Newly-formed GoTo to heat up fintech battle in South-east Asia

Singapore

THE merger of Indonesian tech giants Gojek and Tokopedia solidifies the three-way battle for South-east Asia's fintech market, with the newly-formed GoTo Group having added firepower against Sea and Grab, industry observers told The Business Times (BT).

Financial services has been tipped as a major growth driver for the region's tech giants. However, some watchers reckon that even with the merger, GoTo still lacks the scale of its rivals that operate heavily in regional markets.

On Monday, Gojek and Tokopedia announced that they have completed a long-awaited merger to form GoTo, a company specialising in e-commerce, on-demand services and financial services.

GoTo will be headed by Gojek's co-chief executive Andre Soelistyo. Gojek's other co-CEO, Kevin Aluwi, will continue as chief executive of the ride-hailing service. William Tanuwijaya will remain chief executive of Tokopedia.

Mr Soelistyo will also continue to lead payments and financial services under the new brand of GoTo Financial, which includes e-wallet GoPay.

Gojek had already been competing aggressively in the fintech space, with investments including its acquisition of point-of-sales software startup Moka and its sizable stake in Bandung-based digital banking aspirant, Bank Jago. Gojek's stake in Bank Jago stood at 22 per cent as of Dec 18.

Grab and Sea have also invested heavily in their own fintech capabilities (see table). Grab is a major shareholder of e-wallet Ovo, a fierce rival of GoPay. While Tokopedia was also previously reported as a shareholder of Ovo, it is widely expected to divest its stake.

With the GoTo merger reshaping the battleground, opinion is mixed on which of the three players has the upper hand.

"I think GoTo is in a very strong position when it comes to financial services compared to Grab and Shopee in Indonesia," said Shauraya Bhutani, director at North Ridge Partners. Shopee is the e-commerce unit of Sea.

He believes that GoTo can become the "main financial services network orchestrator" in Indonesia, plugging payments, lending and investment products for different types of customers, mirroring the China market.

"Grab and Shopee, while operating their own large ecosystems in Indonesia, cannot enjoy the synergies and economies scale across ride hailing, on-demand services, e-commerce and merchant services like GoTo," he said.

Joel Shen, a technology lawyer at Withers, similarly said: "GoTo's most obvious competitive advantage over Grab and Sea is that its payments business supports the most complete digital ecosystem in Indonesia that includes ride hailing, food delivery and e-commerce."

As a homegrown company, GoTo could also appeal to the "nationalistic sentiments of Indonesian regulators, investors and the Indonesian public, in a way that Sea and Grab do not", he added.

However, Yorlin Ng, chief operating officer of venture builder Momentum Works, reckons that GoTo is at a disadvantage in terms of scale. "As regional companies, Grab and Sea have a much wider base to tap," she said.

Tokopedia has been focused on Indonesia, while Gojek's main overseas markets include Singapore, Thailand and Vietnam. In contrast, Grab is present in eight regional markets, while Sea has an even wider global footprint.

For now, GoTo still appears to be focused on expanding in its existing markets. The company told BT that besides Indonesia, GoTo will also "continue to expand in fast-growing and emerging markets, including Thailand, Vietnam and Singapore".

But much could change going ahead, as GoTo guns for the public markets. As the company told BT, "this union will accelerate our IPO plans".

Ms Ng of Momentum Works expects GoTo to list in Indonesia first before listing in the US, as it is more tax-efficient for existing shareholders.

That said, a SPAC (special purpose acquisition company) merger or initial public offering is highly dependent on the integration of Gojek and Tokopedia's businesses. While synergies are obvious, such an integration will take time to stabilise and show a track record of combined operations, said Mr Bhutani. "I think it's going to be the first half of 2022 when we see a GoTo listing," he added.

READ MORE:

• Consolidation in Indonesia's e-wallet war could reshape Grab-Gojek dynamics
• Gojek and Tokopedia merger: Why now and what challenges lie ahead
• GIC, Temasek poised to reap capital gains bonanza from tech IPO season

• Garage is BT's startup vertical. Read more news, analyses and opinion at bt.sg/garage