GoTo jumps into ‘buy now, pay later’ fray as global review builds on industry

Indonesia’s biggest start-up, GoTo, is expanding its “buy now, pay later” lending while chasing profitability, despite growing regulatory pressure on companies offering similar services around the world.

Patrick Cao, president of the technology group that offers everything from online shopping to ride-sharing, said GoTo would launch more loan products to capitalize on Indonesia’s large population of consumers who don’t have access to traditional credit.

GoTo and other Southeast Asian tech companies have spurred investment in online BNPL services, with growing internet usage driving demand for alternative sources of credit. Outstanding digital loan balances in the region are expected to nearly triple to $116 billion by 2025, according to a report co-published last year by Google.

BNPL’s boom in Southeast Asia comes as companies offering similar products in developed economies face increasing scrutiny of their profitability and the risks they could pose to vulnerable consumers.

“There is a lot of demand in a very massive addressable market,” Cao told the Financial Times. “Indonesia has the fourth largest population in the world. . . Credit card penetration ranges from 3-6% and financial inclusion has a lot of room for improvement.

Asked how many monthly customers of 100 million GoTo the company was targeting with the credit facility, called GoPayLater, Cao said “as many as possible”.

In addition to GoPayLater, which launched in October and allows users to delay payments until the end of the month, he said the company will introduce a service to pay in installments for high-value items such as mobile phones.

Cao was speaking after GoTo released its first full-year results as a listed company, which showed pre-tax losses rose nearly a third to $1.5 billion in 2021. Since its first day of trading in Jakarta in April, the company’s shares fell more than 8 percent. hundred.

As with its rivals in the region, GoTo is deepening its investments in financial services in search of more profitable business opportunities. Chief Financial Officer Jacky Lo said on an earnings call that the company will “step up and expand more high-margin lending products” as it seeks to “move towards profitability.”

But after business boomed following the surge in online shopping during the coronavirus pandemic, BNPL suppliers around the world are under pressure as soaring inflation affects the outlook for consumer spending.

Shares of Affirm, a US supplier, have fallen 58% over the past year. The chief executive of rival Klarna said last month it was diverting the Swedish business from growth to near-term profitability as losses mounted.

Because GoTo has captive users who spend on a range of services, Cao said the company is more “powerful” than those who only offer credit for third-party transactions. GoTo’s extensive customer data will also help the company generate better credit scores and “whitelist” users who can safely use the service, he added.