Why cross-border payments are Asia’s next big tech frontier — Insights from an Indonesian unicorn

0:00This episode of Beyond the Valley is sponsored by the Singapore Week of Innovation and Technology by Enterprise Singapore. One of the big success stories for Asia's tech sector is Zendit. You may have heard of Stripe, the online payment processing service. Well, Zendit provides similar services, but in Southeast Asia. Now, the Indonesian unicorn is looking to expand its horizons into Latin America with the aim of unifying a fragmented payment systems landscape.

0:31Hello and welcome to Beyond the Valley. I'm Arjun Karpal and we're here at Switch in Singapore, which brings together investors, entrepreneurs and tech leaders in this Asian tech hub. Surprise! This is our bonus episode for this series. We're mainly recording out here from Singapore. My guest for this episode is Tessa Widjaya, who is co-founder and COO of Zendit. Thanks so much for joining me on this episode of Beyond the Valley. Thank you for inviting me here. So Zendit, often dubbed the Stripe of Asia. What exactly do you do for our listeners who might not know? Yeah, so we definitely are often dubbed as Stripe of Southeast Asia.

1:09What we do is we provide payments for businesses. So really anybody who wants to accept payments online in the markets where we are available, they can do so really with one click of a button or one simple integration. we're currently in five markets so that's Indonesia, Philippines, Thailand, Malaysia and Vietnam and growing as we speak so very excited about being here. One of the really interesting things I think traveling across the region is exactly that how different the payments landscape is very different to I guess coming from the UK and going across Europe where it generally feels quite integrated and easy to do payments whereas in Asia there's various different apps and methods of payments.

1:51So this kind of fragmentation, how are you solving that? Yeah, I mean, basically, Zendit aggregates methods of payments. And I think for folks who are living in Europe specifically, because everything is done via cards, it's a bit baffling. Like, why does Zendit need to exist? But, you know, we have to kind of look at the bigger picture of Southeast Asia. A lot of our population are not banked. A lot of our population cannot get credit cards. And therefore, to make payments, oftentimes we need to do other things or we need to have different payment methods. But a lot of us are already online now, right?

2:24We have a significant number of WhatsApp users. I think Indonesia has the highest user of Facebook and Instagram. And we can often shop online, but we don't know how to make payments. So Zendit aggregates things like, you know, you can have no bank account, but you can purchase something online and make a payment in a 7-Eleven, for example. But we aggregate that as well as QR code based payments and any other alternative payment methods. And look, you've been growing over the past few years. What have been some of the biggest challenges as you've pursued growth? Yeah, I mean, you've pointed out yourself, payments is extremely fragmented.

3:00And what that means is a lot of people will need to make payments via bank accounts and whatever else. This means for a Zendit, one of the bigger challenges is having to be hyper localized, having to integrate every single bank, every single wallet in Southeast Asia, every single, you know, over the counter stores. I think that's been very challenging to navigate. And hopefully they've succeeded in doing that. And sort of how have you overcome some of those challenges then? When you talk about hyperlocal, are you sending up like very local offices there to kind of work with partners in each country or even each city?

3:33How does that work? Yeah, definitely. I think whenever we think about being in a country, because the challenge is not the tech, but actually things like partnership or regulatory challenges. We definitely want to be hiring the locals who understand the market better. So whenever we expand somewhere, we definitely expand very heavy footprint. It's not just about sales folks, but the whole team needs to be set up. And then we have to knock on each bank to partner and everything else. And what are some of the kind of big trends right now that's really helping to drive that growth? Yeah, for sure.

4:03Southeast Asia is all about QR code based payments. And what that really is, is you can open up your bank account or your bank app and you can scan a QR code to make a payment. And which is a little bit different than cards. Basically, it's then pulling money from your bank account and sending it to somebody else's bank account. Yeah, I used to live in China for three years and worked there for CMUC and obviously pioneered out there, right? WeChat and AliPay, big on the QR base. Are there other kind of key trends you're seeing in the region that you think are going to underpin your growth in the coming years?

4:36Right. I think for us, you know, we've been very strong domestically so far, meaning we move money in countries. What we see is Southeast Asia is becoming consolidated and cross-border payments going to be the next big thing. You focus your product right now on kind of B2B, right? It's business to business kind of. Is there any part of the company thinking about how you might enter the consumer space? I think that's extremely tough. I feel like the consumer side is a very different DNA than B2B. We're very nerdy. We want to build good tech. We want to understand a lot about uptime. We want to make sure payments are secure.

5:13Whereas consumer, it's all about what do you want to do in order to use our platform. So I don't think we'll be going there in that direction. But I foresee that we'll be kind of going wider in our breadth of services. You mentioned cross-border. This is such a huge topic right now in terms of movement of money. and you're dealing with lots of different things, regulation, different currencies. How are you planning to kind of solve that and make it, it needs to be quick, needs to be efficient, needs to be cheap. Right. I mean, for the businesses or the consumers. For the businesses, yeah. Yeah, I mean, they don't need to care how we do it.

5:47But I think what's really exciting as well for us is trying to figure out using other alternatives like stable coins. I think that's quite a big thing. I know there's a whole hype about cryptocurrency and all the likes. And I'm not sure about the consumer case, but I think for businesses specifically, stable coins are going to be the next big thing for that in order to make payments cheaper as well as faster across border. I'm glad you brought up stable coins because that's exactly what I wanted to ask you. I mean, is that going to be a key part, do you think, of the equation? Is it stable coins that are existing, currently issued by third parties?

6:21We're talking, you know, Circle or Tether, et cetera. Or do you think that, you know, you could create your own stable coin to facilitate the transactions? Right. Right. I think we're always going to be the aggregator. We're always going to be the connector between one thing and one partner and the other and one method and the other. So I don't think we'll be doing that ourselves. But stable coins for sure is going to be extremely important in B2B payments. And it already starting is to be very important in Southeast Asia. And it's important again in connecting Southeast Asia to the rest of the world as well.

6:49So it's definitely here to stay. So Tessa, when it comes to stable coins, where are we in the kind of adoption of that from the business perspective? Yeah, I think, look, in Southeast Asia itself, it's still very early stage, but we're seeing an uptick. I mean, for example, Zendit ourselves, we're still trying to pilot using stable coins for money movement cross-border. I think those stable coins are here to stay and you'll see a much bigger uptick in the next few years. There was a point in Zendit's life where you were looking at crypto or you began with Bitcoin. Is that right? You know, we had a lot of foresight 10 years ago to be doing Bitcoin for cross-border payments.

7:26I think for domestic helpers across Southeast Asia. Yeah, unfortunately, we were 10 years too early. But what did you learn from that? Because obviously you look at Bitcoin now and the discussion around that time was Bitcoin's the future of money. It's going to be great for all these different things. And now it's kind of turned into a different kind of asset. People like to hold Bitcoin and there's all these other assets that have popped up. Stable coins, as you mentioned, but also other blockchains out there as well. And so what were you thinking at the time? What did you learn from that experiment?

7:57I mean, what we really learned was you need to understand the market. You need to understand where people are. To be bringing something like Bitcoin to Southeast Asia, where maybe the financial literacy is still a bit lower and you have a lack of access to any sort of financial infrastructure is just too much of a leap. So really, when you think about starting something, starting in payments, it's about adjusting to local needs. And that's what we've done with the current fiat-based payments, and we've done really well from it. Do you think in your business and how you operate this space for crypto now, given the growth it's seen and perhaps a slight more education and slight more adoption?

8:37I think it's going to be really tricky in Southeast Asia because regulators and countries need to come on board. And I don't necessarily think that there's going to be an opening up to that for now. And that's because there are tricky situations with your AML and money laundering and all the likes. and countries, rightly so, want to monitor money movement across markets and domestically as well. So I don't think we'll see that. But I think other innovation will continue to grow in Southeast Asia. And now, you know, you're looking beyond Southeast Asia, right, in terms of expansion. There's some looking at LATAM a little bit and various of the markets.

9:15How are you approaching international expansion based on, I guess, what you've learned in this region? Yeah, I think for us, any sort of expansion is going to be customer driven and customer led. For example, we used to be in one market, Indonesia only. Then our customers are saying, hey, can you provide the same tech stack in the Philippines? So I think that's always first. If customers are asking for LATM, then we'll go there. I think secondly, it's also about understanding where we can play. Zendit is very good with alternative payment methods. where a country or an area has very solid card space payments.

9:49I don't think we're going to be there. But where it's QR code, where we need a lot of other innovation, that's definitely our bread and butter and our strong suit. How are you sort of approaching new markets then? What's the kind of strategy? I think it's for us, it's really about hyper-localization, going deep, where markets are fragmented, but where there's room to be able to integrate to different partners and to be able to aggregate. I think that's definitely where we play the best. So knocking on the door of, say, each bank, each retail outlet and whatever else, and then kind of going from there.

10:22What about the U.S.? Because, yes, it's a developed market, but actually, you know, people often complain about the payment systems out there. Stripes in the U.S. and we're Stripes of Southeast Asia. Can we just take a quick food break? I call it a food break, Tessa, because I want to bring up sort of a bit of your history. I was reading online, so I've got to verify this as well. you you worked at a bakery in high school and you had uh you launched a sandwich shop venture in Jakarta called Food Criminal is that right yeah that's that was a very long time ago and that's right that's really cool so I mean what you know that there was this entrepreneurial spirit there of course what kind of earth attracted you to the food business at that time you know it was like um a really easy way to kind of learn to be an entrepreneur obviously the barrier of entry is really low and it's very low cost as well to start something.

11:13I was honestly just super naive. I think the slogan of this particular cafe was food so good it's a crime and it was terrible. The food was definitely terrible. I think I had to close up shop within a year but it was really a low cost way to be able to learn how to be an entrepreneur. What were some of the biggest lessons you learned from that experience? Gosh lesson number one is definitely testing your product out i think i was overly confident in the product i didn't really go around you know you can knock on the door uh your friends and whatever and try to give them um try to see if they like your food i didn't do that i just sort of was so confident in my product i went everyone's gonna try it everyone's gonna buy it everyone's gonna love it and they didn't that's so funny and um i also read that one of the reasons you kind of came to southeast i came back southeast Asia after studies was the food in the region oh it's definitely amazing you have a you're probably going to get in trouble with fiance but do you have a favorite yeah country's food or specific dish maybe yeah you know if if if um I'm to be unbiased I really love Thai food and Japanese food definitely Thai food I've learned a lot since expanding to Thailand but obviously being homegrown from the Sundar region I have to give a shout out to some of our local food which is a lot of grilled stuff, stinky beans.

12:33I love that. Inside, I'm so Indonesian, very Indonesian, even though I've been international. Sounds amazing. So let's get back to business. AI, every business is talking about AI. In fintech, in the business you run, what do you see as the opportunities for using AI? Yeah, I think for a B2B business like us, it's all about being a bit more efficient with automation. We've started utilizing AI in every aspect of our business, really, starting with customer success, having your agents be able to utilize AI internally, even to be able to understand the complex products that we have, doing things like reconciliations for our transactions.

13:15That's also something that AI can be useful for. So I think we're just at the beginning. We're also going to see a lot of that. And I think our businesses will be a lot more efficient going forward. That's interesting. So are you sort of building some of this in-house? Are you relying on external companies for this? I think most of the time, I mean, we're using really external tools in order to be able to do this. We do a little bit of, you know, our own internal tweaks, but, you know, there are a lot of off-the-shelf products out there that are available that you can use to be doing this really, really easily.

13:48From a business perspective, You've been around a while now. What's the kind of future look like for Zendit in terms of being a public company, for example? Is that something that you'd like to do? In one day, that would be the dream. But I think in the next maybe five to 10 years, I'll still be putting our head down, thinking about problem solving for payments and thinking about where else we can go to next. What do you think the next major wave of disruption in payments in Southeast Asia is going to be? Wow. I think it's going to be, you know, you guys all in Europe are probably using Apple Pay, OneTap.

14:23You're not even looking at your phones anymore, right, to be able to make a payment. Sometimes you can just walk through in the U.S. and payments charge. I think for us, how do we solve for that where payment methods are mostly still QR code base and based on bank accounts? I think that's going to be really disruptive and it's going to make payments just much more simple as well in Southeast Asia and really exciting. Do you think this, you know, you've mentioned it about the use of debit cards, credit cards in Europe and in the US. Do you think that sort of in Southeast Asia, miss the boat there, that's not going to happen?

14:53And actually, there does need to be new innovations that come up with a solution that's as quick and efficient? I think for sure, because, look, the barrier of entry of getting a debit or credit card is just so high. It's very expensive to make payments with debit or credit cards. And, you know, we're in Southeast Asia. You can go out for your chicken rice here for three dollars. So I think these other alternative methods are going to just still be the way to go in Southeast Asia. And you're going to see a lot of disruption, but similar movements to the card space. Tessa, if we were sitting here in a year's time, what do you think we're going to be talking about?

15:29Oh, gosh, definitely taking more, expanding more towards other parts of Asia, for sure. maybe focusing a lot more on cross-border space as we become more and more of a globalized world and yeah maybe you never know what other innovations we have in in store great tessa thanks so much for joining me on beyond the valley no worries thank you so much for having me that's it for another episode of beyond the valley here from switch in singapore thanks for listening and watching and we'll catch you next time