These payment industry veterans are taking Indonesian schools cashless

Indonesia is undergoing a digital payment revolution. But as for its schools? Not so much. Many students still pay tuition fees and other expenses by physically bringing cash to school.

This calls to mind security issues and manual, inefficient bookkeeping systems. But according to Ian McKenna, a Jakarta-based payment industry veteran, this has also led to problems like late tuition fee payments, as many parents often deprioritize paying for education in favor of more immediate needs.

Photo credit: InfraDigital Nusantara

“What we see on the ground is that as much as 70% of school fees were being paid late,” he says. “This results in real problems, like teachers or electricity bills not being paid on time.”

This led McKenna to set up InfraDigital Nusantara, a fintech startup that builds what it dubs a “digital-era financial system for education,” with co-founder Indah Maryani in December 2017. The two had previously spent seven years working together at the Jakarta branch of Fusion Payments, an Australian company that builds mobile payment solutions for clients in the banking and telecommunications industries.

InfraDigital raised an undisclosed amount of seed funding earlier this year in a round led by the venture arm of Taiwanese accelerator AppWorks.

It has since onboarded more than 200 educational institutions – ranging from regular schools to universities and tuition centers – to its software platform. Last year, the company transacted 30 billion Indonesian rupiah (US$2.1 million) for more than 20,000 students.

Fixing the fundamentals

InfraDigital offers educational institutions a software product to manage school fee payments in a cashless and paperless way. Its features include real-time financial reports (generated with the click of a button), transaction reconciliation, as well as SMS or email reminders for payments that are due.

Parents can also make payment through regular channels like bank transfers, e-wallets like Ovo and Go-Pay, as well as cash payments at convenience stores like Alfamart and Indomaret.

“It’s exactly like paying your utility bill,” says Maryani. “All you need is the name of your child’s school and their student identification number.”

InfraDigital’s clients range from preschools, technical high schools, universities, tuition centers, to Islamic madrasas. The company currently operates in Java and Sumatra, though McKenna says they have received requests from schools in other Indonesian islands like Kalimantan and Sulawesi as well.

Without the firm’s software, McKenna says, schools would normally depend on outdated systems that rely on cash and paper documentation. Some schools, he adds, didn’t even have bank accounts until the InfraDigital team helped them to create one.

A common practice for institutions is to have one large binder or file dedicated for each student, even though they could have hundreds or thousands of students. As such, there is no way for a school to access its transaction histories or the total amount of unpaid fees in real time.

“What people don’t realize is that schools have incredibly complicated financial obligations. A school probably issues 2,500 invoices a month, based on the different types of fees they collect,” McKenna says, adding that at this scale, a normal corporation would have a chief financial officer, finance managers, as well as established systems in place to manage its financial transactions.

Difficulties at the start