Sunday, 16 June 2024

Ayoconnect launches automated recurring direct debit with seven of Indonesia’s biggest banks

5 min read

 Ayoconnect, a Southeast Asian open finance platform, has launched an open finance API that provides Indonesian companies including non-banking financial institutions such as insurance companies and lenders, with recurring capabilities that can instantly debit from customers’ saving accounts across multiple banks. The API can be integrated with minimum effort and businesses can save on the considerable time and effort involved in negotiating terms, signing-up, and integrating with one bank at a time.

For the first phase of the roll out, Ayoconnect is working with seven of Indonesia’s largest banks to introduce direct debit, which can be accessed via one API. Partner banks include Bank BRI, Mandiri, BNI, CIMB Niaga, Danamon, Bank Syariah Indonesia and Bank Neo Commerce. Together, these institutions provide over 50 per cent of all bank accounts in the world’s fourth largest economy by population. Phase two will include BCA, Permata, Bank Jago and NOBU Bank among others.

Direct debit is a relatively new concept in Indonesia. Ayoconnect’s Bank of Indonesia licence - received just last month - will reassure users the technology is properly regulated with consumer protection in mind and is testament to the quality of the fintech’s infrastructure and processes. Ayoconnect is currently the only open finance player in the country to be awarded with the certification.

The first businesses making use of Ayoconnect’s new direct debit API include digital healthcare provider Milvik Indonesia, investment app GoTrade, as well as a leading digital credit platform. All three will use the API to initiate recurring monthly payments for their customers. GoTrade will also make use of the API’s automatic top-ups feature - the first Indonesian business to offer this functionality to their customers.

Recurring payment capabilities make direct debit much more convenient for consumers and merchants. Previously, Indonesian non-bank financial institutions and large companies had to rely on single payment digital initiation for collection purposes which has a number of limitations . Using this method, businesses had to initiate separate payments for each transaction, even for standard outgoings like monthly subscription services and loan repayments. For consumers, non-automated payments could involve inconvenient monthly trips to banks or other physical payment options. 

Furthermore, the single initiated payment mechanism is only possible through relatively high-cost payment providers, such as credit card companies, and as such is restricted to just 6 percent of the Indonesian population with credit card access. Secondly, by law, lending companies are unable to collect funds using this method, therefore further narrowing the user base.

Jakob Rost, CEO and co-founder at Ayoconnect, says: “Ayoconnect’s recurring direct debit will be a gamechanger for Indonesian businesses and their consumers. By automating recurring direct debit, businesses are in full control of their collections, with the ability to reduce costs and make payment fees more affordable for consumers.” 

Wisnu Dharmawan, President Director - PT Milvik Indonesia, adds, “MILVIK is very excited to partner with Ayoconnect because the service will be able to address our requirements to offer reliable payment options for our subscription-based digital health products.”

As well as taking up unnecessary time for both parties, manual settlement also increases the likelihood of late payments and associated penalty fees. Lenders in Indonesia, for example, typically experience loan default rates of about three per cent

For any business relying on regular payments - be it large utilities, insurers, subscription streaming services, magazine subscription providers, gyms, telco and broadband companies - the ability to set up automatic, fully-paperless recurring payments offers multiple benefits: it shortens the time needed to collect funds, reduces the cost of collections and decreases late payments and defaults. 

With Ayoconnect’s direct debit facility, businesses of any size including startups and SMEs, not just the larger more established companies, can initiate regular variable, fully-digital payments, as well as single payments from any end customer who has provided consent. 

Recurring direct debit also opens up the opportunity for Indonesian entrepreneurs to launch rapid-growth lending services, including buy now pay later (BNPL), backed by automated monthly collections.

Jakob Rost, CEO and co-founder at Ayoconnect, concludes: “We’re already seeing strong interest from larger companies, such as insurers and lenders, which rely on prompt, regular payments to maintain services and control costs. We also believe recurring direct debit will open up exciting new business opportunities for innovative services, such as buy now pay later.”

Re-disseminated by The Asian Banker

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