Bukalapak plunges deeper into fintech

Written by Kapronasia || June 14 2023

Platform companies in Southeast Asia all want to capitalize on fintech opportunities, but Indonesia’s Bukalapak may be better positioned than others to do so. The reason is simple: First of all, Bukalapak’s core offering is e-commerce, which is the online service that best syncs with digital financial services, especially compared to something like ride hailing. Sorry, Grab and Gojek. Second, Bukalapak is based in Indonesia, which has a huge unbanked but digitally forward population. The company can ride the waves of both surging e-commerce and digital finance adoption rates.

Bukalapak ventured into digital finance in 2016, but its first big fintech play was a tie-up with Standard Chartered on a digital banking entity, BukaTabungan, in September 2022, which leverages a banking-as-a-service (BaaS) solution. At the time, Bukalapak served more than 110 million users throughout Indonesia, most of whom transact outside tier 1 cities.

When it comes to retail banking, the Indonesian market offers plenty of potential, but building a a large retail user base in an emerging market like Southeast Asia’s largest economy is expensive.  For instance, when BukaTabungan launched, it offered a promotion to customers who opened an account before the end of October 2022 in the form of eligibility for bonus interest of up to 7% on savings as well as direct cashback worth 100,000 rupiah (US$6.72) for each successful account opened.

We are more sanguine about the non-retail segment because of how it fits in naturally with Bukalapak’s e-commerce business. In fact, such is the company’s experience with merchants that it is now moving into the offline segment with its Mitra business to help the owners of small shops known as warung digitalize their operations.

According to venture capital firm Flourish Venture, traditional warung represent 70% of sales in Indonesia’s US$257 billion grocery market, but the roadside kiosk operators are facing increasingly tough competition from modern, larger retailers. With better digital connectivity, warung owners can better compete against the big players, Bukalapak reckons.

It’s a reasonable assumption, and engaging this market will not require the same subsidy outlay as the retail market, while loyalty will likely be easier to secure from merchants than retail customers as well.

Bukalapak booked its first profit in 2022, though it came largely as a result of a gain from its investment in Allo Bank. In the first quarter of 2023, Bukalapak recorded a net loss of 1 trillion rupiah (US$68.2 million), compared to a net profit of 14.55 trillion rupiah (US$992 million) a year ago.