GoPay: Indonesia's Metal Ignition
Euromoney, October 2018
GoPay is considered southeast Asia's answer to Ant Financial. Its CEO comes with a background in the most micro level of finance: empowering village housewives to buy things to cook with. How will he now build a business backed by the biggest names in global private equity?
The story starts with a pot in a village and a motorbike in a city.
Ten years ago Aldi Haryopratomo was working for Kiva, a San Francisco-based non-profit with an online lending idea, and had been touring around Vietnam and Indonesia on a motorbike looking for microfinance banks. It was sometimes a struggle. “People would take my laptop and try to shake it to get the money out,” he says. “They had never seen online lending.”
Seeing the villages first-hand, it occurred to him that what communities needed to climb out of poverty came down to the most basic things, starting with affordable access to pots and pans. In his native Indonesia, this is how life worked at the truly grass-roots level: a pot that would cost Rp300,000 (US$40) in a store in the city was costing Rp600,000 in the village because they could only ever afford to buy it on credit. With costs so prohibitive, they couldn’t afford enough pots, and so villagers would take turns using them.
Aldi learned a simple lesson about business from this. “Rather than build something from the top down and saying: I’m an e-commerce company, why don’t you start with asking: what does the user need?” he says. In this case: “I need to buy a pot that helps me cook rendang for Eid so I don’t have to wait seven days to eat it because I have to take turns using my pot.”
So he founded Mapan, also known by its holding company name, Ruma, in 2009.
Mapan rests upon the fact that in any village or community, there is a natural leader. “If you can find the community leader, who may not be the most wealthy or the most powerful but the person who really cares about the village, and ask them what they need, you can come up with a solution you might not have thought of yourself.”
In the first village where they tried this out, this person was a woman who owned a shop in front of the school; people would leave their children at her shop, and everyone called her auntie. “Everyone trusts her with their children: she must have some influence,” says Aldi. “You’re not going to give your children to someone you don’t trust.”
More commonly that person is a teacher, who is usually already a community leader. “It depends. There is no one occupation. But when you go to a village, people will tell you. You can see it sometimes: the way they walk, the way people talk to them, the way they smile. There’s a lot of trademarks to these influencers.”
Having identified this person, Mapan seeks to use them for two things. One, “these leaders are like your user research, your eyes and ears to the village.” They give a clear sense of what is needed, rather than what outsiders think they need.
And two, they form something called an Arisan, a rotating savings and loan group for the village.
The idea for this came from the woman who needed the pot to cook rendang for Eid. Aldi and his team, by negotiating directly with suppliers, were able to get pots at a quarter of the price the villagers were paying on credit, by ordering in bulk and telling the manufacturer to ditch things like handles and glass tops and just focus on making a good quality Teflon pot. Adding in shipping costs and commission for the village leader as an incentive got the cost to Rp250,000, still less than half what they were paying.
But it was still too much for a village capable only of paying in modest instalments. So Aldi went along to a weekly community meeting one Wednesday and together they figured out a plan: the community should form a collective of five people who take turns to make the payment, meaning at the end of each month one person gets their item, and within five months everyone’s got one. There is no interest, just commission to the person, usually a woman, who leads the Arisan.
It took off. Within two and a half years, a million families in 120 cities were using Mapan. That’s a lot of pots.
THE NEXT SECTION OF THIS ARTICLE, ON GOJEK, THE GOPAY MERGERS AND INVESTORS, CAN ONLY BE READ AT EUROMONEY.COM AND IS OMITTED HERE
Aldi, all smiles, seems elated at the difference the business can make. But how does it work
in practice? Does his idealism survive the practical realities of life?
Several hours later, Euromoney is sitting on a padded children’s playroom floor talking to a woman called Ibu Opay. She is a Ketua Arisan (Arisan leader) in a town called Bekasi, a satellite town to the east of Jakarta.
Prior to Mapan, her situation was bleak. She was left as the primary source of income for her family. She needed, among many other things, an oven, and heard about Mapan; a salesman approached her and said, if you want to buy the oven, become an Arisan leader.
As you might imagine, the Utopian idea of everyone working together is a little trickier in practice. Ibu Opay managed to put four groups together – and they all cancelled.
The problem was trust. The salesman was online, not there in person, and people needed to see the goods arriving. In the end, taking what must have been quite a risk, Ibu Opay formed a group by herself, making it appear that she was five people when in fact it was only her. She was counting on the fact that once goods started arriving, her neighbours would come back in, and so it proved. “I had to convince the community that this was something that could be done,” she says, speaking through a translator.
This is surely cause for concern: what if Ibu Opay had been unable to convince her neighbours to join and had been lumbered with stuff she didn’t need and couldn’t pay for? Is the system so easily gamed?
But that nervy start apart, Mapan has delivered for Ibu Opay what Aldi said it would: she got her oven, effectively, for half the price she would have paid if trying to buy through credit.
What happens when things go wrong? What if one of the five can’t pay? “If someone can’t pay in the middle of the Arisan cycle she can withdraw and the goods will still be delivered,” Ibu Opay says. The goods then come to Ibu Opay and she can sell them, though presumably she will be on the hook for the missing payment. “The problem of cancellations is common,” she says. “It is one of the risks of being the leader.” Goods being delivered late also creates challenges, although since her branch office is nearby she can normally sort that out by dropping in.
“I made all of the group commit before the Arisan started that if you have paid payments and stop in the middle of the cycle, you cannot take the money back.”
Commit how? In writing? She says it depends: if the sums involved are over a million rupiah she will make a written agreement; below that, it’s verbal.
Also, there’s an informal kind of credit assessment always going on at the village level. If someone is renting their house, Ibu Opay will be less comfortable with their creditworthiness than if they own it.
Mapan has worked out well for Ibu Opay, not just financially but clearly in terms of her standing in the village. She speaks of a sense of network, a sisterhood among Arisan leaders. She turns up with a flashy smartphone which she has been able to buy because of bonuses from Mapan; on it, she shows her book-keeping through an app that shows her the amounts of payments expected each month, the bonus she will get, and the status of orders. (She also keeps records manually: she gives members a book to record payments, keeps one herself, and reconciles the two.)
She doesn’t, though, take payments from members using the phone; that still comes to her in cash, which sits with her a month until collections are made by a delivery man who comes to her house, no doubt on a GoJek bike.
Still, it would be wrong to suggest that her community was one of luddites beforehand. She has had a bank account since well before the Mapan days, though many of her neighbours do not; and she first heard about Mapan through Facebook, so clearly had a phone capable of seeing it even then. The widespread appearance of affordable smartphones is vital to the whole GoPay/GoJek model, although there is acceptance that not everyone is tech savvy just yet: one quirk of the GoJek/GoPay alliance is that you can use a driver as a sort of deposit-accepting ATM, handing money to them in order to top up your balance.
She does note a positive difference in her community. It’s not just the accumulation of stuff, but the constructive use of it. A neighbor who didn’t have a fridge before now sells ice cubes (a commonplace practice as most in Indonesia don’t own freezers). Another who bought a blender mixes and sells juices. “It encourages housewives to build a home industry themselves,” she says. There is also the advantage, delicately stated, that they don’t need to go to their husbands to ask for money for various daily needs.
Out on the street, Euromoney meets a number of vendors who have aligned themselves with GoPay. Opposite the Al-Azhar mosque in Jakarta, a string of roadside stalls has sprung up where worshippers park their bikes. Now all these stalls are branded with GoPay signage showing that they accept cashless payment, and offering introductory rebates too.
Adin Bahruddin sells cigarettes and other things from his stall. He linked up with GoPay in June after a few months of discussion. “It makes payments easier for customers, and the branding and promotion are attractive,” he says, through a translator. “Right now we are giving cashback and that is driving transactions.”
Is it good to be cashless? “I prefer half and half. With cash I can immediately spend it to top up my stock,” he says. GoPay is working on this: trying to find a way to allow merchants to use their electronic income for stock immediately.
Adin says the brand has been very important in driving trust. “My customers are already used to GoJek, so they trust GoPay because it’s embedded,” he says. Another group tried a similar cashless initiative, he says, and got nowhere because it couldn’t build that trust; also a state-backed competitor failed to gain traction because of the need to download a separate app. Convenience is everything.
Across the road is Hasan Basri, who has been running a stall selling Indonesian rice cakes with peanut sauce for 30 years now. Like Adin, he’s been persuaded to wear a white T-shirt with writing in Berhasa which translates as: “Becoming a small entrepreneur with big hope.”
He also has found GoPay convenient. “I don’t need to prepare cash change. It just comes in.” He, too, likes some cash coming in in order to buy supplies; in practice he spends the cash this way but uses GoPay exclusively to save, building a retirement fund and checking it on his phone every day, though he says he can’t retire until he finds a successor. He has never yet withdrawn any funds but trusts GoPay because he trusts GoJek; it probably helps that there are hundreds of GoJek drivers going past, or stopping to pray or buy food.
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