With over 100 languages, Southeast Asia is too diverse for a ‘one-size-fits-all’ digital transformation

July 2, 2021, 7:16 AM UTC

Southeast Asian startups face a particular challenge in navigating differences in language, regulations, and behaviors, as the COVID-19 pandemic accelerates digital transformation around the world, says Tessa Wijaya, COO and cofounder of Jakarta-based digital payment platform Xendit.

Wijaya worked in private equity before jumping into the fintech scene. “I was lucky with the timing because right about 2015–2016 was when the startup scene was starting to really happen in Indonesia,” Wijaya told Fortune in an Eastworld Spotlight conversation.

“It was just a really exciting time to be in the tech space.”

Southeast Asia is home to 675 million people who speak over 100 languages and dialects, making it one of the most diverse regions in the world. “We have about 25,000 islands in the whole of Southeast Asia. Indonesia itself has about 17,000 islands,” Wijaya said. “We have to understand that because of such varied cultures and such varied amounts of people, as well as the vast number of islands, payments can be super-duper complex.”

A study from Bain & Company found that while Southeast Asia still relies on cash, the share of people who prefer to use it for payments fell from 40% in 2019 to 34% in 2020. At the same time, 22% of respondents said they prefer e-wallets, an 8% increase from the year prior. The pandemic has inadvertently accelerated this shift by forcing people to stay at home and temporarily closing stores. E-wallet payments in the region were worth over $22 billion in 2019 and are expected to rise to $114 billion in 2025.

Xendit began as a peer-to-peer payment provider in 2015 and has since evolved into a company providing payment solutions to Indonesia, the Philippines, and the wider region. It is the first Indonesian company accepted into the Y Combinator accelerator program and in March raised $64.6 million in a Series B funding led by Accel. In all, it has raised $88 million in venture funding.

In her interview with Fortune, Wijaya talks about Southeast Asia’s diverse digital payment landscape and how it differs from the rest of the world. She also explains the complexities and challenges for businesses operating in the region. This interview has been edited for length and clarity.

Fortune: So what’s a “payments gateway”? What type of merchants do you work with, and what you do for customers?

Tessa Wijaya: I like to use the analogy of a logistics company, but we actually move money. So we accept funds and we deliver funds on behalf of our merchants so that they can transact online with us. We’re basically like the Stripe of Asia. We work with both large and small merchants. One of our biggest customers is Traveloka [the Jakarta-based travel booking platform]. We help them to accept payments online through our platform. We also have a bunch of small-medium enterprises [SMEs] that we’ve been helping to move to become digital players. What this means is if someone wants to sell something online—say, through a platform like Shopify—we can also help them accept payments in that way. We provide the piping to link your bank account to the merchant’s bank account, or to the likes of Visa and Mastercard.

Many of these e-commerce companies have very sophisticated platforms themselves and, to varying degrees, fintech capabilities. Why would they turn to you, and what is it that you can provide for them that they can’t do for themselves?

Building a payment platform is extremely hard. You have to knock on the doors of each of the banks. You have to knock on the doors of the e-wallet players in the market to provide those payment methods. E-commerce players already have to build a whole platform and figure out an algorithm to make sure that the right products are in place or that the right merchants are there. They already have to work on acquiring end users or customers to buy the goods from their platform. It will be really distracting for them to be figuring out how to manage payments themselves.

And just as a reminder, the payment methods prevalent in Southeast Asia are very different than in the developed world. It’s very much a non-card space; a lot of people are paying through bank transfers or e-wallet payments. So this means that you must be able to integrate multiple players, you must be able to figure out which bank transfer, which bank accounts we need to open to be able to accept payments from certain end users.

You mentioned Stripe. But in many ways, the environment Xendit operates seems more challenging than the environment Stripe operates in.

For the likes of Stripe, which operates in the Western world, payment is mostly about credit cards. It’s about connecting to Visa, Mastercard, and then it’s about payment security and guarding against fraud. For us, payment is a lot more varied. You have to understand that in the Southeast Asian market, a lot of people are not even banked. So we have to provide many different options so that they can access payments online.

Obviously, Southeast Asia itself is one of the most diverse and complicated regional markets in the world. Xendit currently operates in Indonesia and the Philippines: Why would it be difficult to figure out how to operate in only two regulatory systems?

People love to slot Southeast Asia as one market when in reality, we have about 25,000 islands in the whole of Southeast Asia. Indonesia itself has about 17,000 islands. Can you imagine the complexity of payments? We have to understand that because of such varied cultures and such varied amounts of people, as well as the vast number of islands, payments can be super-duper complex. We’re seeing in Indonesia that most people are already trained to do bank transfers, because we’ve been trained to do so. In the Philippines, what we see is that people are still predominantly paying by cash. That behavior is completely different.

So I think when people say, “Hey, let’s go to Southeast Asia, let’s tackle payments there,” they think the whole of Southeast Asia is the same. That’s a big mistake.

We’re here because we’re able to understand…the appetites of each regulator and market. We understand that in Indonesia, regulators want to push for payments via QR codes because they understand that most people are used to paying via e-wallets. In the Philippines, that behavior might be slightly different. It’s up to us to educate the market as well as to educate global merchants who want to come into Southeast Asia, to be able to increase the number of payments that they can make and market.

The pandemic has upended a lot of different business models. How has it affected your business model?

We’ve been lucky. The pandemic has accelerated both our markets going digital. Before the pandemic, we were predominantly serving a lot of enterprises. Through the pandemic, we’re seeing a massive influx of SMEs, the mom-and-pop shops. Just last month alone, we saw 7,000 SMEs trying to come online with us, to accept payments through our platform.

Do you have plans for regional expansion? Or any plans in the near future to go public?

We have bigger ambitions. We’d love to be expanding out into Malaysia, Thailand, and Vietnam. We have our eyes set on those markets. In terms of funding, we’re not going to be looking at going public anytime soon. We want to focus on our core business; we want to continue to expand out into these other markets. That’s the dream first. At some point in time when we think it’s right, definitely, an IPO might be on the horizon.

This interview is part of Eastworld Spotlight, a series of conversations on matters of business, tech, and finance with executives, experts, entrepreneurs, and investors in Asia. Subscribe to Fortune’s Eastworld newsletter to get each issue in your inbox.

Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.