With GoTo and Grab, is the platform market for servicing drivers in Indonesia already saturated? Especially when it comes to the payments or lending aspect of these businesses?
No, says InDrive, a US-based tech company catering to gig drivers in emerging markets. It has just launched its InDrive Money service in Indonesia, its first market in Asia and third after debuts in Mexico and Colombia.
“We focus on core markets where we can also find local partners,” said Aleksandr Kurchin, Cyprus-based head of InDrive Money, the company’s fintech arm.
In Indonesia, those partners are Fingular, a Singapore-based fintech with lending capabilities, and PT Ammana Fintek Syariah, a sharia-compliant peer-to-peer lending platform in Indonesia.
InDrive has the drivers; Fingular assesses credit risk and provides loans, sourced from its own base of institutional investors; and Ammana, with a local money operating license, handles cash disbursements and collections.
The passenger-first model
Arsen Tomsky launched InDrive in Yakutsk, Russia, in 2013, as a digital platform to break collusion among local taxi drivers who overcharged customers during periods of cold Siberian weather.
It was formalized as a startup based in Mountain View, California, in 2018, and has raised $465 million in venture capital since, from firms such as General Catalyst and Insight Partners.
InDrive developed a business model different to that of Uber or Grab. Instead of relying on an algorithm to calculate fares, it lets passengers suggest a price, which drivers can negotiate. InDrive also supports courier and delivery services.
This bid/ask model tends to result in lower fares. InDrive is geared more to support passengers than drivers, compared to an Uber-type model. It has proved popular in low-income areas. It now operates in hundreds of cities across 48 countries, including India and six markets in Southeast Asia.
Driver churn
Given InDrive operates at the lowest-income segments of these markets, with a third or more of driver activity conducted in cash. The platform faces constant churn of drivers. Its revenues depend on more drivers taking more fares, from which it gets a cut.
Low-income drivers can be unstable suppliers because they are vulnerable to economic hazards: something as ordinary as car or motorbike breakdowns can derail them, as could a sick family member.
But most of these people lack access to formal finance. If they need a loan, their options are microlenders or the local loan shark. Either way the interest is steep.
InDrive launched its InDrive Money business to provide drivers with access to credit, often the form of cash to handle urgent needs. In Indonesia, it partnered with Fingular and Ammana to execute this model.
Just add fintech
Kurchin says the InDrive app, by onboarding drivers, analyzes them to determine which are probably reliable borrowers. It takes several months of driver activity to assess which ones are bringing in the most revenues (measured as gross merchandise volume). There are also KYC and AML checks. But there are no telematics: InDrive keeps things simple.
InDrive, though its app, will offer the best-performing drivers the ability to apply for a loan. When a driver asks, the company sends the driver’s anonymized data to Fingular, which runs its own credit scores. It’s up to Fingular whether to extend a loan, but success rates are high because of InDrive’s pre-screening.
Fingular is a neobank with operations in Indonesia, Malaysia and India. It relies on companies like InDrive to source borrowers, and on external lenders (investors) to provide capital. But in this arrangement, investors aren’t picking and choosing assets they want; Fingular isn’t dealing with receivables, it’s just a pool of debt.
The repayment comes via drivers paying back interest and principle on the InDrive app, with about 10 percent of every fare deducted automatically until they’ve paid off the full amount.
Kurchin says InDrive targets a non-performing loan rate of 8 to 9 percent. InDrive’s take is not technically interest on a loan but a commission equivalent to 30 percent of principle deducted from driver fares throughout the duration of the loan.
On average this period lasts about six months. InDrive Money launched in Indonesia with loans up to IDR2 million ($121) but now offers them up to IDR10 million ($606). InDrive’s goal is that this adds up to margins of 20 to 30 percent. “It’s a solid return on investment,” he told DigFin.
But the real benefits to InDrive go beyond making a return on its lending platform. Kurchin notes that typically 60 to 70 percent of drivers in a market will drop out over a given year. But those with InDrive loans keep driving longer, with about 5 percent more staying active all year.
Because the point to InDrive Money is to encourage drivers to keep driving, Kurchin says the company doesn’t resort to debt collectors if a driver defaults. The hope is that they will get behind the wheel again. Of course, drivers that don’t default are more likely to get favorable terms on their next loan.
Comparing InDrive and Grab
Structure:
InDrive partners with Fingular and Ammana to provide cash funding to drivers, usually for urgent expenses.
GrabPay is a digital wallet that allows users to fund their accounts using credit or debit cards or other payment methods. It does not provide direct cash funding but offers a platform for cashless transactions across various services. It also integrates with Superbank to offer banking services, savings accounts, and digital loans to a broader audience.
Repayment:
InDrive deducts repayments from ride commissions at 10 to 15 percent per ride, over a period of three to six months.
GrabPay does not tie repayment to fares. It offers financial services like Partner Cash Advance and Pinjaman Atur Sendiri (PAS) with more traditional repayment terms.
Credit assessment:
InDrive uses ride frequency, monthly income, and other key data points to assess drivers’ creditworthiness. This approach is tailored to gig workers who lack traditional income proof required by banks.
Grab’s loan offerings involve more traditional credit risk assessments, considering factors like driving history and earnings over recent months. This approach is adapted to the gig economy but is broader than inDrive’s specialized model.
