Payment Business

1 year ago . 6 min read
Marella Putri
Writer at Forbes Indonesia
Payment Business
Cofounders of Xendit: Tessa Wijaya, COO; and Moses Lo, CEO. Photograph by Ully Zoelkarnain for Forbes Indonesia

In August 2018, McKinsey projected that online commerce market in Indonesia would grow by up to eightfold from 2017–2022, from $8 billion to $65 billion, contributing 2–3% to the nation’s GDP. At the same time, while consumer payment services such as e-wallets have been growing in the country (mostly in big cities), there are fewer players that can ensure “seamless, secure, and scalable payment opportunities” among businesses. Indonesia-based payment gateway Xendit is looking to change this.

“We tried to build different apps, different services all the time, and what we found was there was no payment business that could provide payment of the quality and at the speed that we wanted. So, we said ‘If no one can build it, then we’ll just build it for the country’. And I think that’s what excited us about building the payment infrastructure business,” says Moses Lo, cofounder and CEO of Xendit (PT Sinar Digital Terdepan), who was named as one of Forbes Asia 30 Under 30 in 2016.

Xendit was founded by Bo Chen, Juan Gonzalez, Moses Lo, and Tessa Wijaya in 2015. The team also paved the way for the Indonesian startup scene by becoming the first startup from Indonesia to graduate from Y Combinator—a renowned Silicon Valley incubator that has funded major companies like Airbnb and Dropbox. Xendit first examined consumer habits in Indonesia and tapped into peer-to-peer payments, with particular regard to the country’s huge market and developing technology, but low credit card penetration. The company’s early customers loved how it solved their problems, helped their businesses to easily accept and disburse payments in a faster and more reliable way. The demand gave Xendit the idea of serving as a payment gateway company in Indonesia, steering Xendit’s business from B2C to B2B.

“What we realized at the time was that building this infrastructure was much more important for Indonesia than going down the wallet route. There are so many wallets these days, it’s all about free money and discounts, whereas I think for ecommerce or digital space to grow in Indonesia, what we need first is infrastructure,” says Xendit COO Tessa.

Migrating from B2C to B2B was not easy for Xendit. It had to meet and convince banks one by one to become integrated to Xendit’s systems. Now Xendit works with more than 10 banks all across Indonesia, including the four biggest banks and regional banks, which gives it an advantage in offering its payment gateway service to potential customers. Working with banks is beneficial for both sides.

“What we’ve done is we’ve brought volume to these banks, and what they’ve done for us is they’ve enabled us to grow and provide different types of products to our customers,” Tessa says.

Customers can sign up and integrate with Xendit’s payment gateway service in less than a day, and enjoy automated systems such as accepting payments from all kinds of transactions (by card, bank transfer, virtual account), receiving payment notifications, and disbursing payments. Tessa also says that Xendit is the first in Indonesia to allow for the acceptance of credit cards from all over the world, and for smaller companies to accept payments from across the world, which it sees as crucial in accommodating foreign tourists coming to Indonesia. In addition to seamless transactions, Xendit also provides fraud detection systems.

Process flow of payment gateway. Source: Xendit

As a payment gateway, Xendit’s revenue comes from transaction fees, charged to its clients for every successful transaction made. The fee varies depending on the transaction type and payment method, with schemes clearly published on its website. This “pay as you go” concept allows for transparent business between Xendit and its clients, and breaks the typical contract-based services that imposes many hidden fees.

“You don’t have to pay a subscription fee, upfront fee, maintenance fee, insulation fee. I think that’s also a huge game changer. We were the first to be very transparent. If you receive a payment successfully, you pay us, and if you don’t, you don’t need to. We should only get paid for the service we’re providing you,” explains Tessa.

“I think we are proud of forcing the industry to conform to more open and transparent fees, better products and more reliable products, and have kind of removed competition that is slow and doesn’t help our customers. So I think we’ve helped the industry become better, and then in doing so, allowed startups to grow faster. It’s so painful for startups if payments don’t work,” Moses adds. He recalls how Xendit’s early customers with zero transactions have now grown into some of the nation’s largest startups, and that’s what Xendit wants to do—empower current and future unicorns in Indonesia.

Four years into its operation, Xendit now works with over a thousand companies, from SMEs to big enterprises. It handles around 1.5 billion payments every year, growing at 10% compound every month. Of the many payment methods, bank transfer is still the most preferred, about 60%, followed by retail outlets, cards, and ewallets. Moses says this high number is possible as a result of serving big enterprises in the ecommerce, travel, and fintech industries, which are its largest customers, such as national flag carrier Garuda Indonesia, and online travel agencies like Traveloka and Looking at the number of transactions handled and big clients using Xendit’s services, he is confident that Xendit is in the top three of the payment service industry.

In November, Xendit held a soft-launch for its meeting and event space, XenSpace, in South Jakarta. Tessa says that XenSpace was designed along the sharing culture of Silicon Valley, to give back to the startup community what Xendit was able to learn from Y Combinator. It will be used to host events, encourage collaboration, and let new startup owners hold meetings with their potential partners, all for free.

“And if the startup world grows here, we’ll probably benefit too, indirectly. They may use us for payments one day, and that’s how we monetize at the end of the day,” Tessa says.

For the next couple of years, Xendit aims to keep growing at its current pace of 10% every month. While Xendit says it is “in a very good place” in terms of funding, the company chooses not to disclose its series as of yet, after it was invested in by Convergence Ventures, East Ventures, and Golden Gate Ventures in the previous seed round in 2015. However, Moses says that Xendit is always investing more for research and development as well as new infrastructure in Indonesia as Xendit’s core market.

“We want to build the digital-economy requirements that we think Indonesia will need in the next five to 10 years, and that’s super exciting. Now I think some of the companies we admire, some of our friends have brought Indonesian technology to the world. I think we’ll also do that. We’ll bring Indonesian technology to the region, but that starts by making sure we do well in serving our Indonesian customers,” Moses says.

Written By
Marella Putri
Writer at Forbes Indonesia