Deal focus: Indonesia’s fintech plumber

Among Asian jurisdictions, India is arguably the definitive regulator-driven open banking ecosystem. The scope of financial technology platforms is to a large extent dictated by India Stack, an ambitious government-led initiative to create unified, interoperable digital infrastructure – encompassing identification, documentation, data security, and payments.

Southeast Asia, by contrast, is market driven. Despite the proliferation of mobile wallets, governments in key geographies have yet to take it upon themselves to provide the various layers of supporting infrastructure. Consequently, development has been slower.

“When a market is regulator-driven, it changes business models dramatically because there are often caps on what you can change and who you can charge. It’s a case of providing access to everyone, including the most vulnerable,” said Smita Aggarwal, a global investments advisor at specialist fintech investor Flourish Ventures.

“This doesn’t mean there are no investment opportunities. Rather, you say, ‘This is the base case, everyone’s got it, so what can you do on top of it?’ In Indonesia, just having those base hygiene factors makes a difference, because no one is doing it.”

Flourish and Antler recently led an USD 8.5m seed round for Brick, a local developer of application programming interfaces (APIs) that originated from a recognition of this unmet need. Co-founder and CEO Gavin Tan was working for Aspire, Southeast Asia’s first digital bank for small and medium-sized enterprises (SMEs), when he experienced the pain points first-hand.

“I was involved in product building at Aspire and in launching the business outside of Singapore, in Indonesia, Thailand, and Vietnam,” Tan explained. “We had a good digital skin, but so many of the processes on the backend were still manual – calling customers and uploading documents. We could never wrap our heads around why basic infrastructure providers didn’t exist in Southeast Asia.”

Brick’s seed round includes an earlier and smaller commitment in May 2021 from Better Tomorrow Ventures, 1982 Ventures, Antler, Rally Cap Ventures, and a string of entrepreneurs who had a clear understanding of what the start-up was trying to do. The founders or CEOs of Aspire, BukuWarung, TrueLayer, Cred, Modalku, Carousell, Nium, Xfers, ZenRooms, and CareemPay participated.

Better Tomorrow and Rally Cap re-upped in the latest round, joined by Trihill Capital and several fintech leaders, including the CEOs of Pine Labs and Aspire.

Essential aggregation

Brick went live in March 2021 and signed up one of Indonesia’s top P2P lenders as its first customer. The company now has more than 50 paying clients and supports over 13m API calls per month. It works with conglomerates like Sinar Mas Group and Astra, but most customers are pure fintech players. Lending is the key vertical, followed by personal finance management and bookkeeping.

The core product is data aggregation, essentially the piping that connects fintech providers with data sources like banks, allowing a seamless interface. In this sense, Brick’s closest equivalent in Europe would be TrueLayer, which closed a USD 130m funding round at a valuation of more than USD 1bn in September 2021.

“For a particular data API – in balance checking or verification – to be useful, it must be connected to 95% of bank accounts,” said Tan. “A fintech player doesn’t want to deal with hundreds of thousands of different connections. We are an aggregation with pre-built connections.”

In the past six months, Brick has broadened its offering to include dedicated verification and payments APIs, enabling coverage of the end-to-end user journey from onboarding to disbursement. The company sees huge scope for expansion in a complex, multi-layered ecosystem. For example, banking-as-a-service, which encompasses card issuance and buy now, pay later, is well penetrated.

However, Brick favours adding geographies to adding additional products, and the new capital will be used accordingly. “Expanding the number of products is not something we want to do. We would rather maintain and double down in our current areas, becoming the preferred partner for each product. There is so much functionality and depth we can add,” Tan explained.

Flourish identified the company because the plumbing that makes embedded finance work is a core investment theme globally. This is interesting in an Indonesia context because there is so much white space in a market where bank account penetration is below 50%. Wallet and P2P captured much of the early attention, but Flourish sees considerable promise in SME finance.

Three or four other start-ups were considered alongside Brick, including one that focuses on credit scoring and helping banks develop open API layers and another that specialises in recurring payments and billing. Aggarwal is encouraged by this diversity in approach, believing it demonstrates both the size of the opportunity and the fact it won’t be winner-take-all.

“The first question we asked each platform was why do you need someone local to do this,” she added. “It’s because financial services are locally regulated, so you need local partners. Tie-ups with banks are less important than with wallet providers, because the bulk of customers are not engaging with their bank account. Much richer data come through wallet accounts.”

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• Topics
• Southeast Asia
• Financials
• Technology
• Early-stage
• SME
• Indonesia
• seed
• Financial Services
• Fintech
• enterprise software
• antler
• Flourish Ventures