Episode Twenty One
Fintech's Golden Opportunity:
Claudia Kolonas of Pluang
27 October 2020
Welcome everyone to our 21st episode of Indo Tekno. Salam semuanya dan selamat datang kembali di Indo Tekno. Today's instalment stands at the intersection of two very important themes for us at Indo Tekno: 1) FinTech and 2) female entrepreneurialism. We are therefore very pleased to invite on to this week's session, Claudia Kolonas, Founder of financial inclusion oriented FinTech platform, Pluang. Welcome aboard, Claudia.
CLAUDIA KOLONAS 0:42
Thank you so much, Alan, for having me here.
You're very welcome. Let's kick it off. Claudia, we would love to get a sense of the personal story that has led you to where you are today.
CLAUDIA KOLONAS 0:53
So while my cofounder and I were at business school at Harvard, we had a particular professor, his name was Michael Chu. And he taught us a class called "Business at the Base of the Pyramid." And this class was really interesting, because it was one of those classes that taught us about working with the unbanked and underbanked population. And one of the projects we had was to interview a bunch of Indonesians and try to understand why they were not interested in putting their money in a bank. And the answers were incredible. Indonesians like and trust the familiar faces of gold shop owners. So they have this interesting habit where they prefer putting their money with someone they knew. Or for example, they put their money with cooperatives where they know the person running it, versus in a bank branch where there's typically a rotational program where the branch managers were always different. So faces were unfamiliar. And so we started understanding this behavior that one, Indonesians really liked gold and saw gold as a very viable alternative to banking. And the second interesting thing was that a familiar face and having that trust factor and having something real behind their financial product is very important. So we wanted to disrupt this. We wanted to give people a solution that can meet all of these things, while at the same time gives them the returns that they need to have a better life.
Now, Claudia, the nucleus of Pluang's value proposition is indeed this gold savings product. Particularly for those of us who have grown up in countries in which gold is rarely considered a consumer-oriented investment product, can you explain this choice of asset class for Indonesian consumers?
CLAUDIA KOLONAS 2:32
So gold is ingrained in the Indonesian's consumer society as a product that is pretty safe. And it is also Sharia compliant, and inflation resistant. The Rupiah is quite volatile. So gold provides this safe haven asset that also complies with the religious needs that a lot of people have. So particularly when the country is often plagued by a lot of uncertainties, especially ups and downs in the economy, people really look to gold to keep their money and savings save for the future. So the idea for us at Pluang was not to change the culture or behavior of Indonesians, but to enhance it. So if you look at the existing solutions at the time for gold products, there was no gold market. So for example, before Pluang, gold was typically not traded in the exchange. So we wanted to change that. We wanted to improve that so that consumers didn't get charged high spreads and have the inconvenience of having to go to physical gold stores. And we did have to go to great lengths to innovate this on the exchange level, and listing this specific product in an exchange in Indonesia, but it was well worth it.
My absolute favorite stories are of those tech companies that uniquely represent the needs of the host market. And it sounds as though Pluang is indeed that. And as we go forward, it sounds as though part of Indonesia's contribution to the global FinTech scene will be around FinTech that relates to gold and similar asset classes. Now, if we can peel the onion back a bit, Claudia, what is the common return profile of a Pluang investment product? And how does it compare with other, both traditional and newer, online wealth management alternatives?
CLAUDIA KOLONAS 4:14
Gold is a very stable and safe asset class. In this specific year, it has returned around 36%, while there is economic uncertainty, and there's COVID as well. So I think gold has outperformed other asset classes in recent years. Having said that, I think it's really important for us to diversify and have other asset classes. And hence why at Pluang, we recently also just launched an S&P 500 index product, and we will be launching a few other asset classes as well. The key here is for Pluang, we do want to enhance returns the most of our consumers, and that's why we work with the source, which is the exchange itself. While previously gold prices were pegged by ANTAM, which is the primary gold producer in Indonesia, now consumers are empowered because the pricing is very transparent and available on an open exchange.
Fascinating. Now Claudia, you've mentioned a couple of times that Pluang's business model is focused on the unbanked and also on millennials. Can you give us some further color around this focus?
CLAUDIA KOLONAS 5:15
We like to "bucket" our consumers as first time investors and savers. So I think irrespective of whether they are unbanked or millennials, I think the goal is to get this class of consumers that's just learning how to invest and save. So as I've mentioned, the reason we started with gold is to solve this inherently difficult problem of how we marry that familiarity with something super foreign, like FinTech. So before Pluang, gold was primarily traded in a bilateral form, and this typically being off exchange, results in inconsistencies in prices, and also higher spreads at the expense of the returns to the consumer. And that's not even to mention the custodian risks that are inherent when you leave your money at gold shops, physical gold shops. And so we wanted to provide this service that underbanked consumers can relate to, but at the same time, it's accessible and profitable for the user. So our goal is not to change culture, but to change behavior. And I think we can do this most of first time investors and savers.
Claudia, given our consumer focus that you just discussed, literacy clearly is an important component of Pluang's future success. How does a relatively small company raise prevailing levels of digital and financial literacy?
CLAUDIA KOLONAS 6:30
Financial literacy is a key goal for us. When we did significant focus groups, we found that the typical Indonesian consumer simply does not have access to the right financial information. So channels like social media become very powerful, especially given how ingrained this is in Indonesian society. However, social media is also a double edged sword. We see a lot of fake or incorrect information on social media, especially related to financial education. So Pluang makes an effort to be enlightening, and to show people the right versus wrong financial information. We're very lucky and blessed that we do have partners like Gojek, Dana, Bukalapak, Lazada, and Shopee, who we work with very closely together in order to have webinars, IG Lives (Instagram Lives) and distribute articles in the mass market. So we believe financial inclusion and literacy is a joint effort in Indonesia. We all need to work together to get the right information out to the mass market. So we do quite a few things with our B2B partners on getting that information out there.
Claudia, what are the more fascinating behavioral observations you can share with us across the Pluang customer base?
CLAUDIA KOLONAS 7:36
I think the most interesting thing we've seen is that gold is an entry point. The majority of our consumers are really people who are just learning how to invest, and we're not primarily focused on millennials. A good 70% of our users are non-millennials. So it's been very fascinating for us to see how people's behaviors are changing, and that people are capable of learning new things, even when they're used to certain behaviors, like offline gold investing. The other thing that we find very interesting is that we do see a lot of stickiness. People can be taught to save in a very habitual and a very repetitive manner. So I think for a lot of our users, features like auto debit and goal-based savings, etc, become very important.
Now, Claudia, adding some current events to this line of questioning, how have Pluang customer behaviors changed in the COVID era?
CLAUDIA KOLONAS 8:29
During the COVID era, I think, given the uncertainty of the global economy, you can see there's an influx of people trying to look for safe haven financial assets. And so products like gold have done really, really well. We have seen an over 20 times increase of users year-to-date since COVID began, and we are still continuing to grow. I think COVID has accelerated the demand for safe haven assets. And not just gold, but also other products like government bonds. So that's been very exciting for us. And we've been learning how to adjust very quickly to the changing demands of consumers during COVID times.
Now, Claudia, how do our offerings relate to the growing category of online Sharia finance offerings?
CLAUDIA KOLONAS 9:11
Digital gold has been declared a Sharia-compliant product. So I do think that our products are very relevant. And the reason we wanted to start with a product that was Sharia-compliant from the getgo was to speak to the mass consumer in Indonesia. So a lot of our users care about this aspect of their investment product very heavily. And having said that, we are however, also expanding our products to non-Sharia compliant financial products. So the goal is really to have a breadth of products, but to start with something that doesn't exclude the majority of the consumers in Indonesia.
Now, Claudia, Pluang describes itself as a marketplace. Can you explain further what this means? And, do you have plans to assume a principal role as opposed to an agent role?
CLAUDIA KOLONAS 9:58
While we do sell some marketplace products, I think this is where Pluang is actually quite different, and where we choose to differentiate ourselves. We are the principle of the products that we sell right now, especially for gold. So, each of our products is unique. And we are active market makers. And we do manage the order flows of each of the financial products that we launched in our own platform. So I think we are the only financial services company to do this. We are integrated directly with the clearing house. And for every single product that we launch, we do work very closely with the primary clearing house, and also the primary source of the product itself. So, while other "wealthtech" companies perhaps earn money from a commission, we earn money from the order flow and bid-ask spreads that we sell on products. And so this allows our LTV from net revenue to be easily 20 to 30 times higher than other wealthtech players. And I think this is very valuable in the next six months to a year, as we are shifting to focus more on B2C marketing. And I think this will pay off big time and this is where Pluang shines compared to other players.
Now shifting tack a bit Claudia, you have spent a substantial amount of time overseas in places such as the US and elsewhere. How would you compare and contrast the treatment of female entrepreneurs in Indonesia with those other places that you have visited?
CLAUDIA KOLONAS 11:17
So during my time at business school, I was able to see that gender biases definitely have impacted others a lot in other countries. And I think it's definitely real. I would say that I've been very lucky that this has not been a problem in my career thus far. However, I do recognize that this is an inherent problem, especially given the lack of representation of female entrepreneurs in Indonesia, especially. I do hope to see more women take the plunge into entrepreneurship. We do see a lot of representation in industries such as fashion etc. However, I think for industries such as FinTech and some of the other heavier tech industries, I think there are far fewer females and I do hope to see more females join the journey. I also think that there's going to have to be a lot more effort by companies and VCs etc. to improve this representation as well.
Continuing to look at today's realities, a recently released BCG report reveals that women represent a mere 22% of Indonesia's tech workforce, which is far below the 32% level across broader Southeast Asia. Singapore by comparison is 41%. And Vietnam is at 34%. Claudia where do we begin to rectify this imbalance? Does it begin with educational opportunities? Attitudes? Or is it some other factor?
CLAUDIA KOLONAS 12:36
I think the main problem here, Alan, is that women in Indonesia do not get enough support from companies to balance raising children and their work. So I do believe it starts with the awareness at the company level. I've been lucky that I had a role model of a mother who was working throughout my childhood, and in fact, had very long hours because she was a CFO. But I think she made it work by the company having a daycare at the office. So in fact, a lot of my childhood was spent in the office and even some of my school lessons were held in the office. So I think it's very beneficial. And I think a lot of mothers can use this as an example because I personally think my early experiences in the office were crucial to my growth and my interest in business. And so it has a lot of positives. There's a lot of research, especially one that was recently released by Harvard, revealing that children of working mothers are typically more successful than children of mothers who stay at home. So I think this is something that women shouldn't feel guilty about. They should just lean in and understand that this is a privilege for the children as well. So I think my mom particularly was privileged to have this option, and hence, she could balance both career and being a mother. I think more companies can use this as an example to offer these benefits to women. Simple perks such as having a daycare, or having more flexible working hours, can really help, especially for young mothers being more involved in the company.
Claudia, let's talk further about women in leadership. Only 15% of CEO and board-level positions are female in Indonesia. What factors might drive the percentage of leadership which is more reflective of the population at large?
CLAUDIA KOLONAS 14:16
Particularly in Indonesia, I think this problem becomes perpetuated by two things. One, as mentioned earlier, is that companies do not offer enough support for mothers. But two, that there's also this culture of women having to be more soft spoken and demure. I'm not sure if this is particularly only in Indonesia, or it's in Asia in general, or even global, but it's not widely accepted yet for women to be "go-getters" in Indonesia and to be outspoken. So I think this needs to change, because in order for you to make it to the top, you do have to have a pretty aggressive or a "go-getting" mindset, and sometimes it does involve you having to be outspoken. So I think the more people acknowledge that there is a double standard for women who are outspoken, being seen as negative versus a male, I think the more we can improve this problem going forward and make it more comfortable for women to be go getters in Indonesia.
Those are some wonderfully considered and very edifying thoughts. Now, Claudia, let's go back to your business. What are the natural product extensions for Pluang going forward? And why have you chosen such a roadmap?
CLAUDIA KOLONAS 15:25
I think a lot of people like to bucket us into certain verticals, but we think belong is very unique as a company. We are first and foremost a financial services company. We are a principal financial service provider. And second, we are a tech company. So while we do have world class technology, we do also have a world class finance team in our company. So this means that our key strategy is to innovate on the financial services level, because we think this is what consumers truly care about the most. To give a bit of background, for every product that we launch, we are involved in creating the product from scratch, designing it with our consumers in mind. So the financial products that we launch typically meet two criteria: one, that it is completely unique in the market. Typically this does involve very, very low spreads. And second, we don't believe in competing head-on with others to sell the same products. So we do not believe in that typical marketplace model of a price war mechanism of just selling the same products that my competitors sell. We don't think this is sustainable, especially given the recent focus on having a healthier and more sustainable business going forward. And the second thing is low cost. We do work as closely to the source as possible. In our case, it is a clearing house. And this does allow us to drive our spreads closer to zero and make it more profitable and safe for our consumers. So we started with gold. With this specific mechanism, we initially went out just to disrupt the gold market. However, having taken the time over a year to build this system and to work directly with the clearing house, now we are able to tack on other products within those rails. So we are going to move into other traditional financial products such as equity indices, fixed income products, as well in the form of mutual funds, etc. We can't share too many details here yet. But what I can say is that the products that we are launching are truly unique and completely unlike any other products that you will see in the market. At Pluang, we like to consider ourselves as pretty consumer-obsessed. So we really, really like to think of the consumer instead of competitor-obsessed, and hence why we take the time and take the effort in producing these financial products for consumers.
Claudia what is the risk that the large "2C" or "to consumer" commercial platforms - from Gojek to Grab to Shopee to Tokopedia - seek to introduce competing products in the same way that Alibaba spawned its own FinTech affiliate Ant Financial?
CLAUDIA KOLONAS 17:57
This is a very interesting question. We do think there's going to be obviously a lot of competition in this space. But we don't like to see others as competitors. We like to see others as partners that we can work with for our distribution. We are the primary financial product creator. And hence, I think the goal here is to work with other distribution partners, instead of competing with them. We work with Gojek, and also Dana, as a part of Ant Financial, to launch proprietary products with them. And this is I think, where we add value and where we shine. If our financial service products had been commoditized and existing in other platforms, then we would not add as much value to our distribution partners. This business strategy is just very unique and adds a lot of value to partners like Gojek to help them grow their use cases and move them towards profitability. So we believe, again, that financial literacy is a joint effort between the bigger partners and us. So we are working together to expand the pie. Where Pluang adds a lot of value is that we are innovators on the financial service side. While they are also innovators, they do have a control and almost a monopoly of the distribution and trust that did take many years and a lot of money to build. And I think the marriage of these two can truly help recreate what happened in China and Indonesia.
Now Claudia, what are the toughest realities facing the business today? Is it availability of relevantly trained headcount? Is it a lack of digital literacy that we described earlier? Or is it competitive pressures or something else?
CLAUDIA KOLONAS 19:38
This is a good question. I think for most of us human resources is truly what keeps us up at night. I think most founders can relate that talent is the most important piece in a business, and is always hard to find and maintain, given especially how competitive the job market is in Indonesia particularly. So I think especially during COVID times, what we really struggle with is how do we maintain that level of culture, that level of closeness that was easier to maintain before COVID, when we were all in the office. So I think keeping everybody's motivations up, and making sure that we always have a good supply of talent is important, especially when we're interviewing over Zoom, when it could give a different feeling. I think this is a very challenging reality. The other thing that is important is financial literacy in Indonesia. And this is a real challenge. So while a lot of consumers like to think that they understand finance, when we do tests on consumers, and we do ask them simple questions, they don't know that much. And a lot of the information out there that exists in social media, because it's primarily not censored, is false. So we've seen a lot of cases in recent times, for instance certain companies Indonesia getting shut down, for selling and promoting false information to their users. But it is at the expense of users already losing their money. And that does lead to a lot of mistrust in the FinTech business overall in Indonesia. So I think that is a very real reality that we all as FinTech companies need to work together on improving and calling out the wrong information for our users.
Understood. Claudia, what advice would you share with aspiring female entrepreneurs?
CLAUDIA KOLONAS 21:26
I would say don't shy away from a fight. I think as females, sometimes, especially in Asia, we are taught to be demure. We are taught to be less outspoken. But unfortunately, as an entrepreneur, you just need to learn to "lean in" and be ready to grab what is right in front of you when the opportunity presents itself. And don't worry so much about what others are what society thinks of you. And I think everything is possible equally for a female entrepreneur as it is for a male entrepreneur.
It's such a pleasure to have you on today, Claudia. We really appreciate your candor, your sense of mission and your optimism in reflecting on your own journey, and that of Pluang. And we wish you the very best of luck going forward. Thanks again for joining.
CLAUDIA KOLONAS 22:10
Thanks so much, Alan. It's a great initiative and I hope I've given some interesting insights.
And thank you all for joining us for another episode of Indo Tekno. Terima kasih telah mendengarkan. Sampai jumpa lagi!