Traveloka fuels up 'buy now, pay later' engine for super app take-off

Singapore

INDONESIA-BASED Traveloka - whose name translates to "travel world" - is ramping up growth beyond its core online travel booking platform.

The 10-year-old company has taken its "buy now, pay later" (BNPL) service to the e-commerce realm, while also expanding in food delivery. All of this fits into its broader vision of a "lifestyle super app".

This comes as the company is widely expected to soon go public - drawing attention to the growth story it can present to investors, especially as the travel outlook remains uncertain.

"During the pandemic, we've doubled down on fintech... to make sure that people are still engaged and we are still relevant to our users across the region," Traveloka president Caesar Indra told The Business Times.

Consumer credit has especially been a focus. Back in 2018, the company launched a BNPL service in Indonesia, called Traveloka PayLater, which allows users to split payments into instalments. But this was only for purchases within Traveloka itself.

In September last year, Traveloka stepped into the more competitive playing field of BNPL for e-commerce. It launched a new feature, PayLater Virtual Number, which allows users to transact on major e-commerce sites, with payment made through instalments over up to 12 months.

For both PayLater and PayLater Virtual Number, interest rates range from 2.25 to 4.8 per cent per month. Late fees are charged at 5 per cent of the outstanding amount, for a maximum of 3 times.

The company declined to disclose its non-performing loans ratio and transaction values, citing commercial reasons. Traveloka said that it works with various financial institutions and underwrites a portion of the financing provided under PayLater.

"The impact of this product has been tremendous, we've seen increased engagement," said Indra, adding that the average spend for a user tapping the virtual number feature is more than 2.5 times that of a consumer only using the PayLater service within Traveloka.

The company is betting on its brand recognition among consumers, as well as the data it has from the core travel booking business, to have an edge over competitors in BNPL.

"We understand our consumer better, because when they check in, they provide full information - that helps with the KYC (know-your-customer) checks," he said.

Traveloka is also on the lookout for more ways to expand its BNPL footprint. It recently joined the US$36 million fundraise of Sirclo, an Indonesian e-commerce enabler, which Indra pointed to as an opportunity.

"For Sirclo, they are working with a lot of brand partners. One of the potential areas where we can collaborate is the expansion of our PayLater to their brand partners, as well as the users who transact through the channels," he said.

BNPL is a cutthroat space, with contenders including Akulaku, Atome, Kredivo and even Shopee's own SPayLater.

The segment has been hyped up among regional investors, following the rise of global giants such as Affirm, Afterpay and Klarna. But these companies face growing scrutiny over fears of rising consumer debt and regulatory risks.

For its part, Traveloka is cautious about the credit limits it provides so users don't over-borrow, Indra said.

He added that there hasn't been an impact from rising interest rates on the BNPL service and that the company is assessing developments. It is also looking at growth opportunities for the fintech business in Thailand and Vietnam.

Growth story

Traveloka's fintech growth comes as it has also leaned into other "super app" verticals. Like AirAsia and Sea's ShopeeFood, the company forayed into food delivery - launching its Eats Delivery service in 2020, which has its own delivery fleet.

"The service is available in the greater Jakarta area, but hopefully in future, we can roll out into more cities within Indonesia," said Indra.

In January this year, Traveloka also launched an on-demand taxi booking feature, QuickRide, that allows Indonesian users to book taxis from local operator Bluebird. The company emphasised that this does not mark an entry into ride-hailing, but is simply an extension of its existing cars and airport transfer offerings.

Traveloka is one of at least 24 venture-backed companies in South-east Asia vying for the public markets, as BT has previously reported. All eyes will be on how it can position itself to public investors, who lack the high risk appetites of venture capitalists.

Reportedly valued at US$2.75 billion, the company is seen as South-east Asia's answer to Expedia - in fact it attracted an investment from the US travel giant in 2017. Other high-profile backers include Singapore's GIC and the Qatar Investment Authority.

In February 2021, co-founder and chief executive Ferry Unardi told media that Traveloka planned to list that year in the US, via a merger with a special purpose acquisition company (SPAC). It was later said to be in talks with Bridgetown Holdings, the SPAC backed by magnates Richard Li and Peter Thiel.

However, talks have since halted due to weak sentiment in the SPAC market, Bloomberg reported in September, and Traveloka is said to be exploring the traditional IPO route. Indra declined to comment on the matter.

IPO timing is set to be a challenge, as rising interest rates and global conflict have pushed investors away from loss-making tech stocks towards safer bets. Both Grab and Sea have seen their share prices throttled, as wariness grows.

Asked about investor sentiment, Indra is still sanguine. "I strongly believe that good investors will always be able to find opportunities, and great tech companies will always have interest from investors out there," he said.