The Indonesian startup with an edge over Square

Indonesia has millions of small and medium businesses. The question is how open they are to change. Photo credit: Dietrich Ayala.

It happened again, in a mid-sized hotel at a touristy spot somewhere in Indonesia. Come checkout day, I drew a card from my wallet – and got a blank stare in return. “We don’t take credit cards,” the receptionist said. No debit cards either. Oh, and the only ATM in town is out of order.

Equipping small-scale merchants with EDCs isn’t cost effective.

The situation is common when travelling in Indonesia. Why aren’t more places accepting cards?

Teddy Tee, co-founder and CEO of local payments company Cashlez has thought thoroughly about this.

“For the past 15 to 20 years the only device we’ve known for card payments is the EDC,” he explains. The acronym stands for electronic draft capture. It’s the device you swipe or tap your card on, at a hotel, restaurant, or shop.

“Banks lend the EDC to merchants, and then they have to do the maintenance,” he continues.

It starts with the installation. An engineer has to come to set up and configure the device. She’ll have to visit again for software updates. Merchants need to be taught how to use the menu, how to void transactions, how to replace paper rolls for receipts, and so on.

The hassle means banks only give EDCs to high-end merchants. Everything else isn’t cost effective.

This is what a typical EDC looks like. Photo credit: Wikipedia.

Low-hanging fruit

But it’s 2016, and we’re in the age of digital disruption. Teddy is convinced there are better ways to handle cashless payments – options that don’t exclude medium and small enterprises. When he worked with merchants during his career in traditional financial institutions, he noticed there’s a ton of unmet demand.

Increasing the number of card acceptance points is the obvious route.

Some payments innovators believe cards and readers should be done away with entirely. They’d like to see the transaction take place online from end-to-end, but Teddy is in the other camp.

An edge over Square

Will merchants adapt?