Prior to founding Ayoconnect in 2016, Jakob Rost had already spent a number of years in Indonesia, as director of Lazada. He had the opportunity to observe up close the challenges that the financial services, ecommerce and financial technology (fintech) industries faced as they tried to connect with each other to help facilitate transactions for their customers. He saw the opportunity to connect them via a collaborative financial ecosystem – open finance - through application programming interfaces (APIs), and co-founded Ayoconnect with a few partners.

Today, Ayconnect claims to be the largest open finance platform in Indonesia and Southeast Asia. It is licensed and regulated by Bank Indonesia, and connects over 200 API clients, including leading banks, fintechs, retailers and e-commerce firms and e-wallets, through more than 4000 embedded finance and data solutions. These help them to launch banking, lending and payment services, with relative ease and speed, to not just bank customers but the financially underserved consumers too.

Ayoconnect recently closed a $15 million series B financing round by Tiger Global. It was joined by Indian payment gateway, PayU, part of Netherland-based Prosus as well as Asian multi-family office, Alto Partners. The round also attracted individual strategic investors such as William Hockey, co-founder of California-based Plaid, the forerunner of current open finance and finance-as-a-service platforms, and Jerry Ng, president commissioner of Gojek-backed digital challenger, Bank Jago. Ayoconnect also has close strategic ties with two leading banks, Bank Mandiri and BRI.

Rost said that the additional capital will be used to develop and launch new products such the first direct debit API in Indonesia, as well as account opening, card issuance, and bank statement/balance APIs.

The following are the key discussion points from the conversation:

• APIs provide infrastructure for FIs and fintechs to plug and play
• Southeast Asia is missing a big open finance player
• APIs and open finance technology create launchpad for innovations
• Building financial infrastructure takes time, relationship and technology
• APIs move 30% to 60% of Indonesia’s GDP now
• Indonesia’s digital economy is real and will create more unicorns

Foo Boon Ping (FBP): Hello, everyone, today we're very happy to be speaking with Jakob Rost, the founder and CEO of one of the largest API platforms in Asia. It claims to be the largest in Indonesia. Ayoconnect is a very interesting addition to the digital ecommerce economy in Indonesia, a booming market for financial technology, and increasingly for digital banks, for an increasingly digitally savvy population. Very happy to have you here, Jakob, with us for this interview, I want to first start off by asking you about Ayoconnect, and about yourself. You came from Lazada, an ecommerce platform, and you founded Ayoconnect, which is an API platform. Tell us more about the API platform. How is it different from an API exchange? For example, in Singapore, we have the API Exchange, and how is it different from finance as a service? And what role does it play in this whole phenomenon called open finance.

Jakob Rost (JR): I'm the CEO and founder of Ayoconnect. My background is actually in ecommerce, fintech and financial services. Prior to founding Ayoconnect, I was the director for Lazada Indonesia. So, having spent a number of years on the ground in Indonesia, gave me the opportunity to see the challenges that are there in the financial ecosystem, but also some of the opportunities that digital finance can provide. And when my co-founders and me started Ayoconnect, we really wanted to tackle some of the challenges and we felt that APIs and then more broadly, open finance gave us the opportunity to do so. So, Ayoconnect today is the largest API platform in Indonesia. We have a set of APIs, some of our APIs are related to payment related services, some of our APIs are going on the embedded finance direction. And some of our APIs are pure data APIs. 

APIs provide infrastructure for FIs and fintechs to plug and play

JR: So, the idea for us is essentially, we want to create a business that powers the leading companies of today and fintech unicorns of tomorrow. And in order to do so, we have to also embed finance and data solutions that give our customers the opportunity to essentially launch banking and payment related services on their platforms to their customers, in a matter of days or weeks, compared to historically having to spend months or years. Even branching out in the future. So, APIs for us are a means to an end. The purpose of an API is essentially to connect entities or companies and a lot of our cases, banks with fintechs, and then third-party platforms. But it's a means. What we want to make sure is that there's a real use case behind it. And I think that's probably different to a pure API exchange, as you mentioned. So, it's not like a marketplace model where anyone can just put APIs on. We build them in house, we curate them before we launch a new product, we actively talk to a large customer ecosystem that we have, including some of the largest banks and tech unicorns, and really make sure there's a need for those solutions. And a lot of the solutions are inspired by use cases that already exist in other parts of the world. But we also do a lot of heavy lifting of actually having to localise certain solutions and services to what Indonesia needs. The market is very different. And we can go a bit into that. But our idea is always to basically provide a full-service stack of financial infrastructure APIs to our customers that they can more or less plug and play.

FBP: So, would I be correct to say that other players that operate in the same space as Ayoconnect will be those that provide finance as a service type of solutions. 

JR: So, it's going a bit in that direction. Actually, what we realised is there's not one company out there and in any market that exactly does what Ayoconnect do. So, we take inspiration from a lot of models. When people think about open banking, the companies that typically pop up is like Plaid in the US, which essentially probably was one of the pioneers, even before there was a term, open banking. They were doing this very successfully. And then in Europe, you have the likes of Tink and Truelayer, which are doing really well. There are a lot of companies popping up in Latin America as well. So, we feel there is still a big player missing in this part of the world that takes care of this. But then if you look into those models a bit closer, you realise that the landscape is very different there. For instance, in Europe and the US, you have a high degree of banked people, which is not the case in Indonesia, where give or take 50% of the population are still unbanked. So, if you want to get to know income levels of people, or you want to understand spending behaviours. So, just going after the banked population is oftentimes not good enough for our customers. So, we need to also take care of the other side of the coin, which is the unbanked population. How do you basically derive alternative data sets that can tell you or give you indications on those kinds of data sets. And that's where Ayoconnect does essentially, as I said, a very local version of the idea as the same in other markets, but we need to come up with very local approaches and be a bit more creative on what Indonesia gives us and what our customers need.

FBP: And in Indonesia, and very many parts of Asia, it's very different. You have a huge market of unbanked consumers that banks are all looking to serve, and to serve sustainably and profitably, and to bring into the formal economy so to speak.

Southeast Asia is missing a big open finance player

JR: When it comes to Indonesia, we see it's still very early days to start with. So, open banking, open finance, those terms are just starting to make the rounds. It's kind of like started somewhere last year, and now everyone has heard about it. But there's still a lot of education that needs to be done across the board, to customers to fintech platforms, and also to banks of what it actually means and what it entails. I do believe there's opportunity for everyone involved in any value chain, even banks are starting to realise that this actually provides great opportunities to tap into additional customer segments, additional monetisation channels. But there's definitely a learning curve attached to it. And I think as always, Southeast Asia essentially finds its own way. And it's going to be probably a bit of a hybrid of what we've seen in other markets.

FBP: You were founded in 2016, together with the fintech boom. And in the intervening years, you have seen the collapse of P2P (peer to peer) platforms in China, with tighter regulation and resulting from fraud cases. And then came COVID. And COVID accelerated the whole move towards digital transactions. And also the advent of digital-only bank licence regimes in places like Hong Kong, Singapore, in Malaysia and other countries. In Indonesia, tell us, you set up in Indonesia, because it obviously provides the huge potential market of 275 million consumers. Obviously, you exist in a space where you need to collaborate with incumbents as well as new players. Tell us how has the landscape evolved since 2016?

JR: Yes, we've been around. We're not a new company. In a line of business where we are, basically B2B (business to business)  financial infrastructure, things take time, it takes a lot of time to build relationship. It takes a lot of time to deal with banks and incumbents. And we want to get this right. And there's a lot of time that regulatory side also needs. So, we are okay with that. We're passionate about this business, and we want to do this for a very long time. But financial infrastructure is never an overnight success. So, it's just the way we approach things, they take a bit longer. And you're absolutely right. We have essentially seen how the fintech landscape has evolved in that time. I do feel we're still very early regardless. So, P2P as you mentioned, is a great example of a new form of lending that disrupted the marketplace. And the regulatory side had to learn from that and intervene and make sure it's all legit. And there was a bit of turmoil in the process. But I think if you see where P2P lending is today, in Indonesia, it's actually quite strong, and it's quite regulated. And everyone involved in the value chain knows how to go about it. I think that's different than the early days. And I feel that open finance will probably take a similar path where right now it's more of an early stage. There are laws and regulations set in place, but regulatory side knows about it, and they basically give guidance.

So, not only does the regulatory side says, "we know what it is", they also already put certain frameworks in place that help us but also the banks that we partner with, and the fintechs, to at least have a common ground of understanding of how we have to build systems when it comes to data security, data privacy, what to do, what not to do, and all of this. So, even though it's not mandatory for banks yet, it's still very hands off that certainly paved the way for where we are today. And we can actually, in discussion with the regulators, learn together and figure out things from here on. 

APIs and open finance technology create launchpad for innovations

JR: Having said that, I also feel that the technology that we're building is a starting point, or a launchpad for future fintechs and startups to come to actually build on top of the technology. That's actually what really drives me, what I'm passionate about, we're building a platform. And it's good that there's a lot of news about open banking, per se, but I think what's more exciting is actually the use cases. How does it really make it easier for consumers to own their data? How does it really drive financial inclusion? How does it really open up a new opportunity for banks? And coming back to your earlier question of how we work and partner with the bank, we've been working with them for the last six years since day one, essentially. So, I would like to think that really good relationships are in place, we have two of the largest banks in Indonesia as investors in us as well, which provides a lot of good backing to the rest of the ecosystem and to the other banks. These two being BRI (Bank Rakyat Indonesia) and Bank Mandiri. But having said that, we are also independent, and we work with the entire ecosystem, and trend. BRI and Mandiri are some of the largest banks, and they're very careful with investments. And it's also not that often that they invest at the same time in the same company. So, we're very humbled to have that backing. And we're also open to new banks to come in and become partners or shareholders of our company. So, it really shows that we want to be agnostic that we want to be open to partner with everyone. And that relationship with the banks essentially, takes time to build. So, it's a lot of meetings with various teams across the banks, but I feel that at the end of the day, you come out stronger. And another very important thing that the banks like about us is that we have a category one licence from Bank of Indonesia, which is probably the highest non-bank licence there is in Indonesia, and that allows us to do a wide range of things. And that gives a lot of confidence to a bank, especially when it comes to sensitive things like data exchanging and integrating systems and API's and so on. So, they know that we had to undergo a lot of scrutiny in order to get that licence. It's almost being regulated like a mini bank, if you will. So, there's a lot of scrutiny when it comes to data security data, privacy, mitigation, backup systems, and all of this unsexy stuff. But it's equally important too.

FBP: Describe your business model. It's a subscription-based service, software as a service? And it raises the perennial questions to technology buyer, do they build it, or they buy it or they partner with someone? How do you help them address those?

JR: Correct. We are very humbled to say that we have more than 200 customers in Indonesia alone that use our technology as of today, and that's across the board. So, some of the largest banks out there, some of other large financial institutions, such as lenders, insurance companies, the majority of tech unicorns in the B2C (business to consumer) space. It's using our APIs one way or another. Now, a big focus for us is, more earlier stage startups not only fintechs, but startups across the board, series A, B, and C funded, even traditional companies, we call the local champions that those are big household names that everyone in Indonesia has heard of, and even the unicorns from the tech background, but even companies that have been around for decades in the marketplace that you will not see as a tech company or as a startup company, and they need better financial solutions for their user bases, even government-related customers. So, that's exciting for us. There's still a long way to go. But essentially, what helps us is that we tap into very different customer profiles, and all of them have very different needs. And we're trying to build the solutions that they really need. Coming back to your question, what's the business model behind it? And why are they working with us? So, we've come from a very collaborative approach. The idea is, if you grow, we grow together. We don't want to charge you a big upfront fee, or we're not going to do consulting projects and try to take a lot of money. It's only if you're successful with our solution, then we will ultimately be successful. So, it's more often than not, it's variable kind of component, it depends on the situation. It's pay per "ping", pay per transaction, certain percentage of volume and things like this. And we always make sure that we price it in a way that still makes sense for the company. Because we understand that they definitely evaluate, "is this something I would want to do in house, or is this something where I use a platform like Ayoconnect?" So, where we come in on the intersection when number one, what we do is very expensive to build, and takes a lot of time, again, financial infrastructure. Even if you have all the money in the world, it would probably take you a couple of years to build it. And more often than not, you don't have the time, you need that solution today. There's a need from your customers or from coming from the business team, something that we want to have on our platform today. The second thing is that it's not just about building it, it's also about maintaining and operating it. And that's mostly overlooked by our partners at the beginning, they kind of evaluate the business case to build it, but they underestimated the running costs behind it. And to evolve it exactly. And that's fair for us, it completely makes sense to do it, because people did one time and we can launch it to a few hundred partners. And we run automated systems on the backend that reduce our operational overhead to maintain the systems and so on. And that's what I feel it's a win-win situation.

FBP: Tell us, you recently did a series B funding $15 million. What will that fund go into? And how big is Ayoonnect now in terms of how many people you have? Are they mainly software engineers, distribution, marketing?

JR: So, we are approaching 250 employees, majority of them really in tech and product, a bit of business development and so on. But we are first and foremost a technology company. And we're very passionate about it. We're all we love what we do, we like to be in that middle layer and in the background. Ayoconnect does not need to be very visible to the product market, you will never find us on a billboard or TV commercial or things like this. But we really care deeply about serving our customers and our clients of helping them to monetise the potential on their platform to their users. We did raise our series B earlier this year. We're very happy that we have one of the best VCs in the world that came on board, they have seen this model scale in different parts of the world very successfully. And they had the conversation with us and told us they're impressed with what we're building. But if you look at our investor base, it's quite diversified. So, we have a global VC such as Tiger but also local business lead such as  AC Ventures and a few other investors. We do have more strategic investors, the likes of Mandiri, BRI or, for instance, PayU that came on board that is the largest payment gateway in India, they do understand fintech and payments very well. And there's value that they can definitely add to the business as well. And we even go as far as we have impact investor on our cap table, which we're actually very passionate about. We don't speak about it a lot, because we never serve the last mile consumers directly. But we actually feel that a lot of the technology we're building does drive financial inclusion through our partners and clients and other intermediates in the midterm. And that's ultimately something that gets us very excited as well.

FBP: Now, the investor attitude towards fintech investment has also changed. With QE (quantitative easing), where there is a lot of liquidity versus now where we are facing historical high inflation. So, there is perhaps more focus on your path to profitability, and how has that changed how you operate since 2016? And how do you look at your KPIs now? Have KPIs changed?

Building financial infrastructure takes time, relationship and technology

JR: I think, luckily for us, nothing has changed. The way we have approached and planned our business has always been very long-term oriented. And that's coming back to the fact that there's no quick wins in building financial infrastructure, it takes time it takes relationships and technology, all of the things we have quite long sales cycles, and then our business as well. But the beautiful thing about our business is despite it taking a bit longer to get it off the ground is that it's actually a fundamentally healthy business at its core. So, it's APIs talking to APIs. It's very automated. In an ideal state, it's very hands off. And today, we already do see that our core solutions are profitable. 

FBP: As an entity, you are profitable? 

JR: Not as an entity, as our core solutions. But what happens is that all the investments we take today are basically going to go into technology and solutions that are monetising six to 12 months from now. So, this is this is a conscious decision that we can take where we can dial back and fore where we say, "where do we want to put our focus?" And right now, it's definitely more on on capturing some of the newer solutions. And we know there's a demand out there, we're getting approached from our existing customer ecosystem, who says, "I need this and this and this, and it's not in the market. And when are you guys launching it? Today?" So, it gives us a very clear signal that this is a good idea to spend time and resources on that. But we also had a comfortable situation where we could dial back, and then basically just steer the company towards a more profitable path if we wanted to. This is a discussion that we have on an ongoing basis with our investors as well. But we're not in the business of crazy customer acquisition costs, like what you would see sometimes on the consumer side of things, or on subsidies or crazy competition, race to the bottom, all of those things. I do enjoy being in the B2B fintech sector, and precisely because of all of those reasons.

FBP: You mentioned, your core solutions are profitable. What are the core solutions, core requirements that are focused on?  Payments?

JR: Historically, we actually started on utility APIs, back in the days. If you go to an e-wallet in Indonesia and you're doing electricity payment, there's a good chance that our APIs are behind it. If you go to a mom-and-pop shop, and you do telco recharge, there's a good chance that they're using our API behind it. So, we've actually started the business by integrating more than 4000 utility products into one single API. And the reason why we did it is because it's probably the biggest embedded financial use case in Indonesia. Like anywhere you go offline online, that's the use case that is out there that the merchants want to have in their platform, but also customers need to do on a recurring basis and in a way. without going too much into specifics here. The way it's done in emerging markets is very different than for instance, in Singapore, in Europe, US and then the likes of that so that that's basically where we learned how to build APIs in a very non tech environment, if you will. Some of these companies that we work with, their databases are very old. They are in very remote areas, they go offline a few times for months, for various reasons, and so on. So that allowed us to really learn how to build, create infrastructure, create great tech, take care of reconciliation, mitigation, and all of this. So that has allowed us over the course of the past years to branch into additional financial API use cases where when we now deal with banks and financial institutions, we have very robust cases in place. But some of the solutions that we have in place from the early years, they're growing very nicely, organically, they're profitable. And that allows us to actually put some of the money that we run into the new solutions that we get excited today, and that we want to see going live six or 12 months from now.

FBP: Talk about some of the new opportunities, new solutions, something new that the other banks or other markets are used to, which is new to Indonesia. 

JR: So, just to give some examples. This quarter, we're launching a direct debit solution in Indonesia. This essentially allows merchants to pull funds directly from a bank account on the customer on a recurring basis. 

Direct debit has been around a lot of markets, and it's extremely useful. In Indonesia it doesn't exist until today. We are actually very proud that we are on the forefront of building the technology there and on the back deck, is closed down to like having discussions with banks for the last two, three years, in order to now roll this out this project, it's going to be a game changer like any recurring payment you have would have to do today, you need to proactively as a consumer do a bank transfer, you have to remember the date, you need to do the bank transfer. The next best thing, which is probably credit cards, think about Netflix subscriptions and all of this. We all know that penetration is extremely low less than 3% in Indonesia, that doesn't work, and so on. So basically, it's finding a way for merchants to do subscription payments and also for consumers to let go of the mental headache to have to remember recurring payments on a basis. So very excited that we're launching this. We're shortly launching an account opening API that has been in high demand from a lot of our customers. So basically, if you're having an ecosystem of consumers, and you're involved in taking care of their cash flows or cash value chain in a way, you actually can push a button now, and you can create a bank account with some of our partner banks for your customers. And you can white label this and almost print like you own your own new bank in a way without having to deal with the regulatory red tape without having to worry about the infrastructure and KYC. Exactly right. So, everything end to end. Towards the end of the year, we are launching a card issuance API, that means fintechs can have to own branded debit cards that can integrate into them, the bank account opening. Bank statement, and bank balance API is something that market desperately needs in an official way, where you're directly integrated officially, with a bank, with the consent of the customer, obviously, but get to know their last transactions, their income, their spending behaviours and so on. On the payment side of things, we're branching into disbursements, where a lot of our merchants have to disburse, basically the opposite of receiving funds, sending funds to a large amount of customers on the other side, and not in a traditional sense how you would think about just directly to bank accounts. Also, you think about Indonesia, e-wallet, even cash. So, you could essentially go to a convenience store chain, and then use them as an ATM and deduct cash, Agent banking, all of this right. So, there's a couple of items. I think we're not slowing down anytime soon. And there's a lot of building that we need to do. And we're still actively hiring. But I think the landscape wants all of the solutions alive. It's going to look very different in six to 12 months. And then it's up for the incumbents and the neo banks and the entrepreneurs of tomorrow to actually build the future unicorns on the back of that. That's what I want to see. That's why we should be sitting here in two, three years from now and looking back of how the market has evolved since then. Collections is a big pain point as well. So we're having some ideas and early discussions on a couple of solutions that we could launch there. But I think what's important to our partners is that they're not taking solutions that are fragmented.

When they want to have a disbursement product, they want to make sure it works for bank accounts for offline, for e-wallets, everything is integrated. Or, when they have the bank account statement API, they want to make sure it's with all the banks, not just with a few. That's where it's not just about launching product, it's also then how do you scale it up and get to depth within a certain solution. And that what takes time and effort.

FBP: How big is this whole API market? How do you measure it? It's by transaction, percentage of transaction?

APIs move  30% to 60% of Indonesia’s GDP now

JR: I think a good way to look at it is like, what's the percentage of GDP that is moving through APIs today, and through the financial sector. And that's anywhere between 30% and 60%, at least. The market itself is still growing, but then that percentage is also growing. So, I think, regardless of what the exact number is, I think we're in a good position now and in the future will be exciting from here on.

FBP: And final question in terms of future plans. Obviously, the market is big, there are a lot more things to do. You're looking to more funding? Future planned listing?  What is your valuation, capitalisation today?

JR: We're not a unicorn. But hopefully, we'll start getting considered as one of the unicorns. If you look at similar players and other markets, they have.

FBP: You'll be a unicorn?

JR: Timeframes are difficult in our line of work, because like, no one really knows. There's a lot of dependencies on our partners on banks, and a lot of this. I think what matters to us is that the overall direction is going in the right way. And that's certainly the case. There's a lot of ambitions that we have. And it was just also something that we're very passionate about. My co-founders and me and the rest of the team, there's no other way to go. We feel we are at the most exciting intersection of macro, financial segments, where the partners that we deal with on an ongoing basis, whether it's the banks or newly funded startups, I couldn't think of anything more exciting, and then coming up with solutions together that the market needs, and that will help the overall economy is a great way to spend the majority of my time and our time, I feel so I think valuation will eventually reflect that. But that's.

BP: When you did your recent round of fundraising, it is backed on a valuation of?

JR: It's a nine digit if I'm not mistaken, nine-digit valuation. So, it's somewhere in the hundreds ($ million) club, not the unicorn, not early stage, somewhere in between. I hope I'm right, with the nine digits. We're not really driven by valuation, per se. It's more something that the market has decided. I think we've also seen recently the fluctuations. So, we shouldn't get too carried away. I think we look at the products that we launch, we look at the revenue that the core business priced, and I think that's something we can steer and the partners that we onboard, and how we provide value, and the rest will fall into place.

Indonesia’s digital economy is real and will create more unicorns

JR: For that matter, digital economy, is now at a stage we have the first batch of unicorns that have proven that this is real. And I'm personally waiting for the next 30, 40, 50 unicorns from here on. Digital economy as a whole, actually, a lot of the new fresh founders, local founders are coming out of the first generation of unicorns that are starting their own companies and disrupting things and helping the economy by what they do, which is great to see. I think it really has changed also, in the last three, four years, just the profile of founders. Certainly, there are the challenges that remain, that every country has to go through. But I do believe Indonesia is in a very strong position, due to how they have done, how they have positioned themselves and also the latest developments that I see on the ground. So, that's the reason why I'm there. I think that's why there's a lot of spotlight on the country. It's still the biggest economy in Southeast Asia as well. It's going to be exciting to see how it develops in the next 5, 10 years and beyond.

FBP: Thank you. And I'm sure this is just the start of a conversation that we will have with you and to find out more about Ayoconnect, as you proceed along your growth path. So thank you so much. 

JR: It was a pleasure. Thanks for having me. I really enjoyed the discussion. Thank you.