LinkAja Strategy Towards Profitability, Focus on BUMN Market (UPDATED)

Bloody competition in the area fintech digital payments B2C made LinkAja decide to transfer his business to B2B and B2B2C since 2021. Claimed from various efficiency strategies for pivot, has borne fruit. Since June 2023 until now, LinkAja has achieved a positive EBITDA position, meaning there are only a few steps left to make a profit.

"In the last two years in a row, LinkAja has succeeded in reducing opex cost 50%, but successively increasing revenue up to 30%. "As of June, July and August [2023] we have achieved positive EBITDA for three consecutive months," explained LinkAja Chief Finance and Strategy Officer Reza Ari Wibowo to the media in Jakarta, Tuesday (19/9).

Although not stated in detail, he said that this increase in revenue was supported by various company initiatives since pivot from B2C, as follows:

• Business contributions from the five main services, respectively based on the largest contributors, are money transfer products to bank accounts, buying credit, PPOB payments, top up/withdraw balance, and management supply chain leaders with Telkomsel (DigiPos credit agent) and Pertamina.
• The efficiency of marketing activities is down to 98%, now cashback it's almost non-existent.
• Optimization of technology and supporting infrastructure, including e-KYC, fell by around 30%.
• Laying off hundreds of employees in May 2022.

According to Reza, this increase is extraordinary because the company is no longer talking about monthly active users (MAU) and gross transaction value (GMV) as performance indicators, but rather economic units which has been shown to be real.

"In the future we want to increase it revenue something like this. Our expectations revenue in 2023 it could increase by 30% from 2022. In 2021 we will increase by 30% after lowering cost up to 60%. Loss [EBITDA] is only 99%, still a little more to be positive if it is full year 2023. "

Behind this achievement, there is one interesting thing that the number of LinkAja users shows a downward trend. But at the same time, the retention rate increased to 90%. Reza explained that this happened because the existing LinkAja users were classified as high quality. One of the biggest possibilities they do is transact more frequently.

Take, for example, a company renegotiating for revenue sharing with banking for money transfer services. From initially being free with no admin fees, now it costs IDR 1.000. The proceeds completely go into LinkAja's pockets.

“Compared to three years ago, ARPU (average revenue per user) is now 5-7 times the increase, compared to us big marketing spend. "

Even though there is a downward trend, the company ensures that what it is actually targeting are quality and loyal users. So the quantity issue doesn't really matter to LinkAja. Nevertheless, Reza admitted that he had prepared a number of initiatives to increase the number of users again in the future. He wants every money invested to be turned into company income.

Based on the company's internal data, the total registered LinkAja users reached 91 million people. Current active users are not reported.

“We want to let it drop temporarily [the number of users] to maintain profitability. The important thing is to profit first, so there really isn't room for fat, just meat to become muscle."

LinkAja business model

With a B2B and B2B2C business model, LinkAja takes advantage of its strategic position with investors from state-owned companies. It is stated that most state-owned companies - some of which are shareholders in LinkAja - have the largest market share in their respective industries in Indonesia, such as Telkomsel and Pertamina.

Working on the market captive so it makes more sense because there is still a lot of potential that has not been exploited. This strategy is in line with the initial ambition of building LinkAja, namely trying to increase financial inclusion in Indonesia in second and third tier cities.

Currently, the controlling shareholder in LinkAja is Telkomsel. Then followed by BRI, Bank Mandiri, BNI. Next, Pertamina, Jasa Marga, Taspen and others have more or less the same percentage.

“Rather than us it's up to in the same area [player e-wallet other], better it's up to at SOE (state-owned enterprise) because of the average leader in each industry from SOE. If other startups have to knock it pintu one by one, but LinkAja already has access."

An example is the B2B initiative that is already underway, namely joint supply chain management Telkomsel and Pertamina. Together Telkomsel, through the Digipos credit agent application, LinkAja becomes a payment instrument link between credit agents and dealers. This application is also powered by PPOB, so they don't just sell credit. It is claimed that credit purchase transactions at Digipos reach billions of Rupiah.

“LinkAja is the only payment tool at Digipos, so 100% of the money goes there. This has been talked about supply chain leaders behind. So now we're not just B2C e-wallet but it becomes payment infrastructure."

This successful example will be replicated in other supply chain management in the BUMN ecosystem. Pertamina, for example, for the MyPertamina application, now the payment methods have increased, there are OVO and GoPay. GoPay's parent is a shareholder in LinkAja, while OVO is an affiliate of Grab, one of LinkAja's investors.

To strengthen payment infrastructure, LinkAja plans to add permits as a payment gateway. This step will be taken organically, meeting the requirements determined by Bank Indonesia. Moreover, currently LinkAja has obtained the highest permit category and only requires a few more requirements to obtain a payment gateway license.

The ambition that will be achieved after obtaining this permit is to enable LinkAja's B2B partners to withdraw funds on any channel. Currently LinkAja users can withdraw cash via Himbara ATM. “So we don't it's up to with Xendit or payment gateway another."

Reza also revealed that before the end of the year, the company will raise funds to pursue growth. There are investors Existing and new people from abroad will join.

Special BUMN application

In order to exploit the market captive in the B2B2C realm, LinkAja recently released the LinkAja application with a special BUMN skin. This display is intended for BUMN employees with the function of being an integrated payment and communication application regarding the ministries and BUMN companies that are part of it.

Not only that, this application can also be utilized as promotional media related to the products and services of each state-owned company.

It is stated that more than 200 thousand registered BUMN employees can enjoy products, programs, information, services and make active transactions in the application. In total there are more than 1 million employees who have the potential to become users.

“Games There are many sizes in this application. There is something we want to replicate, one of them loyalty exchanges Later it can be integrated between BUMN applications. Then we can also offer kasbon products to BUMN employees. "A strategy like this will later be an added value for us."

iGrow's recent fate

Related iGrow's fate, Reza said that currently his party is still undergoing the legal process to take responsibility for the lawsuit filed by a number of former lenders due to failure to pay. He was ready to undergo this process.

"We are still trying to complete the settlement steps, including if assets are lost borrowers must be withdrawn to be returned to the lender. Our commitment to iGrow is strong.”

Currently the mediation process between the two parties is still deadlocked because the plaintiff has temporarily withdrawn his lawsuit and is preparing a new lawsuit.

While the process is complete, the name of the legal entity and brand has been changed as of last August. From PT iGrow Resources Indonesia to PT LinkAja Modalin Nusantara, with the brand name LinkAja Modalin Powered by iGrow.

These preparations are in order pivot business from financing in the agricultural industry to MSMEs closed loops within the BUMN ecosystem. The products are Retailer Financing, Invoice Financing, Partner Invoice Financing Telkomsel, and Distributor Financing.

“We are still looking for solutions to resolve [agri financing] until now clear and new businesses too clear, then we will convey it to the OJK. Every new business must receive approval from the OJK. Modalin is not yet running effectively, but we have communicated intensively with the OJK and businesses in BUMN," he concluded.

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*) We have improved the shareholder structure information at LinkAja