Bill payments startup Payfazz is the first firm founded by Indonesians to make it into the Y Combinator accelerator.
It’s been amazing. It’s like an MBA for building startups.
Although each batch is fairly large with around 100 startups, getting accepted out of thousands of applicants holds prestige. The Silicon Valley startup program famously gave rise to companies like Airbnb, Dropbox, and Twitch.
(Disclosure: Tech in Asia is also a Y Combinator company. See our ethics page for details.)
Startups receive a US$120,000 investment from YC, but more importantly, become part of a global network of experienced entrepreneurs and YC alumni.
“It’s been amazing. It’s like an MBA for building startups,” Payfazz co-founder and CEO Hendra Kwik tells Tech in Asia in a Google Hangout.
He’s been in the US for two months now, with demo day looming in two weeks. He’s at a desk in a small dorm, a roommate milling around in the background.
Kwik represents his team alone – unusual for YC, which expects all co-founders to show up. His two co-founders Jefriyanto and Ricky Winata – all three graduates of Indonesia’s Bandung Technology Institute – were denied visas. It’s not easy for Indonesians to enter the US. YC made an exception for Payfazz.
From bill payments to loans
The app lets people buy things like pre-paid phone credit and pay for electricity bills. It’s designed for the large percentage of Indonesians who don’t have a bank account and rely on cash. Users top up a mobile wallet through an agent, and then use the balance for easy online payments.
It’s not unique – bill payments and phone credit purchases are covered by established local players like Tokopedia, Bukalapak, and Go-Jek. And there are other standalone apps like Ayopop or Sepulsa working on solving this.
“The problem with Go-Jek or Tokopedia’s wallet is, they still have to be topped up via a bank account,” says Kwik.
We know the users through our agents. That’s our advantage.
Go-Jek, which offers on-demand transportation services, lets users top up via drivers, which is similar to working with agents. But that has its own limitations, Kwik notes. “Go-Jek isn’t so strong in rural areas. We target the unbanked.”
The plan is to move from bill payments to allowing transfers from one user to another and then to consumer loans.
Eventually, Kwik says, he expects all three use cases to contribute to revenue, especially loans. But they are still at stage one, as allowing peer-to-peer transfers and loans requires licenses which Payfazz is still applying for.
The app sees about 25,000 to 40,000 transactions per day, at a fairly small average ticket size of US$2 to US$4 per transaction, Kwik says.
What he’s putting together now – a customer base serviced by people in their neighborhoods – lays the groundwork for future features like consumer loans. “We know the users through our agents. They know each other, that’s our advantage. We can try to model this into a credit scoring system.”
Learning from Kudo
Before co-founding Payfazz in June 2016, Kwik was part of a local startup called Kudo, which also works with a network of agents. It enables small shop owners to sell items from ecommerce stores, which earns them commission.
During his time at Kudo, Kwik noticed that its app didn’t cover financial services. “So I thought I’d do it,” he says.
Kudo is now part of Southeast Asia’s largest transportation and payments firm Grab and could become his competitor.
This doesn’t faze Payfazz.
“We have 100,000 downloads now, 12,000 agents who transact. We don’t rely on the conventional way of doing sales. We rely entirely on digital,” he says. “We have to be stingy with our expenses.”
Besides the YC investment, Payfazz received a strategic investment through Indonesia’s largest telco, Telkom.
As an avid reader of YC founder Paul Graham’s blog, Kwik has soaked up YC philosophy.
“We know what our agents want: a product that works well and makes them money. If our solution doesn’t work, our agents should be moving to competitors, but they’re not.”
“It doesn’t matter what’s already there. Wufoo came after Survey Monkey. With good quality and a good user interface they won the market. If many people have tried to solve something and it’s still not solved, that’s a good thing.”
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