The Emerging Fintech Boom In Indonesia Is Set To Grow

Although at a nascent stage, fintech (Financial Technology) is taking Indonesia by storm. At the moment, the country ranks second in ASEAN in terms of fintech startups, just after Singapore. According to the country’s Financial Services Authority (Otoritas Jasa Keuangan or OJK), it is estimated that there are currently 71 active fintech startups, either purely homegrown or from overseas.

Indonesia is a hot bed in ASEAN when it comes to tech startups, as well as having a thriving digital economy. Much of the digital hype comes from the country’s rapid growth of online users and e-commerce activities. The Association of Indonesian Internet Service Providers (APJII) has claimed that in 2015, there were 88 million Internet users, of which 85% used the internet via their smartphones.

With ride-hailing tech apps such as Gojek, Uber and Grab in high demand to cater to the domestic transportation market, and e-commerce businesses like Tokopedia, BukaLapak, and Lazada dominating the online shopping scene, the FinTech industry has provided the right financial tools to streamline business objectives with growth opportunities.

The FinTech industry provides diverse products and services, including payment gateways, lending, banking services, insurance services, pawn shops, as well as online financial advisory. Small businesses are believed to be one of the main beneficiaries of FinTech as it offers a new set of tools tailored to the needs of these small businesses.

“One major issue for SMEs to flourish in Indonesia is that 49 million of them do not have access to financial credit services”, according to Gervasius Samosir, Manager at Solidiance (an Asia-focused management consulting firm) based in their Jakarta office. “Meanwhile, 50 percent of Indonesians are unbankable, which means that there must be a way that can bridge the gap of finance with the citizens, and I believe fintech is the right answer to that”, he added.

Indeed, access to financial institutions in Indonesia is relatively low. It is estimated that in 2010, just about 52% of the Indonesian population use formal financial services, whereas 79% of the low income population do not have access to formal financial services.

The development of a stringent Fintech structure can help reach these millions of Indonesians by providing easier access to a wide range of financial products tailored to the country’s customer behavior characteristics. Tools such as e-cash/e-wallet, basic savings accounts, micro-insurance, and microfinancing, particularly super-micro consumer financing, can aid the gap of financial inclusion among the Indonesian community.

Additionally, government agencies are encouraged to support the growth of fintech in the country. To illustrate, financial institutions can create synergy with fintech in order to improve competitiveness and strengthen access to formal financial services.

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