Reading Traveloka Opportunities as a Fintech Company

Known as unicorn in vertical online travel, Traveloka has now crossed the globe in seven countries. The focus of its services is not only accommodation and transportation. The company's business has now penetrated into lifestyle and finance.

The latter sector can be said to be the main umbrella for launching all transaction activities at Traveloka. Traveloka now provides more than 40 payment methods, both online and offline, including paylater financial service products and insurance products.

The need to travel, according to various studies, has become a part of life for young people. Supporting factors are diverse, including improved road infrastructure and internet networks, encouragement from local and central governments to increase the economic potential of tourism, and a diversified transportation and accommodation fleet.

In other words, combining tourism with ticket sizes large and financial needs are the right keys to providing this "buy first pay later" service.

Since its inauguration in June 2018 until now Traveloka has not revealed any achievements Traveloka PayLater, both from distribution figures, customers and bad credit.

However, we can get an idea from PT Pasar Dana Kredit (Danamas) as the first partner they collaborated with. Danamas itself is under the auspices of the Sinar Mas Group and has become the first p2p lending startup to receive full permission from the OJK since 2017.

In previous interview with DailySocial, Danamas President Director Dani Lihardja revealed that in the first year, Danamas' total distribution reached IDR 1,4 trillion cumulatively. The biggest contribution came from Traveloka amounting to IDR 1 trillion and the rest was commercial distribution to credit traders.

However, currently PayLater's contribution is increasingly being eroded in Danamas. In fact, he said it was becoming increasingly minimal, although the exact figure was not stated. This condition occurs due to many factors. First, Traveloka PayLater's target users are mostly the non-formal worker sector, which is not in line with the vision and mission promoted by the company which wants to target the informal and productive segment. As a result, Danamas was unable to expand its customers for more productive loan needs.

"Traveloka PayLater users are customers who have educate and here there is no informal element because most of them are white necklace. So this is different from our vision and mission which wants to raise the unserved so served," he said.

Second, funding source partners for Traveloka PayLater continue to increase. Apart from Danamas, now there are Caturnusa, BRI and BNI. Nevertheless, Dani will not terminate his cooperation agreement with Traveloka. "From the start, we were not exclusive, we were willing because the ecosystem was the same as ours. Borrowers don't accept money, if the ecosystem is different, we don't want it."

Interesting proposition

As a brand, Traveloka PayLater has a fairly strong presence. Also, product diversification and wide use of funds have attracted many parties to collaborate.

Functionally, the Traveloka PayLater loan limit can now be used to pay for all transactions within the application, as well as at offline outlets thanks to the realization of collaboration with BRI in physical card form. All transaction controls via card will be recorded in the application, even when paying bills the feature is provided.

Previously, in October 2019, there was talk that BRI exploring potential to invest in Traveloka. Until the news was published, no decision had been announced to the public.

After BRI, other state-owned banks have been interested in collaborating with Traveloka, especially targeting Traveloka PayLater. There is BNI as a new source of funds and Bank Mandiri for co-brands credit card without the PayLater brand attached.

The facilities offered to users are the opportunity to collect more loyalty points from transactions at Traveloka, daily discounts and other offers from Bank Mandiri merchants. This is co-brands Traveloka's first collaboration with a bank to release a credit card.

Traveloka PayLater has the opportunity to become a unicorn

Traveloka Group President Henry Hendrawan, in an interview with Reuters in late 2019, asserting, “Financial services as a whole started from almost zero beginning last year and we expect that it will be a $1 billion business easily by next year.”

DailySocial tried to elaborate further on Hendrawan's statement, but Traveloka representatives refused to answer.

Hendrawan's statement indicates high optimism in his fintech business, there is even news that the company is raising funding specifically for this line only. It is not impossible, with its unique proposition, this Traveloka (read: Caturnusa) fintech business can achieve unicorn status, following its parent.

Look at how Ovo has now become the 5th unicorn, it's even possible that Traveloka could catch up.

Quote from Fintech Report 2019, Traveloka is in fourth position as the paylater player most used by respondents. The top position and sequentially occupied by Ovo, Gojek, Shopee. If you look at awareness, Traveloka is in third place, the top positions are occupied by Ovo and Gojek.

According to search DailySocial, on the page Terms and Conditions, explained that the borrowers from Traveloka PayLater are PT Caturnusa Sejahtera Finance and Danamas.

Caturnusa is rebrand from a financing company previously named PT Malacca Trust Finance. They are owned by PT Batavia Prosperindo Finance Tbk before sale to PT Hermes Global Ventures PTE, LTD in September 2018.

Batavia sold 25 thousand of its shares to Hermes Global with a nominal value of IDR 1 million per share. The transaction value reached IDR 27,75 billion. The Association of Indonesian Financing Companies (APPI) Suwandi Wiratno confirmed that Hermes Global is sister companies from Traveloka.

"Traveloka is now open finance, his name is Caturnusa, he previously bought it from Malacca Trust. In writing, PT Hermes Global Ventures, PTE LTD., sister companies Traveloka," he said as quoted from Bisnis.com, (28/1/2019).

With its new name, Caturnusa operates in the same area as Traveloka's head office.

Become a financing company

Caturnusa, based on its business as a financing company, makes it easier for Traveloka to find sources of funds because they have to come from institutions. When using permission as a company lending, there are limitations in finding loan sources, namely from individual borrowers.

There is no information that can be obtained from where the funds collected by Caturnusa come from. It does not violate the rules because there is no obligation to publish it, unless it is a public company.

Caturnusa's business as a lender for Traveloka products also does not violate the rules. In POJK 35 of 2018, OJK explains that finance companies are given the freedom to add variations to multipurpose financing products.

Multipurpose is a type of financing for goods and/or services required by the debtor for use/consumption and not for business purposes or productive activities within the agreed period.

In this financing, the OJK requires that it must be carried out by means of a finance lease, purchase with payment in installments, fund facilities, and/or other financing after first being approved by the OJK.

Apart from being multi-purpose, in general finance companies also have other product domains, namely working capital, investment and other financing activities based on OJK approval.

Sources of funds that can be utilized by finance companies are not only from banks. There are other options that can be utilized, such as channeling, joint financing, issuing debt securities from MTN (medium term notes), bonds, syndication on/offshore, until the IPO.

Because Traveloka PayLater already has a business model, Caturnusa doesn't need to bother looking for a business model that conventional financing companies usually do. All business processes are carried out online. It's a different story, if there is a change in business strategy to diversify products.

Playing in the online realm should not be a new field for finance companies. Akulaku could be the closest example in illustrating the potential of a finance company that brings a digital approach to its business processes.

This company pocketed it three licenses, namely p2p lending (Asetku), e-commerce (Akulaku Silvrr and Akugrosir), and financing (Akulaku Finance). Even, Akulaku has also become a shareholder in Bank Yudha Bhakti.

Here it looks, Akulaku do diversify access the funding will be redistributed through a series of loan products. Not only consumer-based loans, Akulaku revealed that he is now receiving loans for car installments and more productive working capital.

In industry, OJK sees that incumbent players have started to implement it slowly. Head of the OJK 2B IKNB Supervision Department, Bambang W. Budiawan, saw that the 57 registered companies were starting to indicate positive progress which was starting to move towards digital. Remember, digital transformation requires minimum costs and standards.

"It's gradual [development]. If there's a lot of capital, that's no problem, if it's just mediocre it will be gradual because this requires costs and [meets] minimum standards," explained Bambang to DailySocial.

According to him, fintech lending and financing have different consumer segments, even though there are several products that overlap. Owning a finance company is not easy because there are many requirements that must be complied with, including being able to maintain it gear ratio, namely the ratio between the loan amount compared to own capital. The company must also have large capital with equity of at least IDR 100 billion.