Interbank Transfer Service Competition: Flip vs OY!

Flip and OY! rivalries, such as positioning Grab vs Gojek, Traveloka vs Tiket, Gopay vs OVO, or Tokopedia vs Shopee. They are both experts in the segment of interbank fund transfer services (interbank) at no cost. Flip has been operating since the end of 2015, while OY! do the pivot, the start-up business as instant message, of 2017.

Both have been licensed by Bank Indonesia as a fund transfer service. Interestingly, in this list, according to monitoring DailySocial, just Flip and OY! who play in domestic interbank fund transfer services. The rest is controlled by companies that play in the remittance business.

According to data from Bank Indonesia, over the past year, the volume of domestic transactions was recorded at more than 218,89 million with a nominal value of Rp. 84,47 trillion. The remittance business itself recorded 37,7 million transactions with a value of Rp90,67 trillion. This almost balanced figure is surprising considering that in 2018 the remittance business far dominated with a nominal value of IDR 177,1 trillion compared to domestic IDR 32,71 trillion.

The start of the domestic transfer business has opened up business space for Flip and OY! to work on. INDEF observer Nailul Huda explained that banking administration costs in Indonesia still tend to be expensive. This includes inter-bank transfer fees in the range of IDR 6.500-IDR 7.500, even transfer fees between Himbara banks are still relatively high, amounting to IDR 4.000.

“Meanwhile, technology is accelerating by providing more efficient processes. "This opportunity was apparently taken by Flip and several other financial transfer service providers," he explained DailySocial.

Consumer habits have also changed due to rapid digital developments. They are more rational about prices. Look for services that provide cheap prices, easy processes, including money transfer services between accounts. As a result, services like Flip and OY! succeeded in attracting users.

This condition is also interpreted as a gimmick for financial companies to attract users. If you are familiar with playbook Well-known e-money players at their inception, generally offered free inter-bank transfer services from users' unlimited e-money balances.

Because the business base is different from Flip and OY!, portions are slowly increasing gimmick it is decreasing. GoPay and OVO are examples. Both stopped subsidizing transfer fees to users, instead providing an additional fee for each transfer to e-money balances instead of as a system maintenance fee. However, the fees they charge are still below the fees charged by banking services.

There are also BTPN Jenius and DANA which set certain limitations for enjoying these facilities. For example, DANA only provides 10 free transfers in one month. Meanwhile, Jenius determines that the quota that customers get is adjusted based on the average balance in the previous month.

Flip vs OY!

In its development, the businesses of these two companies head-to-head and intersect each other as seen in the following chart:

Source: Flip and OY!, reworked

Flip comes at a time when the financial ecosystem has not yet been fully digitized. In interview together with Flip investors, Managing Partner of Insignia Ventures Yinglan Tan, Co-Founder and CEO of Flip Rafi Putra Arriyan explained that in 2015 large companies such as GoPay, OVO, DANA were not yet on the market. Many banks don't have an API yet.

The solution offered by Flip at that time was very simple, using Google Forms to accommodate requests from consumers. Five years on, the ecosystem has grown very rapidly. Flip is not as big as the three e-money players above, but the conditions that remain the same are the admin fees that remain.

“We've been in the market for a long time and we understand how [our] products work, what the right systems are. We also understand consumer desires, and moreover, from the banking industry there are opportunities that we can take. This allows us to make a bigger impact on Indonesia in the future.” explained Ari, Rafi Putra's nickname, in a podcast uploaded at the end of June 2020.

Ari strengthened his statement when contacted separately by DailySocial. He saw that free bank transfers were one of the things people were looking for. Moreover, with the pandemic, more and more people are becoming more selective about spending.

"In terms of trends, of course we see this need increasing, as evidenced by the increase in the number of Flip users from month to month."

Flip provides a basic product of free transfers to 14 banks. They create an account at the bank and connect to the API system to facilitate interbank transfers for free. There is a unique code that the user must enter when transferring, so that it can be processed automatically by the system.

This unique code is collected in one wallet in the Flip application which can be used to transact credit, data packages, buy electricity tokens, or withdraw back to your account.

In its development, Flip has three types of transfer services, for individual, business and remittance customers. Ari explained that the three of them cover the company's monetization method. For individuals, monetization applies if users make transfers with a nominal value of more than IDR 5 million per day. The fee charged is IDR 2.500 per transaction.

"However, this cost is still much cheaper than the costs that would be incurred without using the Flip application."

Flip solutions for business customers, Big Flip, is much more comprehensive because it is able to make transfers directly real-time to 104 banks in Indonesia. Big Flip accommodates batch upload via CSV up to 20.000 destinations at one time for transfer needs to multiple accounts at once automatically through API integration Host-to-Host.

Big Flip is more focused on helping financial operations in companies such as payroll, payments to business partners, and to refund to consumers. The fee per transaction is IDR 4 thousand, IDR 1.500 cheaper than using the manual method, for example internet banking. Its services have been used by more than 320 companies in Indonesia.

Lastly is the remittance service. Flip Globe gives users the freedom to send money to 10 countries with fees starting from IDR 80 thousand. Cheaper than similar services. Sales of digital products are also used as a company monetization channel.

Ari claims that currently there are more than 2 million Flip users, but he is reluctant to mention the number of transactions they have successfully processed. "During the pandemic, we saw online transfer transactions increase more during the pandemic on our platform, compared to normal times [pre-pandemic conditions]."

Meanwhile, until this article was published by OY! did not respond to all questions sent DailySocial. OY! positions itself as a financial solutions application. Not only are transfers free, they also complete the service with payment features that are connected to a debit card.

OY product! directly intersects with Flip. They also provide three types of transfer services and digital products for bill payments. OY! have accommodated top up e-money balances from various players to card-based ones.

They are also testing a cash withdrawal feature without an ATM at retail outlet cashiers. It is not explained who the partners are and where users can use this innovation.

The monetization method is also not much different. Apart from transfers between bank accounts, there are also transfers virtual accounts and debit cards, each of which incurs fees. For debit cards, users are charged IDR 2.500 per transaction.

Fees for bank transfer methods and virtual accounts will be released as long as it does not exceed IDR 5 million. More than that, a fee of IDR 2 thousand per transaction is charged.

In previous reports, OY! As of the beginning of this year, they claimed they already had a user base of 500 thousand.

If you look closely at how these two companies monetize, again the key word is cheaper than similar players. Both already have a path to profitability because they already have clear monetization methods.

Competing with the incumbent

Please note, the admin fee charged by the bank for each transfer is one way the bank earns profit, which comes through non-interest income (fee-based income). Apart from transfers, earning sources fee based is collection, safe deposit box, letter or credit, and credit cards.

Fee based its contribution to banks is quite vital, especially in the digital era because it is able to overcome banking pressure on its ability to make profits, pressure on the bad credit ratio, and a decline in net interest margins (Net Interest Margin/NIM).

The presence of Flip and OY!, continued Huda, actually complements existing financial facilities in banking, but in a more efficient and cheaper way. The hope is that banks can respond by improving technology that can make their services more efficient and cheaper than currently.

"The presence of fintech [services] into the financial services aspect presents disruption for service providers who still rely on traditional features."

Artajasa CEO Bayu Hanantasena added, the market interbank transfers it's still quite big and it's still getting bigger. Create a company switching like Artajasa, the presence of these two companies has not resulted in a decline in their business aspects.

Nevertheless, he still pays attention to what their business model is like sustainable and quite attractive to customers. “Their business model is new, yes and flow the process is different. Regarding business models and value proposition different from switching," he said when contacted DailySocial.

In practice, players like Flip still need company switching in running his business. Ari explained, the company switching is a complementary partner because it can help companies provide better services for users by opening networks to more banks.

"We are always open to collaboration with institutions that we can always contribute to Indonesian society," said Ari.