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Indonesia Becoming Leader in Fintech

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Indonesia, the world’s fourth most populous nation and the largest economy in Southeast Asia, is being recognized as a leader in fintech development and innovation. The country has become home to a diverse range of fintech startups, including several that offer payment solutions along with mobile lending services as well as micro-lending services.

Payments remain the dominant segment, fuelled by providers like GoPay and OVO, which offer seamless mobile wallets and QR code payments. Lending platforms like Akulaku and Kredivo cater to the unbanked and underbanked population, providing much-needed access to credit. Wealth management is another developing area, with robo-advisors like Ajaib attracting a growing base of retail investors. The number of fintech players has exploded, rising from just 51 in 2011 to 334 in 2022, reflecting the sector’s dynamism.

Key factors contribute to the rapid growth of fintech in Indonesia:

  • High smartphone penetration: Indonesia has a young, tech-savvy population with a smartphone penetration rate exceeding 70%. This widespread mobile connectivity offers the essential platform for fintech adoption.
  • Large unbanked population: With an estimated 60 million adults lacking access to traditional financial services, fintech bridges the gap by offering convenient and accessible financial solutions. In particular, recent fintech startups and services are targeting underbanked commercial populations in tier 2 and tier 3 cities, as well as underserved segments such as female entrepreneurs. Fintech in Indonesia is regarded as a game changer in bringing finance to previously unreached communities via digital technology.
  • Supportive regulatory framework: The Indonesian government, recognizing the transformative potential of fintech, has adopted a progressive regulatory approach. The Financial Services Authority (OJK) fosters innovation while ensuring consumer protection through licensing and registration processes. Various regulations and guidelines governing fintech in Indonesia have been introduced in areas including peer-to-peer lending, digital payment systems, and crowdfunding.
  • Improved ICT architecture: Recognising the need for significant improvement to the national ICT infrastructure, the government is widening broadband penetration and improving the regulatory framework. In 2023, Indonesia was ranked 61st on the Global Innovation Index, up from 87th just two years previously.
  • Investment boom: Indonesia’s fintech sector has attracted significant investments, with three of the country’s four unicorns (startups valued over $1 billion) belonging to fintech – Gojek, OVO, and Akulaku. This investor confidence fuels further growth and innovation.

A little under half of the whole population of Indonesia is under 30 years of age, making them digital natives, entirely comfortable with modern consumer ICT. There is a correlation between 125 million young digital natives and the strength of fintech in Indonesia. They share an increasing demand for user-friendly and accessible financial services and often are deterred by traditional and complex bureaucratic processes as well as strict eligibility criteria. Fintech lending platforms offer simpler, faster, more accessible alternatives.

By working with improved technology, such as machine learning and data analytics, along with better user design, fintech lenders can assess creditworthiness and provide immediate approval, more appealing to younger folk with limited credit histories or available collateral. Additionally, the emergence of robo-advisors, crowdfunding platforms, and insurtech startups underscores the diversity of Indonesia’s fintech ecosystem. These innovative ventures cater to various financial needs, ranging from investment advisory services to crowdfunding for social causes, disrupting traditional financial channels and promoting a sense of increased financial empowerment among Indonesians, especially those under 30.

The government encourages the rise of fintech in Indonesia to increase financial inclusion amongst micro, small, and medium enterprises (MSMEs), who often also find it difficult to access traditional banking. Given that this sector contributes significantly to the national economy by providing an estimated 97% of employment and approximately 60% of GDP, supporting the evolution and development of fintech directly assists the MSME segment of the economy.

Given this rise in fintech in Indonesia, other issues have also arisen, including several high-profile security breaches, low transparency of providers, strengthening competition, the need for improved regulation along gross overvaluation by investors leading to various market distortions. Cybersecurity particularly remains a pressing concern as the large values in circulation are powerfully attractive to criminal groups online. Despite these challenges, the future of fintech in Indonesia appears bright with deepening financial inclusion across MSMEs and various previously underbanked communities and sectors. New sectors are emerging such as insurtech, regtech, and services utilizing blockchain technology. Traditional banking organizations, seeking to make inroads in fintech, are active in seeking new technology partners allowing a mutual leveraging of strengths. Further fintech solutions can also contribute directly to sustainability goals by promoting green financing and facilitating climate-conscious investments.


Jari Hietala, Managing Partner, Asian Insiders:

Primadi Soerjosoemanto, Indonesia Partner, Asian Insiders: primadi.soerjosoemanto@asianinsiders

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