Indonesia, which has one of the largest economies in Southeast Asia and also ranked high globally, has emerged as a fast-growing Fintech hub.
It’s estimated that in the next five years, digital financial services revenues in Indonesia will reach $8.6 billion, meaning they’re increasing at a compound annual growth rate (CAGR) of 34%, according to a recent report by Switzerland Global Enterprise, an export and promotion agency.
Indonesia is home to about 20% of all Fintech companies operating in the ASEAN region. Online lending and payments dominate the country’s local Fintech sector, as they represent around 60% and 20% of businesses in the industry, respectively.
Indonesia’s digital wallet sector is dominated by the nations’ leading tech firms and telcos. Local industry participants have also entered various partnerships with foreign businesses interested in establishing operations in the country.
As reported, GOPAY is a major digital wallet provider from GoJek, a multi-service platform that has achieved Unicorn status (valued at $1 billion or more). Meanwhile, OVO has also become quite popular as a local digital wallet service. It has been launched by Indonesian conglomerate Lippo Group. GOPAY and OVO now account for over 55% of all virtual payments made in the country.
As first reported by iPrice, digital or e-money transactions surged by around 12x to reac h$9.8 billion, according to the report from Switzerland Global Enterprise. The nation’s digital commerce market is now expected to reach nearly $27 billion by this year and surpass $50 billion by 2024.
Indonesia’s alternative financing sector has also grown during the past few years. The Indonesia Financial Services Authority (OJK) reveals that there are more than 1,000 active peer to peer (P2P) lending platforms in the country, as of 2019. But only about 160 may actually be legitimate service providers, as the sector has been targeted by many scammers. Only around 25 P2P lenders were licensed as of last year, the OJK confirmed.
P2P lending volumes surged from $173 million in total loans in December 2017 to $6.4 billion, as of February 2020, which represents a growth of over 37x, according to the report.
Fintech News Singapore estimates that there are around 240 Fintech startups based in Indonesia. In addition to digital payments and P2P lending, other high-growth Fintech segments in the country include personal finance, Insurtech and blockchain or distributed ledger technology (DLT).
Fintech sector participants in Indonesia recently revealed that Millennials are only saving 10% of their income due to low financial literacy.
Indonesia’s Vice President says digital technology and online payments have become “absolutely necessary” due to COVID-19.
The country is now also home to several Islamic of Shariah-compliant Fintechs. UOB Indonesia recently launched TMRW, its digital bank, meanwhile, OVO now claims it’s the country’s largest Fintech service ecosystem.
Indonesia’s Bank BRI recently confirmed that it remains focused on leveraging Open Banking to streamline operations of MSMEs during COVID-19.