Imagine if all we had as a mode of payment was cash! On top of that, imagine living in that world without a bank account, or without the ability to use checks. Suddenly, life would become very inconvenient, requiring you to travel in order to purchase and pay for items. Well, you don't need to imagine, as late as 50-60 years ago this was how it was for many people. We grew up hearing our parents' and grandparents' stories of buying goods on lay away and paying the electric or phone bill by having to physically going to the location to pay cash.
Today, we live in a fast-paced world made possible by the growth of online mega-companies like Amazon (AMZN), PayPal (PYPL), Alibaba (BABA), and Priceline (PCLN). The tremendous growth of these companies was only possible because of the strong establishment of credit/debit cards and bank accounts in their user bases. There is no doubt that these businesses would never have succeeded if the infrastructure of online payment did not exist. It would simply take too long and be too risky for companies to ship products to locations in order to receive cash payment.
The world I asked you to imagine at the start, would you be surprised to hear that the same conditions exist today for a country that isn't war torn, one that's been at peace for thirty years, with a population of 250 million generating nearly $1 trillion in GNP yearly? Well, Indonesia is such a place. Strangely, only 42% of the population use bank accounts, and only 5% have credit cards. This is probably the reason why Amazon, Alibaba, and Pay Pal are nonexistent in the country.
Interestingly, Indonesia is the 3rd largest smartphone market in the Asia Pacific, where about 25% of the current population has a smartphone. This user base is expected to reach 90-100 million by 2019. This is a large and ignored population of online shoppers due to the limitations of an easy payment mechanism.
Moreover, it's highly likely that a significant percentage of Indonesia's smartphone users are among the bankable. If a company could address the Indonesian issue of its unbanked population in addition to the lack of credit card adoption, the growth of smartphones and online shopping would explode. This represents a salient opportunity for both online companies like Amazon and Alibaba, as well as smartphone manufacturers like Apple and Samsung.
KinerjaPay, or KPAY, headquartered in NYC with an office in Jakarta, Indonesia is such a company. It offers payment solutions to its users and merchants in Indonesia as well as its own E-Commerce platform KinerjaMall.com. KPAY offers a variety of payment channels to its users which allows them to pay bills such as utility, health insurance, credit card, phone bills, car and moped leases much more faster and conveniently.
They are only one of five companies that have a Central Bank license that allows their customers to deposit money to a KinerjaPay-linked bank account that is registered to their respective smartphone. While the Central Bank has stopped the issuance of these licenses, KinerjaPay's business allows customers to begin shopping anywhere on the net using their smartphone based account. In essence, KPAY has effectively solved the problem that many Indonesians, lacking bank account and credit cards, faced. While this makes KPAY the Indonesian PayPal, their solution has created a completely new opportunity in Indonesian online shopping. This is why they started KinerjaMall.com in November 2016. The company's solutions have been well received, doubling their user base from 50,000 to over 100,000 in fewer than 7 months from 7/2016 to 1/2017, which drives over 1,000 transactions per day.
This rapid success is why KPAY has earned the right of negotiating with the largest companies in Indonesia that require monthly payment from their customers. In addition, KinerjaPay has seen success with the Indonesian Federal Government. Recently, KPAY launched an introductory "No Administration Fee" campaign for Perusahaan Listrik Negana (PLN), Indonesia's state-run electric utility. PLN is the primary provider of electricity in Indonesia, servicing 60 million residents and generating $8 billion annually. 60% or 36 million of these citizens must pay their bills in cash at the utility offices due to their lack of a bank account. As a result, KPAY's solution represents a tremendous convenience for both the government and bank-less Indonesians. With adoption being seen in multiple bill related businesses, the company is aiming to serve up to 10 million accounts over the next 2 years. With accounts generating nearly $.20 per transaction, PLN stands to generate the company $7.2 million per month once fully deployed, which would represent a little over $.86 cents generated each month per share.
Controlling a payment mechanism to allow online shopping will allow KPAY to provide services that exist in other countries but not in Indonesia. You also can see partnerships with companies like Priceline, Expedia, Uber, and many Chinese internet based companies.
KPAY only has 9 million shares outstanding. We can easily see how fast revenue can ramp since the Company allows nearly 140 million people to enter the online universe. Eventually the larger players such as Alibaba and Amazon will want to enter the market. KPAY would make an ideal acquisition to speed their entrance. Hard to imagine that the company's $15 million market capitalization will be at this level for long.
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One Equity Stocks is a leading provider of research on publicly traded emerging growth companies. Our team is comprised of sophisticated financial professionals that strive to find the companies and management teams that will outperform the market and deliver investment returns to our subscribers. We are not a licensed broker dealer and do not publish investment advice and remind readers that investing involves considerable risk. One Equity Stocks encourages all readers to carefully review the SEC filings of any issuers we cover and consult with an investment professional before making any investment decisions. One Equity Stocks is a for profit business and is usually compensated for coverage of issuers. In the case of KPAY, One Equity Stocks and affiliates have been compensated 40,000 restricted shares of common stock and $5,000 to cover expenses for advisory, marketing and business development services. We may receive additional compensation in the future.
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