Gojek leverages Indonesia's Bank Jago in digital banking fight

Singapore

GOJEK has spent 2.25 trillion rupiah (S$215 million) to up its stake in Indonesia's Bank Jago to 22.2 per cent, which observers say could give the former significant access in order to leverage the digital bank's products and services.

Through this deal, Gojek's Indonesia users will be able to open a bank account through its app with Bank Jago and manage their finances, the ride-hailing operator said in a statement on Friday.

Market watchers told The Business Times that although the stake does not exceed the 25 per cent threshold in which Indonesia's central bank describes as a controlling stake, it could still be likely that Gojek will have considerable influence in the strategic vision of the bank and its operational details, since there are mutual strategic benefits in the collaboration.

Bank Jago's focus on small and medium enterprises is firmly aligned with Gojek's corporate strategies, said Su Lian Jye, principal analyst at global tech market advisory firm ABI research, adding: "This is a win for Gojek in the long run."

Joel Shen, a tech lawyer at global law firm Withers, told BT: "Gojek wants to use Bank Jago as a platform to launch digital banking products for its users, while Jago can use this deal to access Gojek's millions of users across Indonesia. As a provincial bank based in Bandung, it would not ordinarily have (this kind of access)."

The Bandung-based lender Bank Jago was formerly known as Bank Artos. Patrick Walujo, co-founder of Gojek backer Northstar Group, had bought a 13.4 per cent stake through Wealth Track Technology in December last year, according to filings from the Indonesian Stock Exchange.

Word on the street then was that Bank Artos would later become a digital bank that would handle Gojek transactions.

Zennon Kapron, the director of fintech research and consulting firm Kapronasia, told BT that being able to access and leverage these digital banking services in itself is already "more exciting", and perhaps more important than having control over the entity.

Indonesia is home to the world's fourth-largest unbanked population, where 52 per cent of adults, or about 95 million people, do not own a bank account. A further 47 million adults are underbanked or have insufficient access to credit, investment and insurance.

"There could be more opportunities to create products and services in Indonesia, considering it has a huge population with a clear need," said Mr Kapron. "The use cases are a little bit more obvious in Indonesia as compared to Singapore."

Observers BT spoke to also noted that although the deal with Bank Jago might place Gojek in a more attractive position because of the potential to tap on the unbanked population in Indonesia, it still might not have a direct impact or sway on a potential Grab-Gojek merger.

Mr Kapron added: "But if they do merge, (this deal) can give both Grab and Gojek more opportunities and an additional financial footprint in Indonesia."

The ride-hailing operator said in a statement on Friday that the deal represents a "huge opportunity", considering that Indonesia has a high smartphone penetration rate of 70 to 80 per cent. This makes the population infrastructurally ready for digital banking, it added.

This strategic investment into Bank Jago comes after rival Grab's successful bid with Singtel for a full digital banking licence in Singapore. These digital banks are slated to emerge onto the city-state's banking scene starting early 2022.

The deal, which was made through its payments and financial services arm, will not alter the control of Jago, it said. Metamorfosis Ekosistem Indonesia and Wealth Track Technology, which have a combined ownership of 51 per cent, will continue to be Jago's controlling shareholders, it noted.

Gojek co-chief executive Andre Soelistyo said: "Our partnership with Jago... is a key part of our strategy and will underpin the growth and sustainability of our business in the long term."

He added that the collaboration with Bank Jago, an Indonesia-listed technology bank, can allow Gojek to "develop a process through which we can work with other banks".

The aim is to leverage more partnerships like this, Mr Soelistyo said.

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