How GoTo Financial is democratizing payments for merchants of all sizes through Midtrans

Indonesia’s digital economy has shaped up well in recent years, driven by the pandemic-induced push toward digitalization. This has, in turn, fuelled an ecommerce boom that’s still on.

Consumers have spent billions on online services amid the pandemic, improving their financial literacy in the process. And micro, small, and medium-sized enterprises (MSMEs) are wasting no time in moving online to capture this growing market.

However, this shift has led to some problems.

Closing the gaps for MSMEs

“Many of these merchants are very small and lack the knowledge to leverage ecommerce tools,” observes Pratyush Prasanna, the head of merchant payments at GoTo Financial, which comes under Indonesian tech major GoTo Group and provides financial solutions for consumers and merchants alike. He adds that they instead manage transactions over social media platforms such as WhatsApp and Instagram. As orders volumes go up, however, they struggle to find a better way of tracking orders and payment statuses.

Pratyush Prasanna, head of merchant payments at GoTo Financial / Photo credit: GoTo Financial

Adding to the conundrum, around 40% of the country’s population remains unbanked.

Payment gateways (PGs) could be a solution to some of these issues by expanding ways of accepting payments for MSMEs, helping them better meet their customers’ needs, and lowering the risk of fraudulent transactions. PGs serve as an intermediary between merchants, banks, and customers to seamlessly accept and process consumer transactions.

Traditionally, Indonesian MSMEs have relied on local switching companies to facilitate transactions between different banks. However, with more locals favoring the convenience of digital wallets, PGs are gradually replacing these switching companies because they support a wider variety of payment methods, from credit and debit cards to digital wallet options and buy now, pay later alternatives such as GoPay Later.

They also offer more competitive rates than switching since they eliminate interbank fees by treating each transaction as an intrabank transfer.

As one of the leading PGs in Indonesia, GoTo Financial subsidiary Midtrans is helping newly digitalized merchants to overcome the key friction points – namely, the knowledge gap related to moving online and managing digital transactions.

The birth of something bigger

Today, Prasanna estimates that seven in 10 ecommerce companies in Indonesia use Midtrans as their primary PG provider.

“One of the first solutions we introduced was the payment link,” he shares. Merchants can generate a unique Midtrans payment link for consumers, facilitating seamless and secure transactions without a website.

“When it comes to payment acceptance, Indonesia has a significant failure rate,” Prasanna notes, adding that around 20% of all transactions are typically lost at the checkout stage to one-time password issues or suspected fraudulent activity.

This is where Midtrans comes in. Fully compliant with Bank Indonesia’s regulations for PGs, Prasanna points out that Midtrans’ payment acceptance rates are generally the best in the industry, with a vast majority of transactions successfully processed. This is thanks to a machine learning system that quickly weeds out instances of fraud. The firm also focuses on reliability, with its uptimes among the best in the industry and comparable with global standards.

In a bid to address client needs, Midtrans has transformed from a PG into something bigger.

“Many merchants didn’t have a digital means to keep track of their business at the start, so we created a dashboard to give them an overview of their transactions,” says Prasanna, adding that remote onboarding via WhatsApp eased the transition for these users.

To further accommodate its merchants, the platform offers 24 payment methods today, including GoPay and digital wallets such as ShopeePay. Prasanna puts this decision down to Midtrans’ belief in being a neutral and inclusive payment gateway for users.

“We want to be present in every part of the merchant’s business journey and make our solutions easy for them to use,” he explains.

Growing with Midtrans

Fashion company Kala Studios is an MSME that has benefited from adopting Midtrans’ solutions. As with many small Indonesian businesses, when it launched in 2018, Kala’s transactions were processed over WhatsApp.

However, co-founder Vina Ameilya shares that amid the pandemic in 2020, orders grew to the point where the team – comprising co-founders Adinda Tri Wardhani and Karina Mahendra – needed to revamp its manual system.

“Some customers didn’t have the same bank as us, while others wanted credit card or payment instalment options. It was hard since we didn’t have an ecommerce store back then,” says Ameilya.

While seeking a comprehensive solution that could provide better insights into the business, the co-founders chanced on Sirclo, an ecommerce website builder that has Midtrans’ dashboard integrated into its platform.

The Kala Studios co-founders / Photo credit: Kala Studios

With it, the co-founders could reconcile orders automatically, view transaction statuses, and get insights into consumers’ preferred payment methods. The MSME also had its service fees waived for the first three months – something all new customers receive under Midtrans’ zero merchant discount rate program in 2020. Through this program, tens of thousands of MSMEs were onboarded to Midtrans and quickly pivoted their businesses online at the beginning of the pandemic, Prasanna says.

Since setting up its online store, Kala Studios has seen its annual revenue grow by 1.5x year on year to around 2.8 billion rupiah (US$195,120). This growth has also been supported by additional marketing resources from Midtrans, which featured the firm on online talk shows and other collaborations.

“Midtrans has been really instrumental to our growth, from promoting us on social media platforms to responding to our questions quickly,” adds Ameilya. “It shows that it really cares about its partners.”

The ever-evolving nature of PGs

Going forward, GoTo Financial’s Prasanna sees payment gateway platforms like Midtrans evolving to serve a full spectrum of users – including fledgling startups – who want to accept payments and disburse funds quickly and securely.

“There’s a huge nascent demand because there are so many opportunities across merchants within different markets,” he observes. “These companies will grow massively, and that’s going to be a differentiator for PGs going forward.”

On a wider scale, the head of merchant payments also foresees improved efficiency and lower cost of transactions.

“I personally think these will be an interesting area for payments in Indonesia for the next two years,” adds Prasanna. “As the economy comes out of the pandemic and grows with new startups and new players in investments and ecommerce, we want to help by providing better rates, better reliability, and lesser downtimes while being truthful to our ethos of safety and security. We also want to maintain a neutral and inclusive position [in the PG ecosystem] so that all payment methods are available on Midtrans’ platform. That’s what I think will fuel our future.”

Currency converted from Indonesian Rupiah to US dollars: US$1 = 14,349.75 Indonesian Rupiah.

GoTo Financial is one of the key growth drivers for the GoTo ecosystem through its financial services and comprehensive merchant solutions. Find out more about how its payment gateway, Midtrans, is helping to improve the lives of consumers and businesses.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.