For the past 15-20 years, the only device Indonesians have known for card payments is ‘electronic draft capture’ (EDC). This refers to the device that cardholders use to swipe or tap their cards at a hotel or restaurant, or anywhere that accepts card payments.
There are 17 million credit cards in Indonesia, and 113 million debit cards, but only 1 million point-of-sales terminals where you can swipe your card.
Banks lend the EDC to merchants and the merchants do the maintenance. Merchants need to be taught on how to void transactions, how to replace paper rolls for receipts, and so on. The hassle means banks only give EDC’s to high-end merchants.
Teddy Tee, Cashlez’s founder, sees that there should be better ways of handling cashless payments. There’s a huge gap between the number of cards already in circulation and acceptance points.
Tee believes that increasing card acceptance is a low hanging fruit because it doesn’t require merchants or customers to massively change their behavior.
What Cashlez does
The startup developed a card reader that’s more versatile than a traditional EDC. It connects to an app which merchants install on their phone. It runs on battery, and can be set up quickly with just a few taps. The device accepts cards from different banks, from debit to Visa and Mastercard.
The startup shares some resemblance with US app, Square and has regional competitors in Singapore’s SoftPay and GoSwift.
To Tee, overcoming Indonesia’s obvious infrastructure challenges are the best ways to probe Cashlez can handle complexity. Indonesia has two million registered small and medium enterprises.
There are millions more unregistered ones, mom and pop stores, bazaar sales people and more, who are currently being underserved as they cannot apply to get an EDC.
The startup has been backed by Angel investors and is now raising a pre-series A round of approximately $2.5 million to reach the next stage. It makes money by sharing profits with its partners in the payment process. Each transaction has a fee of around 1.6-2%, depending on the card.
There are still challenges to the device, such as proof of payment, transaction fees and the sensitivity of the device. However, the challenges are very much entwined within the setup of the startup itself.
A version of this appeared in Tech In Asia on August 17. Read the full version here.