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A new point-of-sales race is brewing in Indonesia

Despite the growing popularity of online transactions in ecommerce platforms like Tokopedia and Bukalapak, around 96% of total transactions in Indonesia still happen offline.

To handle offline transactions, large companies may use a cash register software that has to be installed on-site. Meanwhile, most of the country’s small and medium-sized enterprises still rely on traditional pen-and-paper methods to record transactions.

This led to the rise of mobile point-of-sales (PoS) startups like Moka and Pawoon about five years ago. Using just a smartphone or tablet app, merchants can record transactions, accept online payments, manage inventories, run analytics, and produce reports. Users pay a monthly or yearly subscription fee for this service.

However, these pioneers are facing new challenges: Startups that develop their own PoS systems and offer them to their respective ecosystems.

Point of sales Moka

A sample PoS software / Photo credit: Moka

Jakarta-based unicorn Tokopedia, for example, has built its own PoS software and is offering it to some of its sellers. With this product, the company can get data from the online transactions taking place on its platform as well as from the offline transactions of those sellers. However, Covid-19 forced Tokopedia to put the development of the product on hold, opting to focus on its core ecommerce business instead, a spokesperson told Tech in Asia.

Payfazz, an agent-based payment company, has developed two PoS systems. One is a feature that was added to its agents’ app and the other is called Post, which is aimed at offline merchants.

Warung Pintar, a startup that wants to transform mom and pop stores across the country into smart kiosks, used to provide stall owners with Moka’s PoS software. However, it soon realized that the product didn’t suit warung owners, who are generally not tech savvy.

Moka’s PoS “was too sophisticated, so we decided to build a simpler PoS by ourselves,” says Agung Bezharie, chief executive of Warung Pintar.

Since these newcomers can offer their products at lower prices or even for free because they have other revenue streams, pure-play PoS companies may face tougher days ahead. Covid-19 is also a cause for concern, given how majority of their clients are in the retail sector and the food and beverage industry, which have been hit hard by the pandemic.

Only a catalyst

PoS software is not rocket science, says Michael Liem, CEO of Indonesian PoS startup Qasir. The platform can be easily copied, and its main function hasn’t really evolved since the era of its offline cash register predecessors, he says.

What’s changed with cloud-based PoS systems is their “integration with payment, stock replenishment, and procurement” services, observes Liem.

While other PoS systems charge a subscription fee, Qasir’s product is free, with users paying only for extra features.

The company also gets additional revenue from helping merchants buy goods and apply for loans. However, the amount is not significant, Liem says.

Qasir claims that its software has been installed by 270,000 users, with 30% of these installations being active merchants. “I don’t believe in a pure subscription model for a developing market like Indonesia. Many people can’t afford it or haven’t understood the benefit of such a product,” contends Liem.

Instead, he believes that PoS is only a catalyst for other products. US-based payment company Square is an example. It offers PoS through a freemium model, but the majority of its revenue comes from processing payments for those merchants.

PoS startups in Indonesia also earn revenue from facilitating payments, says Liem, but the gains have been small.

Source: Square’s annual report 2019

Subscription-based Moka, which counts retail and F&B merchants as its main customers, is trying to increase its revenue in other ways. The company, which was recently acquired by Indonesian super app Gojek, has expanded into lending (Moka Capital) and stock procurement (Moka Fresh).

However, the contribution of those two new services are likely small, and a huge chunk of Moka’s revenue still comes from subscription fees, according to a source close to the company. Tech in Asia has reached out to Moka for comment, but it hasn’t responded.

Moka has also collaborated with online lending players like KoinWorks, Modalku, Taralite, and an equity crowdfunding startup called Santara for its lending business. However, Moka has only facilitated around US$2.7 million in loans as of December 2019.

A person who understands the industry says that a company can get 1% or less in commissions for facilitating loans the way Moka does.

Moka Bermvda 2

Photo credit: Moka

Being part of Gojek may revitalize the future of Moka’s services. Its PoS system will be integrated with several Gojek apps: Midtrans, an online payment gateway; GoBiz, which targets offline merchants; and Spots, an offline payment platform and PoS device provider. With this acquisition, Gojek can consolidate and control online transactions on its platform and offline transactions on Moka.

Gojek owns another PoS company called NadiPos. The startup is still new and only had around 200 merchants when Gojek acquired it in 2017. In comparison, Moka claims to be currently serving 40,000 merchants.

Gojek’s archrival Grab also has an app for Indonesia-based merchants called Mitra Grabfood. However, the company has no direct partnership with PoS startups, according to Grab representatives. Instead, it has a close relationship with payment app Ovo, which collaborates with PoS players like Moka and has tapped into hundreds of thousands offline merchants in the country.

Like other payment apps, Ovo can record offline transactions, but only if the customer uses its payment platform. It’s different from PoS players that can record any transaction on any payment platform.

According to Qasir’s Liem, Gojek’s acquisition of Moka validates his thesis that PoS is a catalyst for fintech businesses like payments processing and lending.

“There will be more consolidation in the industry. It’s not necessarily M&A, but it can be in the form of deeper integration between PoS players, payment, lending, and other related players,” he says.

Fragmented market

Pure PoS startups also have to address how fragmented the Indonesian market is. Businesses may have a similar or general need for PoS, but each industry has unique characteristics. Size may also be a factor as well: Smaller businesses may not be able to afford subscription fees, while the bigger enterprises may prefer a more complex and stable solution.

This fragmentation has been a key challenge for players such as Moka.

The company lost some merchants because they had closed down while other customers had matured and needed more sophisticated features that it couldn’t provide, according to Aldi Adrian Hartanto, vice president of investments at MDI Ventures, which had invested in Moka.

“Pure PoS [startups] can have a good business. However, there will be a limitation of the market that they can serve,” Liem notes.

Qasir CEO Michael Liem (center) / Photo credit: Qasir

Qasir focuses on microbusinesses and small enterprises, he says. Almost all Indonesian businesses belong to this category, based on data from the national government. They have assets lower than 500 million rupiah (US$33,500) and annual sales below 2.5 billion rupiah (US$167,500).

“I focus on enterprises in Tier 2, 3 and 4 cities. I can get organic traction because my product is free,” says Liem.

Based on their price points, PoS solutions of players like Moka and Pawoon are more suitable for small and medium-sized enterprises, he adds.

Type of enterprisePercentage of all enterprises in Indonesia
Microbusinesses98.7%
Small businesses1.2%
Medium-sized enterprises0.09%
Big enterprises0.01%

MDI Ventures’ Hartanto admits that pure PoS players may have a limited market in the short run. “They need to expand to other sectors if they want to increase the market pool and keep growing,” he adds. They can also retain clients by linking merchants to a larger ecosystem, so that it won’t be easy for them to switch to other players.

New opportunity

With the fragmentation of the market, some startups are also offering variations of PoS software to offline merchants.

BukuWarung and BukuKas for example, are helping merchants record cash flow rather than transactions like PoS software do. These startups are trying to imitate the success of India-based bookkeeping apps like Khatabook and OkCredit.

“In the near future, we will launch payment features. [The goal is to] get commission from every transaction that happens in our platform,” says BukuWarung CEO Abhinay Peddisetty.

A significant difference between bookkeeping and PoS apps is the availability of loan reminder features, which is useful for customers who often forget to make payments on time. Qasir also has a similar app called Miqro.

Photo credit: BukuWarung

Another variation is startups that focus on processing invoices, like Paper.id. Backed by P2P lender Modalku, Paper.id serves business-to-business (B2B) companies that don’t have on-premise transaction terminals like retail shops or restaurants but collect payment through invoices instead.

One advantage of PoS and those alternative apps is their access to merchant transaction data, which is useful for credit scoring or business optimization.

PoS appsBookkeeping appsInvoicing apps
ExamplesMoka, Pawoon,
Qasir
BukuWarung, BukuKas,
Miqro
Paper.id
Main DataTransactionsCash flowInvoice
Target marketMicrobusinesses
to big enterprises
Individuals
to microbusinesses
B2B companies
Generate accounting report
Issue invoicesx
Inventory managementx
Facilitate payments
Print transaction receiptxx
Loan reminderx

As Covid-19 continues to spread, offline merchants in Indonesia have been hit. Qasir admits that transactions from its retail clients and F&B merchants have decreased. However, the company’s gross payment value is still increasing due to merchants who sell products across multiple ecommerce marketplaces.

“To keep track of their inventory and cash flow, they use Qasir to aggregate transactions from all platforms,” explains Liem.

Even as POS players are racing against each other, it seems that their biggest battle is adapting to a new normal brought about by a global crisis that shows no signs of slowing down.