August 04 2022

Is GoTo pulling ahead in Southeast Asia’s super app fintech race?

Ride-hailing companies can be profitable, as Uber is proving, and so can fintechs, but can ride-hailing companies become profitable fintechs? Untangling that word salad is something of a heavy lift, much like turning an app-based taxi service into a bank. But there is a clever shortcut that deep-pocketed tech giants like Indonesia’s GoTo can take to bolster their fintech prowess. They can invest in a struggling incumbent bank and make it profitable.

Before it upped its stake in Bank Jago to 22% in December 2020, Gojek (It is the investor in Bank Jago rather than GoTo) had a fairly typical e-wallet offering. Like its competitors, Gojek was talking up fintech, but as we all know, e-wallets tend to burn cash more than they hold onto it.

The Bank Jago deal is slowly paying off for GoTo though. In the first half of the year, Bank Jago recorded a net profit of 29 billion rupiah ($1.93 million). While a modest profit, it is still a significant improvement over net loss of 47 billion rupiah ($3.14 million) in the same period last year. Notably, Bank Jago’s loan and sharia financing reached 7.26 trillion rupiah in the first half of the year, up 234% from the 2.17 trillion rupiah it earned in the same period last year.

This expeditious growth benefited from GoTo’s collaboration with fintech lenders, multi financiers, and other digital financial institutions, Kharim Siregar, president director of Bank Jago, told Deal Street Asia. Those partnerships included 34 institutions in addition to Bank Jago’s integration with Gojek, mutual fund platform Bibit, and trading platform Stockbit.

Separately, in the first quarter GoTo Financial said its gross transaction value for the first quarter rose 91% annually to 77.5 trillion rupiah (US$5.32 billion) while gross fintech revenue grew 47% from the previous quarter to 358 billion rupiah (US$24.56 million).

Increasingly focused solely on its home market of Indonesia, which has Southeast Asia’s largest unbanked population, GoTo is poised to develop an increasingly robust fintech business. Data from Redseer suggest that Indonesia’s “total addressable market for financial technology services” will reach US$70.1 billion in 2025 from US$17.8 billion in 2020.

To be sure, GoTo has plenty of competition in the Indonesia market among super apps, but both Sea and Grab continue to spend heavily on digital financial services in many other markets. With the global economy shaky and poised to get shakier, and investors more circumspect on the growth-based approach of tech companies, GoTo’s competitors will find their resources stretched increasingly thin.