Akulaku – Buy Now Pay Later SEA

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Venture capital has been growing in relevance in Indonesia and in symbiotic fashion, the number of Indonesian startups has been mushrooming, especially with the elevation of multiple startups into “unicorn” status and the population increasingly being optimistic about the future of the country, spurring the business-minded to take hold of the bountiful opportunities there, create both by the organic growth of the country (e.g. growing affluent middle-class, younger generation) and aided by the supportive government.

Who are they?

Founded in 2014 and reportedly raising a $100M Series D round in January 2019 with Ant Financial as a strategic investor, Akulaku (formerly known as Silvrr) is a Southeast Asian online financial credit application company, that main business model is to provide Klarna/Affirm-style “buy-now-pay-later” service to consumers. It provides services such as P2P lending (AsetKu), marketplace (Akulaku Silvrr), B2B eCommerce (Akugrosir) and multi-financing services (AL Finance). Its main market is Indonesia and it also has a presence in Malaysia, Vietnam, and the Philippines. It also has a tech development center in Shenzhen, China.

The company started as an online virtual credit card (VCC) provider and subsequently expanded to include an eCommerce platform, which is largely mobile-driven, with what it seems to be a very small presence on their website which allows direct purchase through a browser. Beyond these, Akulaku also allows a suite of online services including payments of bills, purchase of flight tickets, movie vouchers, airtime (cellphone data) etc.

Recently, it announced its intention to expand to Kalimantan and Sumatra in 2019, as part of its effort to deepen its reach in Indonesia, as well as the launch of an Offline Credit feature, that allows consumers to scan a physical merchant QR code and choose to pay in installments. Bukalapak claims that there are already 21K active stalls and coffee shops in Jabodetabek (Greater Jakarta). Paying before maturity incurs 0% interest and merchants do not get charged a fee for this service.

In addition, it also in Mar 2019 announced its intention to acquire a minority stake in Indonesian Bank, PT Bank Yudha Bhakti (Tbk), for IDR 500B (~$35M), further increasing its presence in the country. Akulaku CEO William Li boasted that this collaboration is a first in the country, between a traditional bank and a tech-focused disruptor whereby both parties will stand to benefit. BYB will be able to expand its digital banking services while Akulaku will get access to traditional financial services as well as data sources only available to banks.

eCommerce purchase from a browser. Source: Akulaku website

eCommerce purchase from mobile. Source: Akulaku iPhone app

What is the team and who are the investors?

Akulaku was founded by CEO William Li and CTO Gordon Hu. Li and Hu founded a remittance startup in Hong Kong but subsequently saw the gap in access to lending for Indonesians and hence founded Akulaku.

  • William Li (CEO) – formerly investment manager at Ping An Insurance company and associate at King & Wood Mallesons (law firm), with an LLM from Washington and Lee University and LLB from Tsinghua University
  • Gordon Hu (CTO) – formerly software engineer at CITIC securities and HuaTai securities with experience in auto and algo trading in stocks, futures and options, as well as a software engineer at Tencent, with an M.S. CS from University of Liverpool

LinkedIn provided the following search returns on Akulaku’s employees and that it has ~800 employees, a noticeable proportion of which (apart from Indonesia) reside in Shenzhen, including CTO Hu:

  • Jane (Rui) Ji – (CFO) – joined Akulaku in Aug 2017, in charge of funding, investments and financial institutions business cooperation, formerly a senior associate at investor Arbor Ventures in Shanghai and banking associate at CITIC securities
  • Chunlan Liu (Ops Head, ID) – joined Akulaku in Jan 2019, formerly social-oriented and marketing product manager at Lazada (8 mth) and diverse experience at Tencent (5 yr 9 mth), more recently as a product manager on ads bidding strategy on WeChat Moments and senior operations manager at WeChat ads
  • N. Jaya Sumantri (Head of Collection, ID) – joined Akulaku (then Silvrr) in Mar 2016, with former experience at PT Home Credit Indonesia as a collections team leader (1 yr 8 mth) and district sales manager (6 mth), as well as collections officer at HSBC

Investors include Ant Financial (Jan 2019, $40M at $450M valuation), FinUp (Chinese FinTech), Sequoia India, Australia’s Blue Sky, Qiming Venture Partners, DCM Ventures, Legend Capital, Shunwei Capital, IDG, Arbor Ventures, Wecapital, and Eight Roads Ventures.

What is their value proposition?

Accessibility and speed.

Akulaku allows people to buy things that they otherwise would not have been able to. In a negative sense, they encourage the kind of impulse-purchasing behavior and takes away the pinch of spending, much like a credit card does, except that the audience is now people who likely are in poorer financial status and hence do not have access to credit cards (although the bar is so low in some countries these days I wonder if it truly matters). Its credit approval process is said to take only a few hours, which would be much faster in contrast to the regular credit card approval process in Indonesia.

With its most recent round of funding, it could accelerate its growth in Indonesia and the region, for example, in eCommerce through Alibaba’s eCommerce platform and/or investments (e.g. Lazada, Tokopedia), as well as mobile payments through partnerships with companies such as Dana (Indonesia), GCash (Philippines), TrueMoney (Thailand) and Touch ‘N Go (Malaysia), which are strong players in the region.

Beyond their regular business, they have also expanded into organizing events on financial education as well as promoting their offerings. For example, a carnival that, on top of educational talks, also has performances, music, food, and games. This is part of the company’s customer engagement effort and attempts at educating the public on using online credit products.

Compared to its competitors, it has the advantage of holding licenses. It is reported to have the Multi Finance license issued by the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan or OJK), which allows it to carry out loans to businesses in compliance with regulations, giving them access to bank-quality funds. The significance of this is that business loans (e.g. working capital loans) are, compared to consumer loans, typically more regular in cadence and loan size, and would provide a stable base for which it can grow its business.

How would an exit, if at all, of the company look like?

Given its strong presence in Indonesia and the SEA region, it might come off as a very attractive target both a non-financial services focused company looking to expand into the sector, as well as one that already has a presence and is hoping to anchor its position.

The first company that comes to mind is Go-Jek, which operates the hugely popular Go-Pay in Indonesia and acquired Kartuku (offline payments company), Midtrans (online payment gateway), and Mapan (savings and lending network). It would be an interesting acquisition to allow Go-Jek to intensify its competition with Grab in the lending space, but complications might arise given Tencent’s investment in Go-Jek.

There could also be further consolidation of players in the lending tech space, given the many niche players that currently exist and Akulaku’s goal of becoming a comprehensive financial service provider. For example UangTeman, RupiahPlus, Dana Rupiah, Akulaku, Kredit Pintar and Tunai Kita – whereby a consolidation could be the realization of the much-talked-about unbundling and re-bundling of fintech services and a step towards a unicorn-status valuation and eventual path towards an IPO.

In conclusion, in my opinion, Akulaku presents a compelling value proposition to the growing Southeast Asian population that has unprecedented access to online shopping, buoyed by an increasingly wealthy society to support it and small-medium businesses that are eager to tap on these markets that will need access to credit. Despite the many competitors in the space, Akulaku has a clear differentiating factor in being recognized and has established itself, as a reliable, trustworthy company in the space, gaining the confidence of customers, which is of extreme importance for a fintech service company that I feel will power its growth engine.

Further reading