Southeast Asia has experienced a fintech boom over the last few years. The number of fintech startups have been growing annually and this dynamic region is poised for technology transformation. Our Senior Investment Associate, Ivan Ong, shares his thoughts on our portfolio company, Payfazz, a fast growing Indonesian fintech providing financial access to the unbanked.
In the face of one of the largest unbanked populations in the world driven by the strong rural / urban divide, launched Payfazz in 2016. The company recognized the potential of building a distributed network of banking touch points all over rural Indonesia where at that time, such touch points were scarcely available across the archipelago. In parallel, the company also saw an opportunity to capitalize on the rapidly growing number of netizens across the country many of whom access internet through their mobile devices.
Addressing the rural / urban divide
Payfazz was founded on a simple premise — to bring financial inclusion to the unbanked across Indonesia by operating a nation-wide financial agent network that can help to promote and enable financial access to an untapped market of around 180m people. For context, that makes up around 70% of Indonesia’s population today. The company functions as an intermediary between the customer and the bank where customers deposit money with an agent (most often a micro merchant, also called “warung” in bahasa), in turn receiving an online “Payfazz” balance for a variety of use cases from bill payments to retail shopping to peer-to-peer transfers. Indonesia at that time faced the challenge of a lack of consensus towards cashless payment methods and transacting online was not widely adopted. The theory behind Payfazz was to break that barrier to adoption — agents became your ATM while your SIM card became your credit card.
Payfazz was the first startup from Indonesia to graduate from Y Combinator, a seed accelerator in the US that has incubated companies such as Stripe, Dropbox, Airbnb and Twitch. We first invested in Payfazz upon the company’s graduation from YC in 2017. At that point, their focus was purely on growing the agent network and fostering long-standing agent-user relationships. Since then, the company has grown a staggering 30 times in number of agents and 60 times in number of MAUs. Across the archipelago, Payfazz is a name you’ll see fronting the majority of warungs with agents ready to cash in or out your money on the platform.
Payfazz has since expanded from a digital wallet service to a platform offering a comprehensive set of banking services. This includes loan and POS solutions as well as a merchant API platform with the goal of ringfencing both the customer and merchant side of the rural financial ecosystem across Indonesia. The country has also grown significantly in terms of digital payments acceptance. Every day, a rising number of people transition to cashless payment methods that undoubtedly positions Payfazz on the fast track to becoming the leading payments network.
Hendra and the team at Payfazz have built an effective platform that brings new age financial services to the unbanked across Indonesia and we are proud to be supporting this exceptional business.