Behind Bukalapak’s entry into Indonesia’s digital banking race

Bukalapak, an Indonesian ecommerce giant, kicked off 2022 by spending US$83 million to acquire 12.05% of Allo Bank, a Jakarta-based digital bank owned by Chairul Tanjung, an entrepreneur and former politician.

This was not Bukalapak’s first venture into the banking industry – in mid-2021, the online marketplace made a deal to integrate Standard Chartered’s banking-as-a-service solution into its platform.

However, for the recently listed firm, buying a stake in Allo Bank is a significant move within Indonesia’s fast-growing digital banking space. Notably, Bukalapak’s co-investors in the digital bank include conglomerate Salim Group, super app Grab, and automotive marketplace Carro.

Bukalapak’s office / Photo credit: Bukalapak

Indeed, Emtek – one of Bukalapak’s major shareholders – already has plans to turn the Bandung-based Bank Fama into a digital bank, with help from Grab and Singaporean telco Singtel. The media conglomerate holds a majority stake in Bank Fama.

Bukalapak’s investment in Allo Bank goes against the argument that conglomerates like Allo Bank parent CT Corp are only interested in dominating industries, says Bukalapak president Teddy Oetomo. In fact, such companies are now used to collaborations with multiple parties, including tech players like Bukalapak, he adds.

“The attraction is that we have created such a broad, multi-ecosystem partnership, which has the potential to be big,” Oetomo tells Tech in Asia.

Allo Bank’s appeal

The acquisition of Allo Bank allows Bukalapak to dive into retail – a growing trend among ecommerce companies. Not long after the deal, Bukalapak announced an e-grocery joint venture with Trans Retail, another unit of Tanjung’s CT Corp. Trans Retail operates the Transmart supermarket chain and previously managed the Indonesian outlets of France’s Carrefour.

Allo Bank illustration / Photo credit: Allo Bank

Bukalapak’s move followed those of a few other internet firms: GoTo snapped up over 6.74% of Matahari Putra Prima, while Blibli planned to acquire a majority stake in Ranch Market operator Boga Supra Lestari.

Bukalapak was also drawn to Allo Bank because of the latter’s valuation prospects. According to Oetomo, the bank’s price-to-book ratio was 1.7 when the acquisition took place, which was more attractive than that of other licensed digital banks.

Since the purchase, the value of Bukalapak’s shares in Allo Bank has also shot up. Bukalapak had bought the shares at an exercise price of 478 rupiah (3.3 US cents) per share. That number peaked at over 7,000 rupiah (48 US cents) in January 2022, boosting the value of Bukalapak’s assets in Allo Bank to over US$1 billion – a growth of more than 12x from its initial US$83 million investment.

“We prefer to invest rather than develop our own because a digital bank is like a combination of a bank and a tech company – it is not easy,” says Oetomo. “We are not bankers.”

Playing the long game