Banking & Payments
GoTo results boosted by fintech performance
While the Indonesian tech giant isn’t profitable, its successful integration of GoPay is reaping rewards.
GoTo’s first half 2022 financial results show that the company’s fintech strategy is starting to pay off.
The company says it has shifted its emphasis from user acquisition to monetizing existing business and being more careful about efficiency and operational cost.
Some of these gains are about better use of data and machine-learning models to drive targeted marketing and promotions. It has introduced platform fees on its e-commerce site, and reduced some of the incentives it offers consumers.
The biggest revenue source, however, is its fintech businesses. GoTo has begun to integrate GoPay, the payments capability developed to support the original Gojek ride-hailing business, with Tokopedia, the e-commerce business that Gojek acquired last year.
The $18 billion merger was the largest financial deal in Indonesian history. But Tokopedia had its own payments business, OVO, which it sold to GoTo rival Grab.
“The integration of GoPay to the Tokopedia platform was a resounding success,” said Angus Mackintosh, analyst at CrossASEAN Research, writing on the Smartkarma website.
He says 93 percent of digital payment transactions on Tokopedia now use GoPay. GoTo will also launch GoPay as a separate app as a finance portal backed by Bank Jago – another important acquisition. Bank Jago was a sleepy local bank that has been infused with new ownership, including a 22 percent stake bought by GoPay, and has transformed into a primarily digital bank.
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Indonesians can now open a Bank Jago account through GoTo apps. Bank Jago still collects customer deposits, but deploys them as loans or consumer financing via the app. It is now offering peer-to-peer lending and buy-now pay-later functions too.
This degree of integration reflects an overall GoTo focus on making its disparate parts work. For example, Tokopedia app users can now order food from there, without having to switch apps. The transaction is paid for using GoPay and GoJek fills the order.
These measures create stickiness in the GoTo apps, which leads to more transactions – and more payments and borrowing.
The company has also released its GoPay Coins, a rewards scheme that lets people who purchase one item – say a grocery deliver via Tokopedia – cash in their rewards anywhere within the GoTo universe.
This has been a major driver of customer engagement. The company says the rollout of GoPay Coins enabled it to increase the number of cross-platform users (those who use both GoJek and Tokopedia) by over 80 percent year-on-year. The company says this kind of customer has a higher lifetime value than customers who only use one app or service.
That’s because as people spend their GoPay Coins, they leave data footprints and build up a credit record, which at some point could be integrated into a Bank Jago lending facility.
Commissions versus profits
Fintech remains GoTo’s biggest revenue earner. The GTV, or gross transaction value (commissions charged for transactions), reached Rs73.3 trillion ($4.9 billion) in the second half, up a whopping 87 percent year on year.
Gross revenue is also up, by 54 percent, to Rp.400 billion ($27 million).
GoTo’s management hopes that these synergies will gradually lead the company to profitability. They point to rising revenues and rising GTV, or gross transaction value (the amount of commission the company charges for transactions).
The first half 2022 earnings loss (expressed as adjusted EBITDA) was Rp9.0 trillion ($610 million). Although the second quarter losses narrowed compared to the first, the overall hit to shareholders year-on-year is significant.
The company says it needed to provision capital for the Tokopedia transaction. It also cited COVID-19 as a factor.
GoTo says it expects the group to enjoy its first positive margin (a ratio of what the company keeps from sales, not a pure level of profit) in the first quarter of 2024.