It has been an eventful few days in the Southeast Asian fintech space. As Grab announced its record-breaking SPAC merger on Tuesday, it reportedly also bought a 4% stake in Indonesian conglomerate Emtek, a backer of e-commerce firm Bukalapak and mobile wallet platform Dana, in a private placement. The Singaporean company spent IDR 4 trillion (USD 274 million), according to The Straits Times.
Grab is gaining access to Emtek’s ecosystem, which spans broadcasting, online media, on-demand video, internet services, digital payments, and e-commerce. However, the company is particularly interested in Bukalapak and Dana, analysts believe.
“Grab wants to penetrate deeper into the e-commerce and digital payments sector,” said Bhima Yudhistira Adhinegara, a researcher with the Institute for Development of Economics and Finance (Indef). “These two integrated segments could provide better profit prospects than the ride-hailing business.”
The Sariaatmadja family, which has controlled Emtek since its foundation, also participated in Grab’s USD 4 billion private investment in public equity arrangement (PIPE), which is part of the SPAC merger.
As its rival Gojek is in the process of merging with e-commerce unicorn Tokopedia to form a joint entity called GoTo, it was opportune for Grab to cozy up with another e-commerce unicorn, Bukalapak. It also marks a new chapter in the competition between the two super apps.
Bukalapak and Lazada, with which Grab partners in Vietnam, were the third and fourth most visited e-commerce sites in Indonesia in the last three months of 2020, according to data compiled by iPrice. However, total visits on both sites still lag behind the leaders Shopee and Tokopedia. An alliance between Grab and Bukalapak would still face challenges to reach GoTo in the e-commerce sector.
The ability to compete with GoTo’s dominance hinges on two things: the amount of money they spend and the innovation the partner brings in, said Adhinegara, adding that Grab would have a better chance by partnering with Shopee.
Will Ovo and Dana merge?
News about a possible merger between Ovo and Dana has been circulating since September 2019, although representatives of both companies have declined to speak about the matter. Emtek publicly disclosed at the end of last year that it is no longer a controlling shareholder of Dana’s parent PT Elang Andalan Nusantara (EAN). The fresh funding from Grab, an Ovo investor, once again raised speculation about the possible consolidation of the two payment platforms.
“A merger could be an option,” said Adhinegara. Ovo urgently needs to do something to grab market share from GoPay and ShopeePay, he believes. One option would be additional partnerships with e-commerce platforms, beyond the existing collaborations that include Tokopedia, Lazada, Blibli, and fashion e-commerce site Zalora.
ShopeePay was the most used e-wallet in Indonesia in the first quarter of this year, according to a recent survey by SnapCart. The digital payment platform has been used by 76% of the respondents, followed by GoPay (57%), Ovo (54%), Dana (49%), and LinkAja (21%).
Winners ‘likely’ to take all
Hiro Kiga, a former VC who now serves as COO of cross-border payment platform Wallex, doubts that an Ovo-Dana merger will be happening anytime soon. “I think we’ll see more collaboration between Ovo and GoPay instead,” he said. Tokopedia is one of Ovo’s strategic investors, and it’s rumored that Tokopedia is contractually required to keep Ovo on the platform.
Since both Grab and Gojek are also invested in state-owned mobile payments platform LinkAja, Kiga expects a reshuffling of the alliances. “Once the dust has settled, my prediction is that it’s going to be GoPay-Ovo and Dana-LinkAja versus ShopeePay,” he said. Kiga considers mergers between e-wallets as “monumental tasks,” so partnerships are likely the easier solution.
Given the current dynamics, competition seems to be intensifying. Analysts now believe that it could lead to a “winner takes all” outcome where the dominant players will strengthen their position through further acquisitions.
