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Indonesia's Go-Jek buys fintech startups to boost payments

Ride-hailing app operator to open e-wallet for third-parties

A woman rides on the back of a motorbike, part of the Go-Jek ride-hailing service, on a busy street in central Jakarta.   © Reuters

JAKARTA -- Indonesia's ride-hailing startup Go-Jek is bolstering its digital payment service by buying three local financial technology startups, as the country's most valuable startup looks to extend its lead against rivals Uber and Grab.

In a press release on Friday, Go-Jek said it had entered into "definitive agreements" for the acquisition of Kartuku, Midtrans and Mapan. Kartuku and Midtrans are payment-processing companies, with the former handling offline and the latter online payments. Mapan facilitates saving and lending for communities that do not have access to conventional banking services.

The value of the transactions was not disclosed.

Go-Jek's app offers a suite of on-demand services such as two- and four-wheeler taxis, meal and parcel deliveries, home cleaning, and more. It claims to be Indonesia's largest ride-hailing company, with 900,000 drivers, and the largest online commerce platform, with 15 million weekly active users. Grab, which operates in Southeast Asia, has said it has "hundreds of thousands" of drivers in Indonesia. Uber does not disclose detailed operational figures in the country.

The string of acquisitions come ahead of a major expansion of Go-Jek's payment service. It is planning to expand its electronic wallet, Go-Pay -- currently used to settle payments for the app's motorcycle taxi and other services -- into a payment tool for third parties such as restaurants and online shopping sites, similar to how Alipay is used in China.

Go-Jek is currently testing the service internally using QR code technology, ahead of a scheduled commercial rollout in 2018. It recently added a service on its app that lets users pay their electricity and health insurance bills.

The move comes as startups and financial institutions race to tap tech-savvy consumers in Indonesia, where less than half of adults own a bank account and less than a tenth have credit cards. While smartphone ownership is surging, the lack of payment options is a major obstacle to the growth of online purchases.

"Our technology is changing lives throughout Indonesia -- it supports the sharing economy and connects buyers, sellers, consumers and savers across the country," said Go-Jek's founder and CEO Nadiem Makarim. "Through the acquisitions announced today, we will be working hand-in-hand with three like-minded companies who share our vision and ethos."

The acquisition spree may be a blow for some of its rivals like Grab, which has been forced to suspend parts of its electronic wallet service until it obtains an electronic money license from Bank Indonesia. Rizki Kramadibrata, managing director for Grab Indonesia, on Wednesday said it is still in discussions with the central bank to obtain an e-money license.

Go-Jek has secured an e-money license, but its move to expand Go-Pay beyond the app will be subject to new regulatory approval, according to people close to the company.

The acquisitions will also shake up Go-Jek's management. Mapan's founder Aldi Haryopratomo will lead Go-Pay. Midtrans founder Ryu Suliawan will head the group's merchant platform, and Kartuku CEO Thomas Husted will become Go-Jek's CFO.

Erwida Maulia in Jakarta contributed to this story.

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