network.

Bank Allo, one of the best capitalised among new digital banks in Indonesia, can provide Bukalapak a strong base to service its 10.4-million-strong ‘Mitra’ network, which is largely MSMEs by nature.

Bank Allo’s offerings to Bukalapak’s small businesses will drive the stickiness of those customers as well as improve takes-rates for the e-commerce major. Compared to its peers, Bukalapak’s take rates are very low due to the nature of its 1P e-commerce model as well as the increasing relevance of its Mitra business.

The 3P e-commerce model works on a commission-based approach rather than Bukalapak holding the inventory while the 1P approach is more like normal retail in simple terms. On the flip side, the 3P model enjoys a higher gross margin.

Adding additional service offerings will help to improve take-rates at a faster pace, especially in financial services, as having direct exposure in a bank may yield better terms for Bukalapak.

Offline going online

Lippo Group’s Matahari Putra Prima, one of Indonesia’s largest hypermarket operators, has seen a significant jump in its e-commerce business with sales registering +167% growth in YoY, accounting for 11% of total sales in the 3Q2021. This is the highest ratio since the Lippo Group unit transformed its online to offline (O2O) business.

The key driver for the performance can be attributed to partnerships with leading marketplaces such as GoMart from Gojek during the 3Q2021 period, as well as collaboration with other online marketplaces such as HappyFresh.

GoTo (Gojek and Tokopedia) has already built a 6.74% stake in the company and has been actively adding stores to its GoMart offering, utilising Hypermart’s nationwide store footprint to create virtual online stores using the offline stores for fulfillment.

This can be seen as an example of the potential for success from the collaboration between online and offline companies in the grocery space. Among recent deals that blend offline with online, e-commerce player BliBli acquired a 51% stake in Ranch Market while Grab bought out Malaysia’s Jaya Grocer. For Grab, the acquisition is a move towards building its exposure to the online grocery space under GrabMart by utilising the supply chain of a significant offline player.

Last year, Lazada also invested $400 million into The CrownX, the online grocery business of Vietnam’s Masan Corp, signifying that the race is getting hotter in this space.

OVO’s ecosystem is officially open

Indonesia’s leading digital payment and financial service platform OVO is now officially open to doing business with a wide ecosystem of partners.

Following the sale of Tokopedia and Lippo Group’s stake in OVO, the Grab-owned payments major is going all out to replace the lost Tokopedia business as well as to grow its open ecosystem aggressively. Grab now owns 78% in OVO.

OVO, which has since partnered Pos Indonesia, Mitra Bukalapak, Bukalapak and Lotte Indonesian Mart, has grown its network to remote rural areas and almost all sub-districts in Indonesia. The collaboration cuts across OVO’s digital transaction offerings.

In another deal that deepens the ecosystem play further for OVO, Grab has invested an undisclosed sum into Indonesia-based investment app Bareksa’s Series C funding round. With 2.5 million registered accounts on its platform, Bareksa allows its users to invest in around 200 mutual funds offered by 40 investment managers in Indonesia.

Bareksa will be able to gain access to Grab’s pool of users and drivers, who can buy mutual funds via Grab’s app and pay using their OVO wallets. OVO, incidentally, had already invested in Bareksa’s Series B round in 2019. Bareksa CEO and founder Karaniya Dharmasaputra is also the president of OVO and commissioner at Taralite, a peer-to-peer lending company owned by OVO.

Given the rapid growth in Indonesia’s retail investors, the Bareksa deal adds to Grab’s financial services offerings. Grab already offers digital payments through OVO, insurance products, and small loans to its drivers and merchants besides BNPL services. The next step in Indonesia will likely be to take a stake in a local bank with the intention to convert it to a digital bank.

Troubled waters in Thailand

Indonesian unicorns Gojek and Traveloka have seen their recent fintech-related deals in Thailand fall through, indicating execution risks in the overseas market.

The joint venture between Traveloka and Thai lender Siam Commercial Bank’s venture unit SCB 10x, TREX Ventures, was terminated in December last year with the JV in the liquidation process. TREX was set up to offer financial products to Traveloka customers in Thailand. Traveloka and SCB said they will pursue a direct relationship instead but it is not clear what shape that will take.

Traveloka is at the early stages of tacking on financial products to its travel and lifestyle super app as part of its diversification strategy, with a move into BNPL in Indonesia through collaboration with various partners.

Meanwhile, in July last year, Malaysian budget airline carrier AirAsia Group had announced the acquisition of Gojek’s Thailand business in a stock swap deal. A part of this deal – Gojek’s $10-million sale of its Thai unit Velox Fintech to AirAsia Digital – stands cancelled while the $40-million transaction involving Velox Technology, covering ride-hailing and food delivery business, has reportedly been completed.

The setbacks above underline the execution risks inherent in entering overseas markets for Indonesian digital players, particularly in the fintech space.

Both Traveloka and GoTo are seeking listings this year, with Traveloka having a stronger regional footprint versus GoTo. It remains to be seen whether GoTo will remain committed to overseas markets over the long term.

Angus Mackintosh, a consulting editor with DealStreetAsia, is responsible for the publication’s Southeast Asia digital economy weekly newsletter and its monthly research reports. Angus is also the founder of CrossASEAN Research and publishes on Smartkarma. He has over 30 years of experience covering Asian markets in equity sales and research. For the last 10 years, he has focused on SE Asia and more recently included the digital economy in his coverage. 

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.

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.