Hendra Kwik of Payfazz: Empowering Indonesia’s Unbanked

TRANSCRIPT:

Hans Tung

Hi everyone. Today on the show we have Hendra Kwik, co-founder and CEO of Payfazz, a FinTech platform that aims to build a network of distributed banking agents, a fully digital mobile banking and payment solution for the 440 million unbanked in Southeast Asia. It acts as an intermediary between unbanked users and financial institutions and has served around 2 million people since founding. The alpha which has raised 10 million dollars in funding, it’s the first Indonesian company to make it to YC (Y Combinator), a leading seed accelerator in the US.

Dimitra Taslim

Prior to starting Payfazz, Hendra worked for Schlumberger as a wireline fuel engineer in Brazil for two years. He also spent three months traveling across the region to learn about the startup ecosystem across Latin America. He holds a bachelor’s degree of chemical engineering from Bandung Institute of Technology.

Welcome to the show Hendra. So Hendra, help us understand a bit more about how Payfazz works. How do you acquire these agents? And how do these agents on the platform help the unbanked?

Hendra Kwik

Yeah, first of all, I think in Indonesia, there is a very huge problem, there are many people who don’t understand the importance of financial services. So, one of the main reasons is because when you go outside the main cities in Indonesia, we see a fairly rare presence of bank office or brands. Because of that, many people are not aware of the existence of banking services, and they don’t know how to use it. So we see there are so many banks who lost their application in the PlayStore. But there are still many people who are not using their service means there’s a missing link in the education part. And we feel like building the agent network can help solve this issue. So basically, we started by building a few agents, and we saw the agent start educating the users about banking services. And we are fairly sure that it has the potential to solve the problem. We sort of scale the agents from tens of agents into hundreds, thousands of agents like what we have today. So that’s the main reason why we built the agent.

Hans Tung

What solutions do you find are popular with your unbanked users? What did they use before?

Hendra Kwik

I think for the people in unbanked space, they are fairly comfortable using cash. So most of their money was stored physically in their home, and they usually pay the merchants with cash, but there are some things that they cannot do with cash, in the case when they want to move the money far away. So moving the money far away means when they want to send money to some service provider which are not located in the same city, or sending money to the relatives who live in other places. So initially, we get a lot of traction for people to send money to pay some service providers, like billing companies, or some e-commerce companies. And the other use case is that they like to use Payfazz agent services to send money to their relatives in another city, which is impossible to be done with cash. So that’s the initial importance of our agent network for the bank communities.

Hans Tung

How has it changed over the years?

Hendra Kwik

I think over the years as people are using a Payfazz, there’s some sort of word of mouth among the agents. For example, when they start providing the services, we see some stores telling the other stores that this kind of services is very useful, to help bring in more services to the customer and keep their customers loyal. And the second one is that it can also help the store becoming more popular, because the new service of enabling people to send money, actually bringing more foot traffic to the store, and on the consumer side, the consumer feels happy. First, they’re happy about the services. Second, they start to spread the word about the services. And people start to know more about the ability to use a Payfazz agent to send money. And then it’s just getting more popular among the agents and the consumers, which is the main reason why we can grow healthily in the first couple of years without spending a lot of marketing.

Hans Tung

Yeah. Sounds like you have come up with product specific for the Warungs as well.

Hendra Kwik

Yeah, basically, the reason why we use borrowing is not that it’s only applicable to Warungs. But basically, if you look at the informal place where a lot of unbanked spending the time like Warungs or restaurant, a lot of our agents actually are either Warungs owners because they interact a lot with unbanked population or some small restaurants who also try to provide money transfer services. So when people are coming to the Warung to buy some groceries, or they’re going to a restaurant to eat some food, they also like it to us, the Warungs or restaurant owner to help them spending money. So that’s the main reason why Payfazz is quite beneficial for both Warungs and restaurant as well as the consumers.

Dimitra Taslim

Hendra would love for you to tell our listeners who are not from an emerging Asia video about Warungs and mom-and-pop stores. What are Warungs, and tell us a bit more about the community around it?

Hendra Kwik

Warungs is typically like all the city center and shopping mall that we see in the city. So we look at the place like Jakarta people love to go to the shopping mall or the city center to hang out, like drinking some coffee or spending their money. And we see that so many banks actually built their office or brands around the city center or shopping mall, retail stores, while on the more suburban side or on the rural side of Indonesia, people do not go to the shopping mall or city center. Instead, they go to this place called Warungs, or small restaurants to spend their time. So the reason why we built Payfazz services on top of Warungs and restaurant is because it’s the place where all the unbanked spend their time mostly. And this is the place where they go most frequently every month. So building the banking services on top of this location is very smart because you exactly target the people that you want to help and solve the problem. And on the other side, the amount of the Warungs and restaurant are abundant, and they have a very good distribution across the country. So it’s a very effective distribution channel when it comes to serve the unbanked, and they also need some ways to make more money. So in this case, by allowing the Warungs and restaurant to become our agent to earn extra money. We can also use them as a distribution channel for banking services, so they are typically selling grocery products, or they are selling food or some small drinks for the people in the rural societies.

Hans Tung

When I met you about a year ago, you spent a lot of time on the unbanked users the world when was more of a recent development? What has happened in the last one year? And do you spend more time solving solutions for the Warungs as the sort of next phase of your growth?

Hendra Kwik

Yeah, I think typically we spend the first three years of our existence trying to solve the problem for the world. And I think in the last three years, we understood a lot of pain points that we need to solve. Basically, I feel like anything that helps to Warungs bringing more customers, retain their customers and make more money is going to be useful for them, because at the end all these Warungs are just like all the drivers we see on the ride hailing platforms. They use this platform to earn money, it’s not like the consumers who use the platform typically to solve their problems or to get their needs being fulfilled. So typically, in the last three years, we built a lot of functions on top of our agent platforms to allow our agents to earn extra money over and over. While recently we just roll out a consumer app, which basically allow our Warungs and restaurants to become our Payfazz agent to promote our consumer app among the communities. When I mentioned promote, it means that I want all Payfazz agents to actually educate all the communities that having a good financial services and banking services is good for them. Because I cannot imagine that people in the rural never store their money in the savings account and get some interest. I can’t imagine people in rural never have the chance to expand their business because they don’t have capital access, I cannot imagine the people in rural are never able to think about saving their money to send their kids to the college later on. On the other side, we see in the city everyone is aware about this, so what we want to do in the last one year is that we use our agents to educate them that you actually have to start saving your money, and start building up credit history so that you will have enough money in the future for your family and your kids. And when you want to expand your small business, you have the ability to access a cheap source of capital by having a good credit history. So we are building that education across our network. And now we are launching a consumer app, and we hope that all these unknown communities can use this consumer app just like all the people in the city using mobile banking products and take it for granted. So we would like all the people to have the same awareness and the same access to financial services.

Hans Tung

I talked about this consumer before from the early signals, early data, what are the most popular uses for the consumer app?

Hendra Kwik

I think it’s still the same like for the consumer app, people still like to use it to move money from one city to another city. When I mentioned moving money, it means that you can put your money on one city, you send it to another city, and the guy in another city can withdraw the money out and use it for the daily livings. On the other side, unlike the people in the city who work in the office, most of the people in the rural typically don’t work for somebody else, they own their own business, a fairly small business or micro business as we call. But in order to help them grow their business, they need capital access. So typically, besides using it for sending money, they also ask Payfazz to help bridging them with financial institutions, or P2P lenders who can give them some capital access to expand their business. So I think that’s the two most typical use cases that we see nowadays.

Hans Tung

Those tend to be more low frequency usage, over time mobile be some of the high frequency usage that you will want to use for.

Hendra Kwik

I think because we don’t want to become a company that actually become a sweetener, we want to be the painkiller, the main pain that we see in the rural community is actually their inability to move money across cities or between cities, and their inability to get access to a cheap source of capital. That’s the two main pain points we see. And as we get more familiar with the products, we would like to build the way for them to interact with one another in the form of like ability to do P2P payments as well. To me it’s like one of the consumers who already have a consumer app that can go to the agents who are typically grocery stores, let’s say when they want to buy groceries, we want to allow them to be able to pay this agent with the fear of the interaction peer to peer payment from the consumer app to the agent apps. And on the other side, let’s say all the restaurants who also provide the banking services, we want to allow the consumers to pay the restaurant as well, but that’s going to be later steps when the company someone’s already got their pain being solved, I think because typically peer to peer payment is not really a major pain point, is smoothening their user experience, but it’s not really paying for them. Because even with cash, they are still okay. So for Payfazz, we don’t want to become sweetener before we solve all the pains, so we always start with the low frequency use cases like

Hans Tung

You’re saying that you want to help someone to get capital for their business growth. So you sort of implied that there’s some kind of lending.

Dimitra Taslim

And Hendra, you outline very well Warungs and the community around the Warungs, and why they’re important to Indonesian life. But your business also strays into, like what I just mentioned, FinTech and payments. For a lot of people. They look at Indonesia, and they look at OVO, Grab pay and Go-Jek, and many, many other wallets, but they don’t understand what’s going on. So can you paint a picture for us? What’s going on in the payment space right now in Indonesia with the two big guys and a long tail of small players who are also competing with them?

Hendra Kwik

I think GoPay and OVO are actually two of the startups that was built on top of the right hailing use cases. Unlike the other country where we see some companies that PayTMcomes from the original of many use cases. And then we see some Alipay claim it comes from the e-commerce use cases, but we see in the data it’s coming from ride hailing use cases. And I think one of the reasons is because ride hailing now are two of the biggest bank accounts in the country, they have a lot of cash, so they have the ability to educate users about shifting users of from cash into cashless and because they have a lot of capital, they are really well positioned to be the first to educate the market. But I see that most of the education still happen on the city side. And it’s still quite overlapping with what all the banks have been doing in the last couple of years. The bank has existed in Indonesia long time ago, I think since 40,50 years ago. They’ve been educating people, mostly in the cities who are already using bank account about the importance of financial services. And they also enable you to pay cashless with a card and swiping it on the terminal. Now with the emergence of wallet, I remember a couple of years ago before Grab and Go-Jek, there is already a cashless payment method, it’s called t-Cash. But t-cash is not really like taking off back then because they don’t have that much capital to subsidize the user payment. So for now, we see Go-Jek and OVO taking off because they put a lot of subsidy, but after the subsidy stopped, we are not really sure yet if the consumer is going to prefer to pay with cashless. By thing like the good thing about GoPay and OVO always that they sort of like educating the market from cash to cashless with the bank have been failing to do for the last 50 years. But I see that GoPay and OVO a is still not answering the core problem of financial inclusion yet because they are still rotating in the city and the city. The city market is very big. There are a lot of people with high disposable income. And they are sort of competing against one another for the bigger pie of this market in the city, while for some smaller players, maybe they try to target a different niche. For example, like Payfazz they focus on the rural, some other companies focus on people in the university, students market, some startups targeting the working class, so they’re like very different type of FinTech tackling a very different sort of problem, but I think the biggest one still is getting the people with high disposable income in the city. So I think for Payfazz itself, we are not really targeting people in the city. You can see from the way we shape our strategy, but it’s always evolving around Warungs because we want to target the market that don’t have bank on yet. And this market who don’t have bank, typically they haven’t used GoPay or OVO. Because first of all, they are not comfortable using cashless and they still don’t know how to put their money in the bank. The people in the city is already being well educated in the sense that now they understand that they can save their money from bank account to GoPay and OVO and they get extra discount from the subsidy offered by these two giants. I think that’s sort of the landscape happening in Indonesia nowadays.

Hans Tung

And how do you plan to compete against the big players by focusing on tier two tier three cities away from the big cities?

Hendra Kwik

If I say about Payfazz, we are less focused about payment because we feel like this society’s looking at the history of t-Cash in 2009. They lost the castles payment and nobody is really using it because they don’t provide subsidy. And in the rural side, we also see that people are still comfortable using cash, and we don’t want to be the sweetener for something that they are already comfortable with. So we are more comfortable solving the pain points in this case like helping them sending money, helping them saving money and get some return for the savings, helping them to get a cheap source of capital, which is the major pain among the rural communities. So Payfazz focusing mostly on the more sophisticated financial services, which is like savings, money transfer and also lending. And we use a distribution channel of agent network that cater specifically to the rural communities. And I feel like that’s very different compared to the focus of the two big giants who focus on payment and the city market. So I’d say that a Payfazz is mostly focused on banking services instead of payment. And we focus on the rural market instead of city.

Hans Tung

For a small company that’s growing extremely fast. You have two businesses. One is B2C that focuses on banking services for the unbanked in tier two here, he also have a Warungs so interact with the unbanked a lot. And with the Warungs you could build a very strong B2B business on their supply chain side or on their other financial needs. How do you balance the two different business models under one roof? And do you have to focus on growing one versus the other?

Hendra Kwik

Yeah, I feel like the Warungs and the consumer banking I mean, like, the B2B for the Warungs, and the consumer banking product for the unbanked population is actually sort of like supporting one another. Just like in the two-sided platform, we see Airbnb, where we have a traveler and host. We see Uber, passenger and driver for network effect. So that’s also what we believe in Payfazz that the agents and the users are not independent. They’re dependent of one another, they have a good relation to one another. And we want to grow them together. But in the first three years, why we don’t want to go to the consumer app? Because it doesn’t make sense for you to tell people that you can use this agent to help you spend money when we don’t have enough scale of agents. So once we reach enough scale of agents one year ago, when we have about 50,000 agents, that’s when we start to think about launching consumer app because we feel like now we have enough presence. Our agents are everywhere in all the cities. They are distributed enough to cover the whole population, then we want the consumer to make sense at this point. And then we want to build a network effect in the sense that if you want to send money with our consumer app, it will be easier because you can easily find our agents everywhere. And on the other side, the agents also think that becoming a fast agent is better because there’s a lot of consumers who are already using them and want to use us to either deposit money or withdraw money. So, I think it’s a two-sided platform. And we feel like instead of sacrificing one of another, we’re going to grow them together and build a strong network effect.

Hans Tung

For that part of the business I completely understand. There are some problems with the Warungs you could solve, such as improving their supply chain, exactly getting more scale and discounts from the brands and so forth. But that’s a very B2B business, how important it is to grow that part of the business versus the consumer app part.

Hendra Kwik

I think it’s more important for the consumer app because we are Fazz Financial, so Payfazz itself and the name of the group company is Fazz Financial. So we are purely focused on the financial part. So the B2B supply chain and the consumer goods part is not really the main intention for our company. But we built that because our agent requests for them, because we have a philosophy that we want to build a product that our people want, our agents want and our consumers want. But for the DNA of the company, we have a very clear mission, we want to fix the financial inclusion issue in Indonesia. And because of that, our main mission is actually solving around financial services. So you asked me which one is more important, I’d say that the consumer relationship with the agents to enable financial services and achieve financial inclusion is the main priority for the company.

Dimitra Taslim

That’s so interesting. Thank you for sharing that. What I’m extracting from what you say sounds like this polarization where you have in tier one cities, the banks are serving them to cities, traditionally, the cost of acquisition is very high. But if you’re using agents to acquire these people who traditionally cannot be acquired by banks or out of the bank’s range, you can then have bank them. Exactly. And the follow up question I have on that is how do you think the banks will react to somebody like you if you eventually get big enough and become a meaningful player in tier two, what do you think is gonna happen?

Hendra Kwik

I think the reason why there are still many people unbanked in Indonesia, the 150 million people is roughly 70% plus of the population. The reason why is that it’s because people like me, I used to live in rural, I understand exactly the problem. So basically, there are so many people who are living far away from the banks. And as much as the bank want to acquire them, they cannot do it because they are always trapped with the mindset of building a branch. And it’s always not economic enough for them to build their location in that rural population living place. So on the other side, they also think that we can solve it with the app if you don’t have branch, we can at least have it with the app but then even they put their mobile banking app, I mean BCA, BRI. They are all in Play Store, everyone who have a mobile phone should be able to download them and just use that. But why is not happening in the rural it’s because they didn’t have the education part first. And the second part, they don’t have the trust yet to your brand. On the other side, we see like one bank who caught BRI by building the presence among the rural. So basically, they focus their branches all across the rural location, and also having some agent network. So that has them earning educating the market and earning the trust, we see the case of BRI, and then they’ve been quite successful in getting some of the population to start using them. So I feel like the banks at the end, the way they see Payfazz or the way they see our agent network is going to be a very good partner for them. We feel like we can build a joint product with the banks to deliver banking services in a fairly scalable way, in a fairly good user experience and in a fairly technology enable method, in the sense that now we can really extend their services to everyone in the country by combining the power of technology, Internet access, and also agent network.

Dimitra Taslim

You always mentioned when we chat about banking the unbanked, you always told me about m-Pesa. How you’re inspired by what they’ve done in Kenya, can you? Can you share a bit more about the similarities between Kenya and Indonesia? And what are the key lessons you take from m-Pesa?

Hendra Kwik

I feel like Kenya and Indonesia are both fairly wide countries, actually, Indonesia is much wider. Indonesia is a very maritime country with thousands of cities separated with sea. And even Kenya is not as complicated as that. But there’s one same consistent problem for both countries, if we look at Kenya, it’s quite as a distributed country. So the city with the most density is just Nairobi, the capital. So most of the banks only find it economical enough for them to build their location or brands in the Nairobi. So banks like Citibank, or some big banks in Kenya, they decided that they want to focus their brands only on the place like the capital. And so they neglect all the smaller cities outside Nairobi. And then unfortunately, only around 10% or 20% of the population are living in Nairobi by deciding not to build their brands outside Nairobi, they basically decided that they don’t want to serve the other 80% of the market. And then there comes one guy from London, he’ll study about Kenya and he wants to do something to help the lending company collect payment from the people outside Nairobi. At that time, it was very difficult. There’s a lot of people in the rural who need capital access because it’s normal. The people outside Nairobi always have a small business. They are farmers or they sell stuff, they need some capital. And then they land from the company who provide loans in Nairobi. The moment they want to repay the loan, they have no other way, then the guy is trying to find a way to help them pay the loans. And they use this like telecommunication network from Safari Com. And then it has been proven to be really effective. But in the middle of the experiment, there are some misuse of M-Pesa. In the rural communities, instead of just using it for paying loan, they start using it to pay money to the relatives and sending money across one another. It was the initial concept of how agent network enabled money transfer was born. It was originally from Kenya, it was from M-Pesa. And look at Indonesian characters，I feel that it’s very similar. If I see all the multi finance company and lending company, they all collect the repayment from either agent or minimarket network. But unfortunately, it’s still not being utilized effectively for money transfer. And that’s when Payfazz is seeing the opportunity about how we can replicate the success of M-Pesa. Starting from using the agent network and minimarket network for the loan payment, then go to bill payment and then go to money transfer. Then at the end, what we see with M-Pesa is that now they start launching bank account for all the unbanked. We’re cooperating with one of the banks in Kenya, and it was approved by the Central Bank, we are also going towards the direction, we already have a very high frequency of money transfer. Now we want to cross sell to bank account for all the unbanked and then after what there’s a startup called Tala. They are trying to build a lending services on top of M-Pesa. Because there’s a lot of data locked in M-Pesa account, there are payment data, loan payment data, bill data, money transfer, who you send the money to, who you receive the money from. And then they can use this data to decide if you are looking for loan and then you can withdraw the loan easily from one of the embassy networks. So after we had bank competency, we also looked to work with various P2P lenders to be able to extend some loans to the unbanked population. So I think it’s very similar and I feel like the Payfazz’s value proposition and the way we develop our product is quite similar with M-Pesa, because we believe that Indonesia and Kenya space must be very similar.

Hans Tung

You also lived in Brazil for two years, so what similarities do you see between Brazil or Latam and here in Indonesia?

Hendra Kwik

I think Brazil it’s a much more developed countries, pretty much everyone usually have a card and a bank account. I actually live in the city. I know that the GDP is higher because whenever I buy a food it’s always like much more expensive. Because I work as an expatriate there, I always become the lucky guy. I feel like one of the main pain points in Brazil is that all the banks take it for granted, they get a lot of customers but they don’t have a very good service quality. They charge a very high interest rate, and because of that, some people feel like the bank are not providing the best service for them. And I feel besides being the agent, it’s also providing a banking service, which is much better than the other place where new banking was born. But I feel like Brazil is quite similar to Indonesia as well. It’s a tropical country, the way people behave are quite similar. And I feel like there’s an opportunity there as well. But because I was born in Indonesia, I decided to start in Indonesia first.

Hans Tung

So it’s not a first time you’re involved in a startup. You worked with KUDO before, how did that experience shape you, for you to be a second time entrepreneur?

Hendra Kwik

For me, being an entrepreneur or being an employee in a fast growing company is the same. I personally like to find a challenge and I’m a very curious person. So the first time I went back from Brazil is because I was bored with my previous job. I was at the point where I know everything. I was already promoted in a position that is quite high in the company. I’m a chemical engineer and then become a petroleum engineer, because I already understood chemical engineer, I felt bored, and then I want to study petroleum. After three years, I understand everything. And I was bored again, then I decided to go back to Indonesia. And then at that time, I got some chance to work either in the multinational consulting company, or working in a small startup, I feel like at that time startup is fairly challenging. I feel like a lot of startup, for example, GoJek started as a fairly small call center, and I see they transformation into a fairly big company. So I feel like KUDO at that time is still like a fairly small company. They just closed $1 or $2 million dollars, so it’s fairly small. I want to be part of the journey of building KUDO into something that benefit our audience.

Basically, at that time, they are actually building a tablet, and they put the tablet across Warungs, hoping that all the unbanked people can start purchasing e-commerce they want to introduce and educate people to shop online with their tablet. So I was assigned as one of the early product guys, and then I was assigned to boost the users of e-commerce to be higher. But at that time, it was very hard. So I got a lot of very ambitious targets like startup, you need to deal with the reality of the market if the market wants to grow at that rate of rates. So then they give you a discount, and I need to burn the money. I feel a bit scared when I need to win a lot of money, so it was a very tough time for me. And then like all the customers always said, you shouldn’t put this, maybe you should just provide me loans, just let me send money. And I can look to my boss. I said, Boss, I think we should do KUDO pay instead. Let me become the head, and my boss said no, you know I always start with e-commerce first like Alibaba. I said it’s different. And I feel like maybe we should see if the direction was, if you don’t want to do it, then let me become the boss. And then there’s a lot of discussion, but the e-commerce charm is too strong at the time. Tokopedia is rising billions, and it was so hard for them to shift to payment. And then I got crazy, there’s some rumor that Kudo gonna get acquired as well. And then there’s a lot of conflict and I cannot survive, I cannot keep burning money. I feel like it may be something wrong. I don’t want to be responsible if I burn too much money. And it turns out that it didn’t go well. So I decided, Okay, I’m just going to leave. And then I thought that I want to do an MBA at Harvard. I was preparing my GMAT. I was about to fly and then one of my friends said, Hey, I was about to fly to Singapore for a scholarship provided by Google and then US and then let’s catch up with me. It’s been a while since we haven’t caught up. And I went to one of the shopping windows in the Central Park and met with my old friends. We spoke a lot, like how’s the startup ecosystem? Why people keep burning money? Can we do something better than getting some products that people love or burning money like Airbnb and Stripe? And they’re like, yeah, you know, but maybe we should study first. You don’t understand it. Okay, you will go to Singapore, I will study in Harvard and we go back after three years, again, this place. But the next day he told me Oh, my visa was rejected, I cannot fly to Singapore. And then, okay, so how long will you need? Will you need another three or six months? I’m going to delay my application.

And then actually before I said, we tried to pick some Indonesian investors. None of them believe in us. It’s a very bad coincidence. Actually, if somebody’s finance, if I met Hans, and Hans gave me $2 million dollars, maybe I’m gonna be a $10 billion company. I didn’t met Hans, nobody wanted to invest, but our company is growing and we get to the point where we become rather profitable. But as it grows bigger, we get into trouble because we need some finance, we need some customer services. We decided that we need to build it into a company. Nobody want to invest. I put all my savings from Brazil about $100,000. And then we hired the initial team. After that somehow we get connected to YC. YC is the first one to decide, and we are also the first from Indonesia. We don’t know that YC gonna find us. We just let’s give it a shot because we don’t have any option, nobody wants to find us here. And then the CEO of YC told me that I like your product, I’m gonna invest in you guys, good luck. Welcome to YC.

Dimitra Taslim

You shared with me the moment that you got that call from YC, when you’re walking around San Francisco?

Hendra Kwik

Actually when we want for the interview, my co-founder didn’t get the visa. And we were in chat with YC like hey, can we do it even without all the funds attending? It’s not possible.

Airbnb and Stripe did that, they are very good companies, we have no exception. Even though you’re good, we cannot do it, but we don’t get the visa. And until the last minute, I think the interview was almost done. The best is about the stock. We don’t get the feeling. And I come just like the day before the demo day, I was flying right away to Silicon Valley, and then I haven’t slept an hour, go straight away to the interview. And I was like a zombie, trying to answer everything as much as I can. It was like a very short period already. And now we went back to the hotel, I was actually falling asleep. And then Michael was calling, I think I didn’t really listen to it, but the phone was vibrating. I got the phone and answered. Michael said, hey, we really your product, you get into YC but there’s another issue, Mike said that, the best is about to start soon, it’s better for you to get the visa now. Because now we cannot tolerate the founders not coming. Because the batch need you to attend the training, they want to educate you. But then we don’t get the visa. And then they said, we cannot fund you if you don’t attend the training. I negotiated with YC, can we extend to the next batch and hopefully the next time we get the visa. And then we still gonna keep this on hold and hopefully in the next batch we can finally go back to Indonesia and then like we delay our batch a bit and then actually still like a Honda cannot get the visa and then yeah what you just said okay you just go here and then you just attend your sign we’re going to give you the money. Finally YC said okay, this is the only acceptance we give because it’s been three times since the interview. That’s the first point the best delay and the second batch.

I haven’t given up, so Michael said okay, I’ll help you. And I attend YC and they educated me. And then I understood more about how to run the company better, and then we get some initial investment, it helps us to grow to where we are today.

Hans Tung

We are seeing the quality of international startups in the YC batches getting better and better, it’s amazing, and it makes sense. And that’s the whole purpose of doing this podcast, the next billion, because seems like that’s where the action is.

Dimitra Taslim

We’d love to know as well, the three of you founders from 3 different plances in Indonesia. So how do you guys meet? And how do you guys stay in touch up at this point?

Hendra Kwik

We all study in the same school and then one of my co-founders is a very smart guy in computer. All of us are inspired by computer, we all applied for Computer Science in the school. But only 2 of my cofounders passed through the selection for the Olympia. I’m not that lucky guy. Some of the biology teachers like me, they like send me into biology competition. And they told me to become a doctor instead of a computer scientist. I know that biology is not as lucrative as computer science.

Hendra Kwik

Because you see Mark Zuckerberg, you see Bill Gates. Ricky is very brilliant; he represented our school software for Computer Science Olympiad. And then Ricky become the Top 5 in Indonesia. And then he’s about the representatives and a lot of international competitions and won a lot of medals. He got a scholarship in one of the best Computer Science universities. I, the other side, not really get the scholarship. Like a test to be accepted in the University of Indonesia for medical or ITB for engineering. It’s not bad. And it’s still like cheap. And I actually ended up studying in ITB, but we can get free because they study at business University, and then fast forwarding after graduating. Ricky just be one of the best students in ITV in the computer, the Stanford of Indonesia. And then after I graduated, one company, Petroleum Company sent me to Brazil, and then Ricky and Jeffery started work in startups in Indonesia. They asked me, is it good to visit they want to move to Brazil. But on the other side, I want to be really in the startup. So the more we met again, there’s a chance that the VISA from Ricky got delayed. And we said that we shouldn’t miss this chance, let’s build Payfazz.

Dimitra Taslim

Finally, just a couple of quickfire questions for you. Sure. Number one, who or what was your biggest teacher?

Hendra Kwik

Jack Ma. First of all, despite he fell a lot, nobody wants to invest in him. He still managed to make it to the end.

Dimitra Taslim

If you could spend a day in someone else’s shoes, who would they be? And why?

Hendra Kwik

Maybe Elon. Flying here and there, and multiple companies to be managed. I think it’s gonna be quite interesting.

Dimitra Taslim

And the last one is, what’s a habit that you have developed that you think have changed your life?

Hendra Kwik

Totally curiosity. I’m very curious about everything. So I always question things when I see something new. So that’s actually what brings me this far. I seek petroleum engineering, somebody assigned me to Brazil, and I accept the challenge because I feel like I already know chemical engineering, why don’t I try to study petroleum? If I’m curious enough, I always go to the good opportunity. Somehow I always get directed into the right direction by being curious. But of course, it’s not always happening because there’s a lot of other factors. I think being curious always gives a good impact in terms of personal development. Challenge keeps you excited with life. And also, that’s what I heard from Yuri. I think he has the same principle. He likes to be curious.

Rita Yang

Hi, Hendra. It’s great to see you again. So you are currently in Jakarta, right?

Hendra Kwik

Yes.

Rita Yang

I could actually imagine that COVID-19 hits you guys pretty hard because you have a big team of agents, operating in the field going from place to place. So what has been the impact on you so far? And how are you guys coping with it?

Hendra Kwik

Yeah, so I think the impact of COVID has brought some changes to the country we operating in, as well as the market. On the macro level, we’ve seen the purchasing power and economic activity, like decreasing a bit competition or like GDP. That’s the first impact that we see. And the second part, we also see that because Payfazz operates an agent network where actually a lot of transaction are driven by in-person interaction, just like GoJek or Grab, where you actually all the delivery service for the people typically happen when the people meet with the driver, so it’s the same for us. But fortunately, we see that the impact that we feel is not as bad as we expect it to be. So it seems that this kind of stores can be quite adaptive and smart enough. So I feel like this retail is not only just selling in the normal way, but they can also adapt to the situation. When I mentioned adapting, I mean that this store is trying to put the measures on how to be able serve their customers under the COVID situation without violating the safety protocol(45:35). So we saw some of the agents are putting masks, telling the customers to do the transaction a little bit farther. So despite there are some drops, but it’s not as severe as the impact on the other industries as a struggling industry.

Rita Yang

I see. So you’re saying that Warungs are still in operation and they adapt to the change. Maybe they do delivery, how are they adapting to the COVID situation?

Hendra Kwik

First, I think they still do the business in the old way, but they tried to adapt the old way to the COVID situation by putting mask and putting some procedures that the customers cannot go close to them upon doing the transaction. And the second part, because they see that there’s a little bit drop in transaction value because of the weakening purchasing power from the customers, they start to think about the other way to make money besides the existing source of income, such as providing financial services, so we’ve seen them exploring some other stuff, and they asked us to provide the services into the applications. And it turns out to be a very good way. For us to detect, the store actually is open to exploring other stuff that can be done so they give us some feedback to add some features that actually help them surviving.

Dimitra Taslim

I just wanted to ask Kendra, what are some cool product features you have pulled out specifically in this time, for example, one of our portfolio companies in India Khatabook then the situation is that it rolling out things like opening hour details, the shops, they started a routing function where people can check with the shop owner. Hey, are you open? What stocks are left? And they can show us stocks so that they can essentials? What kind of stuff are you guys product for COVID?

Hendra Kwik

The first thing is that the agent is asking for further ways to promote their products into the social media. So our work is to provide those kind of ability. Typically under the normal situation, people will pass through the store, looking at the product and say Okay, I made this product, I’m going to do the transaction. But what happened in this situation where all the people sit at home, then all the offline attraction will disappear. Because people will stay at home with their phone, then we are trying to help the agents promote their product into the smartphone of their customers through communication channels, such as Facebook, or texting them directly. And then the other part is, there are some cases where actually the the agents are providing the products first and then they will collect the payment letter from the customers. They say when the lockdown is lifted out, they would like to pay for the services. So we enabled them to record the data from customers. So that’s maybe something Khatabook is doing. So we enable the agents to get the ability to give the financial services and products first, and then they can take the notes of who have got the product but haven’t paid because of COVID, and they will collect the payment later. And the last part is also because of the drops in the income for the agent, the purchasing power is weakening. The agent is asking us if we can enable them to sell more stuff. And that opens up our mind that there are some other categories of products that we can buy to them to increase the income during this difficult situation. Those three are the main takeaways that we see during the last three months of the crisis.

Rita Yang

Are you managing your agents given in the current situation? Is there anything different?

Hendra Kwik

Yeah. Instead of leaving our platform. The agents actually becoming more dependent upon because if you imagine before COVID, maybe doing the business in the old way they used to do without smartphone, they don’t like smartphone because it was a little bit sophisticated. Then because of COVID, we become a more reliable way for them to do business. Because it’s online and it’s much simpler compared to the old way. That’s what we see. And then we see that there are more agents open to application because everyone want to make a lot more money upon this situation. As you know, that Payfazz core value proposition is that, okay, you are already a Warung, you have a specific amount of income, if you implement our apps, we will be able to increase it by at least 20% ~25%. So that becomes a fairly interesting proposition that may be under the normal situation where we don’t have COVID. There will be a little bit more hesitant to try. But then under the situation where everyone needs to get extra income, they are more open to try new things. So then we see our apps growing faster than ever. The cost per install and cost per acquisition also drops, and there’s a lot of exciting things going on. And then we got a lot more feedback then under normal situation, because the agent does get more excited than usual, it’s the same as the e-commerce. I think before COVID people are more hesitant to try e-commerce, but now you’re forced to do it to order from home, then there’s a lot more adoption for e-commerce during this time, and that creates a stronger demand for e-commerce, sort of like some inflection point of growth for all these companies. And that’s the same thing that happened in our agents.

Dimitra Taslim

Hendra, I was just curious with the agent, the last time we spoke about this, we know that one of the revenue streams that they have at the mobile phone top up, so these people walk through for our listeners in the Western world, these people walk in Warungs is that I want to top up $5 on a mobile phone. So that line of revenue is it affected, what’s happening to those sort of revenue streams for the Warungs that require people to visit them during the time of COVID-19.

Hendra Kwik

Yeah, so that’s the kind of interesting adaptation that I see. So fortunately, the reason why we are not affected is because all the things that our agents have, from our platform to rural are typically basic needs. This is not a pet care needs such as travel or business class airline plan, it’s more like basic needs. So regardless of COVID or not, you still need to call your mom, you still need to get internet access, to get entertainment in your home, I still need to pay bill. So those things are actually never really affected under COVID. But maybe the way they do it is changing a bit compared to the normal situation. Because as you said that typically under normal situation, they will go to the store and ask for the service, and then pay in cash, but now under COVID they will interact with the Kirana store on WhatsApp. And then they ask them to provide the bill payment for them so that they can continue to get internet data on credit to call their parents or families as well as electricity to continue living comfortably at their home. And then they said that maybe they will pay the money later when it’s less crowded, because there are some infections. So typically, the store will accept that proportion from the customer, they will send the product first and then they will take notes that this guy need to pay the money to me when it’s not really crowded, maybe on the afternoon, or two days later, they take notes on the application and then when the customer feel like it’s safe to go out, they go and pay. So, I think there’s some kind of other patient. That helps leave the evolution of the transaction interaction, and then that’s helping the agent to actually survive under the crisis. And that’s okay. It’s not really helping, actually. That’s obviously. So we are quite safe.

Dimitra Taslim

Awesome. And the other question I have was around your employees. How do you keep morale high at a time like this? How do you keep them safe, high functioning, and positive? I think that’s something that other founders would love to learn from you.

Hendra Kwik

I always imagined my team as a sports team. If you look at the sports team that represents our nationality, you have to have one common goal. We all want to bring the pride for Indonesia, and for that purpose, we all tried really hard so that we can win the gold medal for the country. So we sort of like coming to the same spirit and trying to have a common goal for the country. When we started the company, we always have one strong vision and mission, which is we would like to actually help bring the small business, and the rural population to be able to grow to the next level, growing their income, making them more prosperous, helping the small guys in Indonesia has always been our spirit. So under this difficult situation, we see that a lot of donation coming out for the small business are dying. And Indonesia it’s a stipend as well as a country because of the A little bit of recession. So we tried to tell our team, I know that this is the difficult situation, but it’s also the time where all the small business and small people in Indonesia need our help the most, because they cannot get good jobs, and the small business are struggling because of lower purchasing power and less traffic into their store. So if we can, it should be 5 x 10 x better, so that we can support these guy to survive all these crisis, so that they can survive and continue to prosper. So that’s kind of the spirit I bring, and even though the situation is hard, I can turn the difficult situation into a source of motivation, and relating that to the efficient and mission of the company. Even we work from home, I still see that our product line never misses, the performance is still doing well. So there are some challenges that only in the remote communication in the first and second month, it’s not that effective, but we are learning and then I think it’s getting better.

Dimitra Taslim

Yeah, it’s good. Don’t let a crisis go to waste kind of mindset, right? I mean, it’s an opportunity to galvanize the team as well, they also become more resourceful because they learn to deal with more difficult situations. Last time we spoke, you also think of launching a B2C product. How is that coming along? You can share the progress of that with us.

Hendra Kwik

So the B2C product it’s the on the product development states. To be productive in the beginning, it took me like almost one and a half year to validate the real vision. And then for the B2C product, we are almost done with that. We tend to be very perfectionist on how the product should look in the market, like diagnosis, say like every small detail count or the user experience. So we actually try to get to the point where we know that the value is already at the point where we feel like this is going to be a fairly strong experience for the customer, then we’re going to lose some big launching and scale rapidly. But for now, we still like sort of launched it, but still on the limited environment, because we still try to see what’s the feedback of the users to optimize the feedback lifecycle upon the time when we feel like it’s already strong. And I think that the big launch should come somewhere within this year. I don’t think it will be delayed until next year.

Rita Yang

One question on Hendra himself, reflection over the past few months, I think it has been very clear that you have led the team to motivate them with the vision that you share. What are some of the things that you learned about yourself as a founder during this special time? Or what are some of your reflection that you want to share with other founders who are listening?

Hendra Kwik

I would like to tell all other founders out there that, being a founder is hard enough. Along the past four years, I’ve been facing a lot of hurdles but I would like to tell everyone that I do agree that this COVID crisis is one of the worst, and one of the most difficult leadership challenges that I face alone. My four years of leadership in Payfazz or Fazz Financial. So it’s definitely not easy. There are times when you feel like it’s so stressful, you just want to give up, but again, I think all the founders who start a meaningful company out there always start the company without one strong mission and vision. Despite how difficult the situation is, we just need to remember why we start a company in the first place. Always remember the vision you said and the people got that believe in you and your ambition, and trust you and have joined you for 4 years. For some other companies. Maybe it’s been 10 years. So I’d say hang on. We just need to adapt our business and be safer in how we use our cash, and how we accept the people from the customer we have, we just have to be much smarter than normal. And then the way to make it happen for the founders is to stay confident. Always believe that we will pass through this hard time and then demonstrate that confidence and strong ability to manage all this crisis in front of your people. So that they will also be firmed about your standards. And then they’ll be able to stay motivated. And then don’t forget to tell them about the efficient way we started with the company. And by doing that, you will see some additional power that will help you survive.

Rita Yang

Thank you, Hendra.