Indonesia has the 16th largest economy in the world with a GDP of over $1 trillion. It’s also the world’s fourth most populous nation with around 275 million residents, out of which about 85% are below the age of 54.
The Southeast Asian country has a 67% Internet penetration rate but financial inclusion remains a major challenge, which is being addressed by a rapidly evolving Fintech sector.
As reported recently, Fintech Unicorn TransferWise will now let customers in Indonesia send remittance payments to 80 different countries. Fintech platforms in the country are also getting ready to support an expected rise in investments from young investors following the COVID-19 outbreak.
The nation’s fast-growing Fintech sector is being supported by a proactive government that has introduced progressive rules and policies for peer to peer lending platforms, digital payments, and Open Banking. As covered, Indonesian President Joko Widodo has said that local Fintechs must adopt good governance practices to support rapid tech development. These regulations aim to promote innovative projects and enable greater financial inclusion.
This progressive business environment has attracted investments from local and global Fintech investors, many of which are quite confident about the potential of digital financial services in the Southeast Asian country.
Global investors such as billionaire Jack Ma’s Ant Group (subsidiary of Alibaba Group Holding (NYSE:BABA)) are now involved in various initiatives based in Indonesia. Tencent Holdings, which owns widely-adopted messaging service WeChat, has made strategic investments in GoJek, which is described as a “super app” that runs Indonesia’s popular digital wallet GoPay.
As confirmed by Fintech News, US-based private equity company Warburg Pincus led tax compliance provider OnlinePajak’s $25 million Series B investment round back in 2018. More recently, Indonesian digital credit platform Kredivo closed up to a $100 million warehouse financing facility with Victory Park Capital.
Clear regulatory guidelines along with investors interest have resulted in the steady growth of a vibrant Fintech sector in Indonesia that’s quickly become one of the world’s most competitive. The country is now home to Fintech Unicorn OVO, which provides a mobile wallet. OVO is valued at around $2.9 billion (as of September 2019). Meanwhile, GoJek is valued at approximately $12.5 billion.
As first reported by Fintech News, there are at least 322 Fintech firms operating in Indonesia, along with 125 registered but unlicensed digital lending platforms.
Indonesia’s Fintech startups sector mainly includes online lending solution providers, which represent around half of all Fintechs in the Asian nation, according to the latest Indonesia Fintech Report 2020.
Online lending platforms are followed by digital payments with 73 Fintechs (or 23%) providing these types of services. Meanwhile, the blockchain and crypto-assets space is supported by 26 (or 8%) local Fintechs while 24 firms (or 7%) specialize in investment/personal finance.
Other key Indonesian Fintech segments include Insurtech (15 firms), crowdfunding (9 firms), point-of-sale services (7 firms), and financial comparison (7 firms).
As covered recently, ride-hailing firm Grab, a diversified business that includes financial services, led a $100 million round for Indonesia’s LinkAja.
Southeast Asia, which includes Indonesia, has emerged as a Fintech hotspot with a CAGR of 55% in equity funding, according to a recent report.