Coda Payments Deliver Mobile Payments to Axis with PulsaQ

We reported earlier that Axis has launched Beli Pake Pulsa, a program which allows Axis customers to pay for digital products using their phone credits. With nearly 20 million customers and almost all of them on pre-paid, Axis teamed up with newly launched Coda Payments to deliver its mobile payment solution. Coda Payments is a company based in Jakarta, founded by former GSMA executives who specialized in mobile payments and the Asian region.

Mobile payment companies are springing up all over the place using various methods and add-on devices to streamline the shift from physical payment to digital. Square is one of the most prominent companies leading the charge in the United States but it's operation is still very limited and it's not even on a national level yet at this moment, let alone taking on the world market.

By paying for goods using airtime, Coda turns any cellular-based mobile device into digital wallets that can be used directly to pay for digital purchases, unlike smartphone apps which would obviously not work unless they are installed.

Indonesia's lack of banking customers, let alone credit card holders, makes electronic fund transfers challenging for many companies to deal with but by relying on phone credits, it makes such payments more accessible to the masses, with one caveat. Credit cards are useful for making big item purchases but for things that cost less than $100, forcing people to rely on credit cards, especially in this particular market, is self limiting.

Credit card adoption may be on the rise in the country but when there are more mobile phone owners than bank account holders, it makes more sense to aim directly at mobile transactions to allow people to pay for purchases using airtime or mobile phone credits.

Neil Davidson, co-founder and CEO of Coda Payments said that Axis was the first Indonesian telco that understood the significance of what Coda wanted to achieve and willing to have the company on board as its mobile payment solution provider.

Davidson told DailySocial via email that the pain points around e-commerce in Indonesia are unique. A sample of a unique case for example, is when customers pay for an online purchase by literally getting up from their seats, go to the ATM and make a bank transfer. "We have found that consumers and merchants in Indonesia are particularly receptive to our proposition", said Davidson.

Completing an online transaction using bank transfer takes 10 steps while a credit card payment takes four. Internet transactions using Klik BCA or Mandiri Internet take seven steps. Coda's method though its Indonesian PulsaQ service takes four, just like with credit cards.

Indonesia already has a handful of payment companies such as Veritrans, Doku, iPayMu, but most of them are still focusing on credit and debit card payments. We asked Davidson whether Coda Payments sees those companies as competition. "Not really. Credit cards are a great way to make large-value purchases of physical goods, while we're focused on small-value purchases of digital content", he said.

According to our research with Veritrans on e-commerce last year, 42% of online shoppers spend up to Rp 500,000 per purchase. This amount is too large compared to the average phone credit balance, which is less than Rp 100,000, but the market is used to purchasing digital items like wallpapers, ringtones, and other mobile content.  "The ecosystem benefits from both", Davidson added.

The area that Coda Payments aim to serve is the small item purchases. Speaking to mig33 country manager for Indonesia, Kiki Rizki, earlier in the week, she said that a big part of mig33's success is in the small item transactions. "[mig33 members] don't make one big purchase, but they frequently spend on low cost items because it's a lot easier to spend a little each time than  spending a lot once."

The e-commerce ecosystem in Indonesia is currently in its infancy, but the numbers keep growing rapidly, attracting investors and companies such as Coda Payments. A few analysts estimate that it will take 3-5 years until the e-commerce and startup ecosystem will grow to a more attractive stage.

When asked where Coda Payments will be when the industry matures, Davidson answered, "In three years we expect our network to have grown to include all the telcos in Indonesia and many more merchants, and for PulsaQ to have become established as the easiest way to purchase digital content online".

Rama Mamuaya contributed to the report