Indonesia has the world’s 16th largest economy and is the world’s fourth most populous country with 274 million people, out of these 84% below the age of 54.
With Internet penetration standing at 67% and financial inclusion remaining a key challenge, Indonesia offers a fertile ground for fintech innovation.
Indonesia’s fast-growing fintech ecosystem has been largely driven by a proactive government that has introduced rules in areas including peer-to-peer (P2P) lending, digital payments, and most recently open banking, in hopes to encourage innovation and improve financial inclusion.
This favorable landscape has attracted the attention of both local and international investors, many of which are betting big on the prospects of digital financial services in the country.
Global backers, including China’s Ant Group, have entered into joint ventures in Indonesia. WeChat’s owner Tencent has invested in GoJek, the so-called “super app” that operates Indonesia’s largest e-wallet GoPay, and American private equity firm Warburg Pincus led OnlinePajak’s US$25 million Series B round in 2018. OnlinePajak is a tax compliance solutions provider.
Clear regulations, coupled with investors interest, have led to the growth of a dynamic fintech ecosystem that’s now one of the most competitive in the world as evidenced by the emergence of Indonesia’s first fintech unicorn, mobile wallet Ovo, which was worth an estimated US$2.9 billion as of September 2019, and the presence of decacorn GoJek that’s valued about US$12.5 billion, according to Pitchbook.
Today, Indonesia is home to 322 fintech companies, in addition to 125 registered but unlicensed online lenders, according to a new report produced by Fintech News Singapore.
Indonesian Fintech Map 2020, Source: Indonesia Fintech Report 2020, Fintech News Singapore, Nov 2020
Backed by Swiss export and promotion agency Switzerland Global Enterprise, the Indonesia Fintech Report 2020 looks at the state of the domestic fintech ecosystem, shares key industry trends, and unveils 15 promising digital finance players to look out for.
Indonesia’s fintech startups
According to the report, the Indonesian fintech startups landscape is dominated by companies in the online lending space, which account for half of all fintech startups in the country.
Online lending is followed by payments with 73 companies (23%), blockchain and cryptocurrencies with 26 companies (8%), and investment/personal finance with 24 companies (7%).
Other segments represented include insurtech (15 companies), crowdfunding (9 companies), point-of-sale (POS) services (7 companies), and financial comparison (7 companies).
Breakdown of the Indonesian Fintech Ecosystem, Source- Indonesia Fintech Report 2020, Fintech News Singapore, Nov 2020
Key fintech trends
These past two years have seen early signs of consolidation and several merger and acquisition (M&A) deals including GoJek’s US$130 million acquisition of POS services provider Moka, and Ovo’s purchase of local startup Taralite to enter the online lending space.
GoJek has also been expanding aggressively across Southeast Asia this year, acquiring Vietnamese e-wallet WePay in September. The so-called super app raised about US$3 billion in its Series F in March.
Despite COVID-19 and global uncertainties, Indonesian fintech startups continued to attract significant funding, with three mega-rounds of over US$100 million recorded since late-2019. These include Kredivo’s US$110 million Series C and LinkAja’s US$200 million Series B.
In the online lending sector, the report notes increased use of artificial intelligence (AI) for credit scoring and alternative lending solutions. This year, P2P lending volume continued to grow in Indonesia with total funding reaching IDR 113.46 trillion (US$7.7 billion) as of June 2020.
Fast-growing Indonesian fintech startups
The report names 15 fast-growing fintech startups to watch out for in 2021, comprising 10 companies in the lending space, 2 in payments, and 3 in investment.
UangTeman, one of the first P2P cash lenders licensed by Indonesia’s Financial Service Authority (OJK), is expanding to the Philippines and is in the process of obtaining a license. Investree, a P2P lending marketplace for small and medium-sized enterprises (SMEs), raised US$24 million earlier this year to expand across Southeast Asia, starting with Thailand and the Philippines.
In investment, shariah-compliant fold investment app Pluang received funding from Go-Ventures in September 2019 to launch new products, including US dollar savings and fixed return products.
Are you interested to learn more about Fintech in Indonesia? Download Market Report: Indonesia Business Opportunities In Fintech here
