The COVID-19 outbreak has created significant socio-economic challenges, which have impacted individuals and businesses across the globe. More people are now spending time at home due to government-enforced nationwide lockdowns.
Certain segments of the Fintech industry, including digital, mobile, and contactless payments, have seen increased adoption in recent months, since the pandemic began.
Banks and other financial services providers in Southeast Asia have experienced a dramatic surge in the usage of their digital platforms, which includes a considerable increase in the number of consumers wanting to open digital banking accounts.
As reported by the Jakarta Post, Indonesia’s state-managed and owned Bank Rakyat Indonesia saw a 10% month-on-month increase in the usage of its mobile banking services. Fintech lending in the country has also seen a rise in demand as businesses across the trillion-dollar economy have been laying off staff members or asking them to go on unpaid leave.
Local sources report that Indonesia is ready for digital banking because it has a relatively large unbanked or underbanked population. The country also has a large population that regularly uses mobile phones, which could make it even easier for digital banks to onboard new users.
Although major incumbents such as DBS and the nation’s Bank Tabungan Pensiunan Nasional (BTPN) have introduced their own digital platforms, they might still have to compete harder with many smaller, more lean, and agile Fintechs. Big Tech firms in Indonesia, including Gojek’s GoPay and Lippo Group’s OVO may also compete for market share in the country’s evolving Fintech and digital banking sector.
Facebook is also reportedly planning to introduce a unified payment service in Indonesia, as it’s currently in the process of obtaining regulatory approval.
The evolving, global Open Banking framework could potentially accelerate banks’ digital transformation strategies. Bank Indonesia recently introduced its own open banking standards in order to develop and maintain a more unified national payment system – which is expected to be completed by 2025.
An open banking platform could see incumbents assisting smaller Fintechs with reducing the technical costs associated with enforcing Know-Your-Customer (KYC) checks or determining creditworthiness for loans (via advanced APIs).
There are now 2,000 digital payment transactions being processed per second in Indonesia. If these transactions are carefully examined, then it’s possible to gain key insights from them about consumer spending patterns and requirements.
Analyzing consumer spending could help banks customize their solutions in order to better serve their customers.
It’s worth noting that not all Fintech industry businesses may be doing well due to COVID-19.
As reported, the P2P Fintech lending sector in Indonesia may struggle due to risky loans, as lenders rejected over 50% of restructuring requests.