On the heels of investment platform Ajaib becoming the first digital brokerage in Indonesia, CEO and co-founder Anderson Sumarli goes on a call with Insignia Ventures’ Samir Chaibi to share the opportunities for capital markets in Indonesia, vis-a-vis markets like India and Brazil where Zerodha and XP have emerged, Ajaib’s approach to building an attractive product for first-time investors and millennials, and what Ajaib has the under the hood as they drive investment penetration in Indonesia
This episode was recorded on Zoom, 10 June 2020.
0:40 Introduction to Anderson by Yinglan Tan;
2:20 How Anderson first met Yinglan;
2:46 What does the acquisition of Primasia Sekuritas mean for Ajaib?;
3:49 What are the opportunities in the Indonesian market for retail investment?;
5:06 What are the parallels between Indonesia and markets like India and Brazil where the likes of Zerodha and XP have emerged?;
6:59 What are the early signs in Indonesia of the so-called “generational buying moments” into stocks?;
8:31 How does Ajaib’s user experience make things easier for the first-time investor?;
9:51 What should users expect to see in the next few months from a product perspective?;
10:50 What are some success stories of users that touched Anderson?;
12:52 How democratized can stock investing be in Indonesia through Ajaib?;
14:13 Ajaib is not just a one-country platform right?;
14:41 What would be your top investment advice for first-time investors?;
16:41 Where does Ajaib want to be in the next five years?;
17:26 What message do you want to leave with our listeners?;
Samir: So I’ll start with the fantastic news we just heard a couple weeks ago, you getting into the securities brokerage business with the acquisition of Primasia Sekuritas. Why don’t you tell us a bit more about what it means for you and how it will change the trajectory of your company moving forward?”
Anderson: Just to add a quick bit with what Yinglan just mentioned. Yeah, we met over at dinner. It was a half-dinner, half a house party. Once the house party was over, Yinglan was like, “let’s talk more, get in my car, I’m gonna go to the airport,” so I actually followed in his car and started pitching my idea in the car. Now I think about it we even stopped for gas at one point and I just kept pitching while you guys were gassing up the car. That was a really exciting first introduction to you.
So back to the question of Samir. As he mentioned, we’re really at a really exciting time right now. We just closed an acquisition of an existing stockbroker in Indonesia, which makes us the only startup with a full broker-dealer license in Indonesia. We’ve been working at it for many many months now, and we’re just incredibly proud of the team to be able to push forward during this COVID19 period.
The reason we did this acquisition is, when we started Ajaib, we had this vision to make investing easy for all Indonesians. We started out by dominating the mutual fund industry, where in our first year we captured 10% of all retail investors in mutual funds in Indonesia, and contributed 25% of all new investors in the market. And we intend on doing the same for stocks, really trying to open up access to all kinds of asset classes and capital markets for the average Indonesians to access.
Samir: What’s the opportunity at this point in the Indonesian market? Where do you think Ajaib can provide a different value proposition to what investors are facing now?
Anderson: I think that Indonesia as a whole is a really exciting capital market scene. We have a half a trillion dollars in market capitalization, that’s the highest in all of Southeast Asia, larger than Singapore, by many times. We see this rising trend in retail investor participation. First of all, Indonesia is highly underpenetrated, only one percent of the population are investing in capital markets today, whereas compared to India and China, many, many times more.
But we do see this trend from the millennials, that millennials are starting to realize the value of investing, how exciting it can be to invest in corporates or brands that they recognize or use every single day. We’re really targeting towards these first-time investor millennials. It’s reflected in all our product, the way that we onboard people, the way that we reach out to people, and the way that we educate them to use this platform perhaps to help increase their earnings potential or to diversify their portfolio of investments. So really that was the idea to capture the millennial first-time investors.
Samir: And if you have to draw parallels between Indonesia and where you see brokerage platforms emerging like Zerodha in India or XP in Brazil. What would you say about Indonesia, where is this market at now?
Anderson: I feel like Indonesia is at a point that is perhaps only a couple of years behind India, also only a couple of years behind Brazil. In fact, Indonesia and Brazil are pretty similar to each other in their capital markets scene. Brazil also has only about 1% investment penetration, so it’s very underpenetrated, yet it also has these vibrant, huge capital markets. Companies like XP in Brazil were very successful in capturing first-time investors, convincing them to start investing, telling the millennials that capital markets is an exciting place to get additional income from.
On top of that, we also look a lot towards Zerodha, being the dominant online brokerage force in India, being able to attract massive amounts of millennials into their platform. And the reason why they were able to do that is because they were very strong in technology from the early days, they were very innovative in the way that they reached out to customers, and they were very smart in educating people.
And so we look at these two markets with Zerodha and XP who’ve done incredibly successful with their $16 billion IPO last year. And we draw a lot of parallels here in Indonesia where we get to tune back the time by a couple of years, and kind of replicate but still adapting to the local market, the strategies that they took elsewhere.
Samir: Hitting a bit more on the recent news, you see that COVID19 has created what some newscasts have called the “generational buying moments” into stocks, right? Folks, especially in the US, like Robinhood, Charles Schwab, Ameritrade, Etrade, all of them are piling up new accounts, and most of the accounts are coming from millennials as you say right? What are the early signs you are starting to see in Indonesia?
Anderson: COVID19 has actually driven more people to start investing for the very first time in Indonesia than before. It’s a similar trend elsewhere in the world, in India, China, US, and Brazil, where you see an increase in the amount of retail investors, as well as an increase in the volume traded. You look at the Indonesian statistics, more people were trading during the COVID19 period on average than before.
We think it’s because of two things. First of all, we think that people investing for the very first time are taking advantage of this massive discount in the market where a lot of equities have dropped massive amounts based of their market cap prior to this. And at least in Indonesia, these people understand that there’s going to be a rebound effect. I take the example of 2008 where the stock market tanked, but only two years later not only did the stock market recover but it tripled in value. And I think a lot of millennials have seen that and think that it’s going to replicate here again in this 2020.
I think the second one, is that there’s a lot of restrictions right now that keeps people working from home. And we know that the economy is not doing well, so, unfortunately, a lot of people’s employment might be impacted. A lot of the younger generation and millennials try to look for other sources of income, especially when they have a lot of time on their hand at home. That’s why we see a lot of more behaviours of people trading on our platform during working hours, maybe earlier in the morning as well.
So we think it’s these two things driving this kind of behaviour that increases the participation of retail investors in this COVID19 period.
Samir: From a user experience, how do you make it easier?
Anderson: We invest a lot in our onboarding process. When we ask the regular Indonesians who have never invested, whether they want to invest or not, More often than not, the answer will be yes, that they do want to invest. The problem is that the friction between “I want to invest” to actually investing in capital markets is just too difficult with today’s players.
You gotta fill out forms of twenty pages and deliver it to a branch and wait for a week to two weeks for an answer whether they get rejected or whether they need additional information before they can open up an account. So we really invested a lot in our onboarding process, such that we have one of the fastest account opening processes and most accurate in Indonesia today. You can open a trading account for most people within the same day, and for the majority of people even within the same two hours thereafter.
And the reason why we were able to do this, is because we really partnered with a lot of regulators and government agencies to allow us to conduct this in a very efficient manner but still maintain the high-security standards that they require. This has helped a lot of first time investors to remove the friction of wanting to invest to going to start investing for the first time.
Samir: What should users expect to see in the next few months from a product perspective?
Anderson: A lot of exciting new features, things that people have never heard of introduced into the market. Basically, our product roadmap is directed towards the first-time millennial investor. Our language is very simple to understand, even if you’ve never invested before, you’re going to quickly learn how to invest on our platform. And all these features we’re going to introduce is to guide people to start investing, but also to take you through the investing journey, that once you gain that confidence, we’ll give you additional tools, we’ll give you additional support and advice, so that you can become one of the top traders. We love it when our customers are successful. We love hearing stories where customers are able to achieve financial independence, or are able to fulfill a goal that they wanted to spend to buy a car or for the wedding, we really love these stories. So we’re going to create all these features to help empower investors to become really great investors.
Samir: Can you share one or two of them with us? Some stories of users that have particularly touched you?
Anderson: So there’s this one user that was very memorable to me. We had this one user who kept talking to our customer service team. We also offer personalized financial advice. So we had this one user that just kept on talking to our customer service team, our financial advisers, through WhatsApp. And she wouldn’t stop. She would just keep on texting us night and day for many weeks on end. She actually started developing a relationship with our customer service agents, getting to know them, and joking with them.
And it was a couple of weeks later that we discovered that she said that she’s actually mute and she also cannot hear, so she’s deaf. And she said that she’s always wanted to invest, but she’s never gotten a chance to because she cannot go to an agent, she cannot go to a branch, she cannot express herself and ask them these complex questions on how to invest, how to start investing, all these things.
We realized that she found us to be useful for her, because we provided a lot of great learning materials online as well as we serviced her very well with our financial advisers on WhatsApp, digital advisers which we actually give for free to everybody. We actually started developing a relationship with her, and I invited her to our office. One of our customer service agents coincidentally was able to do sign language. We actually communicated to each other, and I found her to be a very funny individual, a very lively individual, and you know, these kinds of stories really touch us — our efforts are able to really open up access to investment, no matter where they are, no matter what their circumstances are.
Samir: I guess a point about democratization. We talk about Indonesia as that market with 250 million people, but I think a lot of folks who are maybe listening to us today, fail to understand that not every substrat of that population has the same access to those financial tools. How do you see this panning out? How democratized can stock investing be in the near future through Ajaib?
Anderson: I think that Indonesia is going to be a really exciting capital market scene. I really do. Already we are the largest capital market in Southeast Asia, yet we have the lowest investment penetration of any country of our size in the world. There’s only 1% investment penetration, the potential is huge, where we can go up to 3%, 4%, similar to India, even up to China many years later on, in the double digits. We are primed to take advantage of this new boom in retail investors.
Our mutual fund product itself, majority of our users are first-time investors. There’s just something about our product that first-time investors appreciate. The kind of features we provide for them, the kind of educational resources we provide for them. We really pride ourselves in taking this approach of “Let me give you all these resources for you to learn, for you to understand. If you feel comfortable about it, come on board and we’d be honoured to be your first investment partner” whereas maybe many others approach it the other way around, where they say, “Alright, give me your money. You gotta be able to spend this much money before I take care of you, then I might actually teach you how to invest.” So it is a really different way of thinking.
Samir: And not many users know right now, but Ajaib is not just a one country platform right? You want to tell us a little bit about that?
Anderson: We have always started Ajaib with the vision to open access to investing for all. We’re starting first here in Indonesia, and we have a couple of exciting announcements later on, but we’re starting here with Indonesia first. We think that there’s still a huge opportunity in Indonesia. We really want to make an impact in this market.
Samir: What would be your top investment advice for the first-timers that are joining Ajaib or thinking about it?
Anderson: My top investment advice to everybody is to diversify. You gotta diversify. The minimum level of diversification is in asset classes. You gotta not invest a 100% of your money into stocks, or just bonds, or in fact, don’t just put 100% of your money in the bank, cause that means that you are investing 100% into cash, which is an asset class on its own. You ought to take a small percentage into stocks, into bonds, and a small percentage into money markets, or cash. And we also have a lot of tools on our platform to help people discover their risk profile, what is the appropriate mix between these asset classes.
Once you’ve achieved diversification among asset classes, you also ought to diversify in terms of industry exposures. So if you have a huge stock portfolio, don’t just invest in stocks in financial services, you also ought to get some industries such as consumers, construction or industrials in your portfolio, because as smart as anybody is, no one can really predict which industry will go up and down at the exact same time. I think COVID has really taught us that, so it’s a good idea to diversify across a couple of industries.
And lastly once you’ve achieved that, diversify across a number of instruments, or stocks. Don’t just put your money into BCA when you buy their stock for bank(ing), buy also BRI, buy another stock product, so you can diversify into the exact industry. It’s not easy for everybody to do that, because you have to have a huge portfolio, and you have to have a huge amount of money in order to buy a lot of stocks. So you can buy a stock mutual fund as an alternative.
A mutual fund is basically a basket of stocks managed by a professional. So immediately with a small minimum of 10,000 rupiah or a dollar, you get a basket of 40 to 50 stocks in your portfolio. So that’s my advice, kind of diversify, diversify, diversify.
Samir: I want to switch gears a bit and go back to what’s under the hood for Ajaib. Where do you guys want to be five years from now?
Anderson: Five years from now, we want to be in this place where any retail investor can come in for any of their investment needs, and get the right advice, get the right access points, get really affordable support, and really be successful. We were really inspired, when Yada and I went to school in the US, where we see lots of these financial advisers, lots of these brokerages, and we really want to be that resource — that one-stop shop for anybody who wants to invest in any asset class to come to us and we’ll teach them from scratch and we’ll set them up with our tools and resources for success.
Samir: I just want to close on this great vision that you have, and just ask you one last question, if there’s one message you wanna leave what would that be?
Anderson: I recognize that a lot of your listeners are entrepreneurs or aspiring entrepreneurs, and I recognize that a lot of founders are impacted by COVID19. I understand as a founder how challenging it is, just to survive through this winter that we’re going through. But I also want to tell them that there’s a lot of opportunities coming out of COVID19. That there’s an opportunity not just to survive, but to thrive during the winter. And so staying at home, working from home, is no excuse for us to slow down. This is the moment where the world needs us the most.
People no longer want to go to a bank branch because of social distancing measures. They demand an online, fully digital experience, so they can manage their money from their couch, from their home. And so this is our moment to actually step up and show everybody else the value of technology in any industry that you’re in.