Tapp Commerce aims to ‘mobilise’ cash-based SEA, starting with Indonesia

By Masyitha Baziad June 23, 2016

Only 36.1% of adult Indonesians have bank accounts, e-commerce still a luxury
Indonesia launchpad into SEA, where mobile can solve financial inclusion issues

Tapp Commerce aims to ‘mobilise’ cash-based SEA, starting with Indonesia

THE dynamic e-commerce market across South-East Asia, especially in Indonesia, faces two main challenges: Logistics and payment.

Finland-based Tapp Commerce Oy aims to tackle the latter with its mobile payments technology, saying it intends to bring “e-commerce down to the street level” across the region.

Founded in 2013, Tapp Commerce is a peer-to-peer (P2P) mobile payment solutions company that targets cash-based developing countries. Its first consumer solution, Tapp Market, is a mobile app and web-based marketplace that connects local sellers to buyers, and was first launched in Indonesia in July 2015.

Kicking off its South-East Asian entry with Indonesia was a strategic move: The republic not only has the largest general population in the region, but also a large unbanked population.

Indonesia has 177.7 million people aged 15 and above, but only 36.1% or 64.2 million of them have bank accounts, according to the World Bank’s 2015 Little Data Book on Financial Inclusion.

Furthermore, only 25.9% of its population have debit cards, and only 8.5% of them use debit cards to make payments. The rate is even lower for credit cards: Only 1.1% or around 1.9 million people use credit cards for payments.

The Indonesia Credit Card Association (AKKI) reported that as at April 2016, there were 16.9 million credit cards in Indonesia, with the total amount of transactions from January to April coming up to only Rp89.4 trillion (US$6.7 billion).

In 2015, Indonesians had 16.8 million credit cards, with the total amount of transactions reaching a mere Rp273.1 trillion (US$20.7 billion) for the full year, according to the association.

Besides the low penetration of credit cards in Indonesia, this relatively small amount of spending is also because many Indonesians still use their credit cards to withdraw cash.

Bank Indonesia reported that the volume of cash withdrawals via credit cards grew 75% in 2015 compared with 2014, while the volume of transactions via credit cards grew only 9% in that same period.

“Cash is still the only available payment method for most people in emerging markets, and hence a majority of the world’s population,” Tapp Commerce chief executive officer Warren Sample said in an official statement.

“In South-East Asia alone, formal banks and credit products are a luxury that many people simply cannot afford,” he added.

Kicking off with Indonesia, Sample (pic above) said Tapp Commerce would “work its way through” until its solution covers all of the developing markets in South-East Asia.

“We started in South-East Asia because we see the region’s economy is growing rapidly, but at the same time suffers from lack of infrastructure that could boost the economy even further,” he told Digital News Asia (DNA) via email.

“The high youth population and mobile-savvy Internet users provide a chance for countries in South-East Asia to leapfrog and solve payment and financial inclusion issues with mobile technology.

“We believe that when more people have the tools to do transactions, the market is going to be bigger, and it will be good news for the region, especially in the e-commerce era,” he added.

Tapp Commerce entered the Philippines this March. Between both countries, it currently has more than 30,000 local sellers on board and has served about three million buyers there – mostly in Indonesia.

But the achievement did not come easily, he admitted.

“It required significant sales efforts to convince local sellers in Indonesia to try and move their business from SMS (short messaging service) based selling to our solution.

“We understand that building awareness and showing people the real benefit of our solution is the best way to make them move – however, it is a continuing effort.

“The Philippines market is rapidly ramping up, and we are positive that we can make a difference there,” he added.

According to the World Bank, the Philippines has 64.8 million people aged 15 and above, but only 31.3% of them have bank accounts.

From cash to m-commerce

Tapp Commerce aims to ‘mobilise’ cash-based SEA, starting with Indonesia The Tapp Market app works as a platform that connects local sellers and buyers, and allows them to conduct transactions using cash.

Both buyers and sellers have to download the app, currently only available in for the Android platform. Buyers who can’t download the app can use a simpler web-based version.

Buyers can locate the nearest sellers through the app, and can order the goods they want to buy. The seller will them go to the buyer and collect the cash.

Buyers can also convert their cash into ‘Tapp coins’ from sellers, and use these Tapp coins for cashless transactions.

On the sellers’ side, they need to deposit a trading balance to make sure they can provide the service. The app provides inventory monitoring as well, where the history of all transactions is recorded.

“Unlike existing e-commerce solutions, Tapp Market targets consumers whose purchasing power is limited to cash,” said Sample.

“The system is autonomous of any existing global banking ecosystem – anyone can establish a mobile sales point with just a mobile phone and a small trading balance,” he added.

Sample said that in Indonesia, most Tapp Market transactions revolve around topping up prepaid mobile accounts, paying utilities bills, and the purchase of daily necessities.

However, he believed that this behaviour would slowly change as people become more aware of the platform and how it can help a cash-based society.

When asked how the company makes money, Sample said Tapp Commerce receives a small percentage of every transaction.

Expansion plans

Tapp Commerce kicked off with seed funding of US$3.9 million, and in April received a €1.25-million (US$1.4 million) grant from the Finnish Fund Agency for Innovation.

More recently, it secured Series A funding worth US$9 million from Amma Private Equity, an Australian early-stage investment network which has also invested in music streaming service Guvera.

The fresh capital injection will be used to expand its network of local agents and acquire more buyers across its South-East Asian markets.

“Our plan is to acquire more different types of agents – for example, small business owners,” said Sample.

“We will also use the funding to bring a wider range of services to Tapp Market, and we aim to strengthen awareness among our target audiences,” he added.

According to Sample, Tapp Commerce already has a presence in all the big islands in Indonesia, but most of the local sellers are based in Java.

“We have a significant number of agents as well in Sumatra, Kalimantan, Sulawesi, and even Papua. We hope we can add more local agents in these islands,” he said.

In terms of the wider South-East Asian market, the company plans to start operations in Thailand and Vietnam in the third quarter of this year.

“We are also aiming to tap into Myanmar by the end of the year – we are now doing a market feasibility study,” Sample said.

Vietnam has an adult population of 69.3 million, of whom only 31% have bank accounts. Myanmar has 40 million adults, but only 22.8% of them have bank accounts.

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