‘E-payments just a cash-burning exercise’

Bloomberg

The venture capital arm of PT Bank Mandiri thinks electronic payment platforms will only ever be profitable by serving as gateways to more lucrative services. Otherwise, they’re “just a cash-burning exercise,” said Eddi Danusaputro, chief executive officer of PT Mandiri Capital Indonesia.
The race for customers in Indonesia is so intensive that e-payment providers have been willing to offer steep enticement discounts, calculating that the immediate cash hit is worth it in order to secure a bigger market share, said the CEO in an interview. In Jakarta, services like Gojek’s GoPay and Grab Holdings Inc-backed Ovo have been dealing out purchase discounts and cashback as high as 50% and sometimes even 90%, none of which is sustainable in the eyes of the Mandiri Capital CEO, which has itself invested in LinkAja, another competitor in the field.
“Nobody makes money from e-wallets,” Danusaputro said. Seller fees are “coming down, gone are the days of 2% or 3%. The banks are making money from the funding side and savings or checking accounts of the merchants.” For them to survive, e-wallet services have to direct users to more profitable ventures, said the CEO, such as by cross-selling financial service products like mutual funds, stocks or insurance products.
Mandiri Capital said that LinkAja’s alternative e-payments approach is to pursue fees from various public-utility transactions such as toll roads, train tickets and healthcare payments.