Fintech industry participants in Indonesia have noted that the nation’s residents have been slow when it comes to adopting the latest technologies in the finance sector. This may be due to relatively lower levels of financial literacy in the country, according to researchers and analysts.
Indonesia’s Financial Services Authority (OJK), a government agency that regulates and supervises the financial services sector, states that a financially literate person must have knowledge of financial institutions and related products such as the main features of financial platforms.
They should also be aware of the potential benefits and risks involved with using these products, the OJK recommends. They should have the basic skills needed to use these services as well, the agency states.
William, director of marketing, communication and community development of the Indonesian Fintech Association (Aftech), reveals that Indonesian Millennials are only saving 10% of their earnings.
Millennials or younger Indonesian residents prefer to spend most of their income, instead of saving it, William said.
As reported by the Jakarta Post, a Bank UOB Indonesia 2019 survey reveals that Indonesian Millennials (aged between 21 and 39) are spending half or 50 percent of their earnings on maintaining the “4S lifestyle,” which stands for sugar (like food items and beverages), skin (beauty products), sun (travel and entertainment) and screen (digital screen consumption).
Indonesian residents have been scoring low on financial literacy tests, according to a 2019 survey by the OJK. There have also been various scams targeting unsuspecting investors.
Financial advisory company PT Jouska Financial Indonesia, which had managed to gain many social media followers, was shut down by authorities as it was accused of engaging in illegal activities and mismanaging customers’ funds.
Frecy Ferry Daswaty, VP of marketing at online lending firm KoinWorks, tells the Jakarta Post that the country’s (relative) lack of adoption of financial technology may be due to low levels of financial literacy when compared to other neighboring Asian countries.
“The biggest challenge [in financial education] is the acceptance of developments in financial products and the willingness of the public to learn about them and how to use them.”
In addition to relatively low levels of financial literacy, there’s reportedly a $300 billion funding gap for SMEs in Southeast Asia which is critical because they account for 42% of region’s GDP.
As reported recently, Fintech solutions can enable more widespread financial inclusion, and could increase GDP of emerging markets (like Indonesia) by $3.7 billion.