Highlights

1. “Because I personally still believe that in order to win Southeast Asia, in some of your essays you mentioned that local players, local founders, and localization are very important. And that’s also what I believe.” 
2. “We also realized that we cannot be good at everything. If you look at Paytm, they focused on recharge. And that’s also how Payfazz was started, we focused on recharge. In order to be able to also bring other use cases we decided to invest.”
3. “The difference is that I’m not only doing the product myself anymore, but I need to develop lieutenants. I need to act as an incubator for the future mini-CEOs of the company who have to have the same “founder quality” as the original founders of Payfazz…”
4. “Do the recruiting ourselves [as CEOs], find a culture fit, recruit those you can mold and teach.”
5. “So that rural localization and that laser focus on fintech, especially for the unbanked, I think is our key to be able to defend in our David versus Goliath scenario that we always face.”
6. “What I foresee in the next five years is that the evolution of the Indonesian fintech landscape will shift away from purely payment and e-money playbook into a full banking stack…where people are going to start to use this more than just for payment.”
7. “So that’s what I want to share with founders: focus on people.”
8. “Our job [as board of directors] is to make you the Superman, empower you with some extra superpowers by leveraging our experiences from other domains and other geographies.” – Yinglan

In the first episode of Season 3 of On Call with Insignia, we have returning guest Hendra Kwik, CEO and co-founder of Payfazz. The last time Hendra was on the show last year, he and Yinglan talked about building the Google Play for fintech apps in Indonesia. Since then, Payfazz surpassed more than US$2 billion worth of transactions processed last year. The company also recently announced the formation of Fazz Financial Group with their investment into Xfers, a Singapore API fintech, as Payfazz builds on regional growth and becomes what Hendra calls the “Alphabet” for fintech in Southeast Asia. 

Let’s dial in Hendra’s catchup call with our founding managing partner Yinglan as they chat about Payfazz’s regional ambitions through Fazz Financial and how Hendra’s own leadership and mindset have evolved with the company’s rapid growth. 

Timestamps

00:53 Hendra gives a company update;

01:48 Approach behind Xfers investment;

04:16 Factors behind formation of Fazz Financial;

05:52 Change in leadership approach as company goes regional;

07:49 Advice for founders as companies scale;

09:21 Impact of increased interest in financial services by regional giants on Fazz Financial;

11:20 Lessons from the last five years of Payfazz and outlook for the next five years;

13:14 Hendra’s perspective on the richness of the Payfazz ecosystem;

15:20 Rapid Fire Round;

16:33 Hendra’s advice for early stage founders;

18:02 Hendra asks Yinglan about his role as a board of director;

Transcript

Yinglan: Hey Hendra. Great to have you again on call with us today. I still remember the first time we met, where we noticed a very fast-growing fintech company in Indonesia, and we reached out to you and it happens that you were in Singapore. Coincidentally, we caught up and we managed to persuade you to partner with us and the rest is history. And now you have proceeded to a very formidable fintech juggernaut Indonesia. And it’s been about six months since I last came on the show, and a lot of things have changed. So would love for you to give us an update. 

Hendra: Yeah, over the last six months, we’ve been busy, trying to beef up our regional plan. And one of the moves that we did actually [was] to invest in the Xfers, because we believe that actually the regional playbook has to be done by the people in that specific region. And that’s when we decided to form Fazz Financial Group and accommodate Xfers into our group as well. 

Yinglan: Great. So that’s a great addition to the family, Xfers, and it has been an honor to serve on your board and see the growth journey of Payfazz. Now you’re growing from strength to strength. So the first time you came on this show, we talked a lot about the growth of the Payfazz ecosystem in rural Indonesia. And over the past six months to a year, you reached a point where the company has begun growing beyond this ecosystem and beyond rural Indonesia. Obviously rural Indonesia is still your stronghold and with Payfazz’s investment into Xfers, maybe you can tell us a little bit more about this investment and how the formation of Fazz Financial Group expands the scope of Payfazz’s mission.

The dream team for financial inclusion

Hendra: Yeah, when we met a couple of years ago, Yinglan, I mentioned that initially, we wanted to prove that we can build a strong fintech product in Indonesia, but in the end, the ambition for the whole company is to be a Southeast Asian scale company. And of course, like what you said, we always focused on rural Indonesia because five years ago, we see that’s the place where the biggest influx of internet finance will [be] flowing from.

So I think adopting the vision that was mentioned by Stripe, one of the alumni of Y Combinator as well, where we participated as the first Indonesian startup. They want to increase the GDP of the internet; for us, we want to increase the GDP of internet finance. So it all started with rural Indonesia because five years ago, we saw that everything related with finance in rural areas was done offline and manually, and we wanted to bring the internet to revolutionize that.

As a result, we’ve been able to achieve US$2 billion in transactions. And we believe that in the long term, in the next five years, we’re going to be a 10 years old company. And at the time we become a 10 years old company, we want to be regional. And that relates to your second question — why we invested in Xfers — because I personally still believe that in order to win Southeast Asia, in some of your essays you mentioned that local players, local founders, and localization are very important. And that’s also what I believe. 

And I believe that Xfers will help us gain a deeper understanding of the Singapore market. And also we expect them to bring more “founder-mentality” team members from other Southeast Asian countries to be able to make sure that we are going to succeed in those countries as well as we expand in Southeast Asia.

“Because I personally still believe that in order to win Southeast Asia, in some of your essays you mentioned that local players, local founders, and localization are very important. And that’s also what I believe.” 

Yinglan: Tianwei and Tim have been great additions to Payfazz. From your perspective what are some of the factors both in the market, which is quickly changing, and the company that has over the past few months made Payfazz evolve into Fazz Financial. Was it simply a matter of evolution or were there any market sort of conditions that move things faster or slower than planned?

Hendra: When we started Payfazz, initially we focused on helping the unbanked in the rural areas to pay their bills, but as we operated the company for the last five years, we realized that finance is actually very vast, it goes beyond payments. Sometimes the people in the rural areas of Indonesia may want to pay for goods, but they also want to send money. They want to pay merchants, as well as global merchants like Spotify and Google. And they also want to buy gold or invest their money. That’s when we realized that we needed to be more than just a payment company, we needed to be a [full-stack] financial services company.

So we rebranded the company into Fazz Financial. But we also realized that we cannot be good at everything. If you look at Paytm, they focused on recharge. And that’s also how Payfazz was started, we focused on recharge. In order to be able to also bring other use cases we decided to invest. So that’s why we invested in Xfers to bring in the payment gateway capability. We invested in Credibook to bring in the bookkeeping capability. That way we can bring those use cases without distracting the focus of the company on the recharge or money transfer. 

“We also realized that we cannot be good at everything. If you look at Paytm, they focused on recharge. And that’s also how Payfazz was started, we focused on recharge. In order to be able to also bring other use cases we decided to invest.”

Why not do both?

Yinglan: Yeah, the ecosystem mindset is very powerful. And we are also honored to be invited by Payfazz to be partners of Credibook. The whole synergy with the financial group Fazz Financial Group is a formidable moat for a lot of companies to be plugged into. So now that you are CEO of a Fazz Financial Group, how has your perspective, and vantage point or approach to the role changed? And when I met you, you were maybe 10, 15 people. Now it’s close to approaching a thousand, right? How does it feel to manage a company then, and then managing a company now at this scale? 

Hendra: Yeah, I would say that it’s not very straightforward. I will say that I was in this “puberty transition”. I was once a kid, now I am going to be a [teenager]. So sometimes I still want to do the things that I always like to do — product management, building PRD, going into the details of product execution.

On the other hand, I also realized that as the company becomes a group, we have some portfolios to support. We are in more than one country now, with Singapore and other markets. The main thing that changed now is that I used to only do products for Indonesia when it was 15 people — I was the guy driving everything. Now I still spend half of my time in that product side, and I spend half of my time at the group level and regional level. 

So with that being said, now the difference is that I’m not only doing the product myself anymore, but I need to develop lieutenants. I need to act as an incubator for the future mini-CEOs of the company who have to have the same “founder quality” as the original founders of Payfazz because now that we are a group, we have a bigger organization and we hope that everyone can be as good as us in leading their team. 

“The difference is that I’m not only doing the product myself anymore, but I need to develop lieutenants. I need to act as an incubator for the future mini-CEOs of the company who have to have the same “founder quality” as the original founders of Payfazz…”

Yinglan: That’s great. Your transition and evolution are similar to what a lot of folks in our portfolio are going through. Maybe you are more advanced, but a lot of them want to learn from you. What advice would you give to other founder-CEOs, in Southeast Asia, while also going through this transition or formation of larger entities in terms of leadership and management? 

Hendra: Yeah, the first very important piece of advice is, always do the recruitment yourself and feel free to take your time. Some of the best recruits that I have in Payfazz, it took me more than five to six months to recruit. The fastest one was in three months; I needed to go through a lot of candidates before I found those who will be a very good culture fit for the company. 

And secondly, find the ones whom you can shape and is eager to learn from you. So you have to take time to find the one who is good for you. And secondly, you need to teach them and they need to be willing to learn. 

And lastly, those people that you recruit — you should expect them to be able to take the extra work from you. So let’s say one day you step up, you can give the responsibility to these people and they have to be ready.

So a lot of founders in the early days, maybe they just think that they need to recruit faster. They bring a bunch of people and because there’s a bunch of people, maybe the culture doesn’t form very well. There’s no culture fit and leadership doesn’t have time to educate them. It could lead to a fairly messy organization that can create a lot of trouble. And I also made mistakes when it came to that. So I think those are the three pieces of advice from me to the founders.

“Do the recruiting ourselves [as CEOs], find a culture fit, recruit those you can mold and teach.”

CEOs can’t and shouldn’t do everything

Yinglan: That’s great. Do the recruiting ourselves, find a culture fit, recruit those you can mold and teach. Those are great points. We also had a chat with you and a few other founders on some of the trends going forward in 2021. Some of the other players — those in ride-hailing, those in e-commerce — are gravitating towards fintech. So we’ve seen players in this former space gravitating to the latter. That also means more, I guess, competition, but I guess, you know, it’s more interesting now the landscape. How does this affect Fazz Financial Group’s focus and also the allocation of resources? 

Hendra: This David versus Goliath scenario always happens, especially for us. I remember when I pitched Payfazz to you four years ago, you also asked the same question. “Hey, you guys are small. There are some other players who are actually backed by large unicorns and decacorns. How are you going to survive?” And with this same mentality, but over the course of three years with a relentless focus on execution, we actually managed to secure market leadership, and that’s also the case that I believe applies today.

It’s like the digital bank playbook that we see today. It’s a dejavu of the things that we discussed three years ago. Of course, I always believe that focus and localization are key. The fact that our name itself — Fazz Financial — implies that we are a company that focuses solely on fintech will give us a better focus compared to other unicorns that maybe have other bigger businesses that actually make them decacorns, like e-commerce or ride-hailing, so maybe their focus will not be 100% on fintech or banking. 

So that’s what I foresee in the future, that the guys who have a laser focus on one field and have a very localized approach, especially in the rural areas, [will win]. You may be in the same country, Indonesia, but rural Indonesia will have its own localization. So that rural localization and that laser focus on fintech, especially for the unbanked, I think is our key to be able to defend in our David versus Goliath scenario that we always face.

“So that rural localization and that laser focus on fintech, especially for the unbanked, I think is our key to be able to defend in our David versus Goliath scenario that we always face.”

David vs Goliath Fazz Financial ver circa 2020

Yinglan: Yeah, that’s a great answer. We always like founders to reflect on the past five years and future five years so I thought it’s a good time to take stock of the past five years and also visualize the next five years. So if you were to think about one thing you’d like to tell yourself five years ago, as you were starting up Payfazz, what would that be? And also, after that, where do you see yourself and Fazz Financial Group in the next five years? What’s the game plan going forward in the next five years?

Hendra: There’s definitely a lot of mistakes — avoidable mistakes — that I did because that’s part of the learning. But if I can repeat that time, I would focus more on people. A lot of founders when they started, typically the Y Combinator program teaches us that you need to get the product-market fit correct. And you need to get a large market and founders of some of the successful companies usually get those parts as well.

And then they get VC funding. They get a lot of money. Then they forget about people, they keep thinking about product-market fit and capital raising. So I was thinking that actually, if in the last five years, I actually invested enough in bringing good people and transforming these people, they would be a very strong asset today. So in the last five years, that’s something that I could have done better. 

And what I foresee in the next five years is that the evolution of the Indonesian fintech landscape will shift away from purely payment and e-money playbook into a full banking stack where people will start to offer you, instead of just payment with QR, a full banking stack where people are going to start to use this more than just for payment. They’re going to start using it for other use cases, such as investing, lending, or also buying houses with installment, et cetera. And I think this evolution is unavoidable. And a lot of fintech in the region will need to adapt to stay relevant. 

“What I foresee in the next five years is that the evolution of the Indonesian fintech landscape will shift away from purely payment and e-money playbook into a full banking stack…where people are going to start to use this more than just for payment.”

Read more about our take on the evolution of fintech in Southeast Asia >>>

Yinglan: That’s great, man. I think the beauty of your business is that now you have close to a million agents who are very sticky and they have a large wallet share and you account for a big chunk of the livelihood who interface with tens of millions of end-consumers who are dependent on the product. So you have a very sticky user base. And you’re starting to lay out different services and products, like with Credibook, like POS features. How do you think about the ecosystem growing richer and richer, going forward?

Hendra: Definitely we saw the first revolution of the Indonesian tech sector — the gigantic tech companies initiated the birth of large e-commerce marketplaces and large ride-hailing [companies]. But the way I see this marketplace and ride-hailing is that they are digitalizing the merchants first, maybe in the case of marketplace, they are digitalizing the online shops and online travel agents in the case of e-commerce giant and OTA giants. In the case of ride-hailing, they are digitizing the taxis and the ojeks. And then once those merchants are digitalized, they can start accepting cashless payments that actually finally bring a lot more users to start adopting internet finance and internet payment as well.

We also believe that the next wave of [digitalization] will happen with the offline restaurants and offline kirana stores or mom and pop shops that we call warungs in Indonesia. That’s what Payfazz has been focusing on in the last five years — how we can digitalize as many offline warungs and offline restaurants as possible.

So that one day we can turn them into cashless merchants in the same way you see today with GoPay, which was built for customers to pay offline taxis and ojeks that were offline and very cash-centric before. And we see ShopeePay and TravelokaPay being used to pay for online shops and online travel agents. That’s what we also expect to see in the future [with warungs].

Our ecosystem consists of offline merchants like restaurants and warungs tied to their customer base. They are sticky and we’re going to start to transform their way of payment from offline cash-based payment, into internet-based payment so we can realize our vision of increasing the GDP of internet payment and internet finance in Southeast Asia.

“We also believe that the next wave of [digitalization] will happen with the offline restaurants and offline kirana stores or mom and pop shops that we call warungs in Indonesia.”

Waves of digitalization in Indonesia according to the impacted segments in society

Rapid Fire Round

Yinglan: That’s great, love the vision. We’re going to do a rapid fire question round. We have new questions that we’d love to get your [answers] on. So I’ll ask you a question and then you can come up with a quick snappy answer, okay, so let’s start. 

What are the top 3 skills a CEO should have? 

Hendra: Okay, people grooming. Secondly, I wouldn’t lie, but fundraising is important. Lastly, they have to have a good sense of product. 

Who is a leader that you look up to in your career? 

Hendra: Yeah, a lot of tech people will be inspired by Elon Musk with the amount of transformation that he brought in the technology space. And not only the internet actually, but also in other spaces.

What is one misconception that people have about Indonesian tech startups?

Hendra: That you can always copy whatever works in the US or China and bring it here and it’s just going to work, but it’s not. Actually, a lot of localization and local operational expertise and excellence is required. 

What is your go-to activity to destress?

Hendra: I like sports and running a lot, so yeah, I run a lot. 

Anything you’d like to plug or share with our listeners?

Hendra: Maybe my advice will be more relevant to startups that are smaller than Payfazz. So I’m speaking about the startup that maybe just started and is just starting to raise its first Series A capital. That it will always be hard. In the early days, when I raised Payfazz’s first ticket from Insignia and the first ticket from YC, I thought that after I have money, problems will be solved, but actually, you will have another problem. Right after Series A, you have another problem. After Series B you think your problems are solved, but actually, you will have another set of struggles and you will realize that actually, it’s normal, that you will always find these hardships.

And it will be impossible for you to solve it alone. So that’s why I keep mentioning people. You need to leverage people around you. You need to bring a good set of investors who can support you from the investment side, and also be a good board of directors. They can be good people to support you in your decision-making. A good C-level and good team members can be the people to help you execute [on your decisions]. Don’t try to do everything alone because that’s going to drive you crazy. And maybe a lot of founders try to do everything themselves and that will make them feel really stressed and depressed.

So that’s what I want to share with founders: focus on people. In this case, I’m not only talking about the people that you recruit, but also the people on your board and the people that are brought by your investors, because they can influence a lot in your company. 

“So that’s what I want to share with founders: focus on people.”

Who knew all Captain America needed was a good dose of the right BoD and C-suite leadership?

Anything you’d like to ask me? 

Hendra: I told you about people before, right? I mean, you’ve been an investor in some of the companies. You have also been a board of directors. How do you actually see your role as a board of director for all the startups that I know all of them are facing hardships, especially during the COVID downturn a couple of months ago? How do you see yourself as one of the people who are close to the founders in your position as BOD and shareholder? 

Yinglan: Yeah, that’s a great question. It’s very interesting. Because it’s my job as a board director [not] to run the company for you. And I think a lot of ex-operators make that mistake because they try to operate from the board which is usually a recipe for disaster.  I think the right role for us is, “Hey, we, we can’t expect to know what’s happening in the, you know, a few hundred people organization like Payfazz. But I think we have a broader vantage point.”

So, we are able to sort of surface things that are happening macro-wise, worthy of consideration to the CEO. Our job is to make you the Superman, empower you with some extra superpowers by leveraging our experiences from other domains and other geographies.

Ultimately the decision is still made by you. But I think the beauty is that we may have seen other mistakes or pitfalls in previous companies that may be useful for you to consider. And we try to ask questions that you know best [what] the right answer is.

Hopefully that helps you make a better decision or avoid a pitfall or pothole. I think that hopefully we’ve done our job. The other thing that we try to do is that we are essentially a glorified recruiter. I think as you mentioned correctly, you know one of the great things about being a CEO is to surround yourself with good people or great people.

Recruiting takes out a bit of time. We try to share the load by referring you to good candidates or sometimes we help with the recruitment. Sometimes we help with the selling of the candidate. So I think that that is one of the things I spent quite a bit of time on. The third one is of course capital strategy. 

If you do your job right, there’s only three things you need to do right, one, you need to set a strategy for the company. Two, you attract great people to, you know, do all the jobs. And third is to ensure that the company never runs out of money. So our job is to help you shine in these three areas. 

So how do you orchestrate the next fundraise? Some of our companies are going through IPO, M&A, even SPACs. We try to give us some data points, what we are seeing in the industry. So I think that that’s our role. And there’s no way we can understand what’s going on in the company. What we can do is to sort of pick up things we see, and give you some data points so that you can come to the right conclusion yourself. So that’s pretty much it. 

So on that note, I think, you know, thanks Hendra for really, you know, taking time to share insights on our show, and Payfazz has really grown tremendously in the last five years. The work is not done. There’s still a long road ahead, but it’s very exciting, and I feel very privileged to work with you and the team. So I look forward to Fazz Financials’ future moves in the space. And wishing you all the best as you continue to grow as an emerging regional fintech player.

Hendra: Thanks to Yinglan and Paulo looking forward to working together in the next five years, let’s build a rocket ship.

About our guest

Hendra is Group CEO of Fazz Financial and co-founder CEO of Payfazz. Payfazz is the first Indonesian startup to graduate from the Y Combinator program and has been part of YC’s “Top 100 companies of all time” list for two years running. In 2019 the company was also named as one of “Indonesia’s best company to work for in Asia” and were recipients of the Singapore Venture Capital and Private Equity Association’s “Deal of the Year” along with Insignia Ventures Partners.

Prior to starting Payfazz, Hendra was the Head of Growth at Kudo (acquired by Grab), where he engineered the growth of the company’s offline-to-online agent network. Hendra holds a bachelor’s degree in Chemical Engineering from Institute Teknologi Bandung (ITB), one of the most prestigious universities in Indonesia, where he was awarded the University Most Outstanding Student and graduated as a valedictorian in 2012.