Fintech Company in Indonesia has been thriving for quite sometime. Financial technology, commonly abbreviated as fintech, is a new form of technology that aims to disrupt the usage of traditional financial methods in providing financial services. Generally, there are four pillar areas of fintech: Artificial Intelligence, Blockchain, Cloud computing, and big data. Most people know Fintech in Indonesia for their usage of smartphone technology for mobile banking, investing, loan services, and cryptocurrency. In recent years, fintech companies are growing larger in Indonesia, both in numbers and revenues.
Reasons Why Fintech Company in Indonesia is Thriving
Here are 5 reasons why fintech company in Indonesia is thriving:
1. High Demographic, High Internet Usage, Low Bank Usage
With a population almost reaching the figure of 280 million, Indonesia is the fourth most populous country in the world. Around 204 million, or 70% percent of the population are active internet users. Considering the fact that fintech is internet-based, it makes Indonesia such a fertile market for these enterprises to invest in.
During the peak of the Covid-19 pandemic in 2020, about 129 million Indonesian used e-commerce and conducted transactions which amounted to IDR 266 trillion in total transaction value. As the most popular form of online payment these days, fintech companies are reaping the benefits of this upwards trend.
According to the e-Conomy SEA Report conducted by Google, Temasek, and Bain & Company, it was stated that 92 million Indonesians are unbanked, meaning they do not have any bank account at all, while 47 million are underbanked, meaning that they have a bank account but do not have access to credit cards as form of payment. This is an enormous opportunity for fintech companies that provide internet banking and digital payment services.
2. Government Support
Law and regulation compliance often become a tricky obstacle in the financial sector. Strict laws and regulations are there to protect the consumers. In Indonesia, the government realizes the needs for an inclusive financial system. That is precisely why every fintech in Indonesia operates under the license, authorization, and guidance from the OJK (Financial Services Authorities). The Minister of Finance, Sri Mulyani also reaffirmed the intent of the Indonesian government to support the optimization of fintech company in Indonesia. Apart from easing regulations, the Indonesian government also collaborates alongside fintechs for the distribution and sales of Surat Berharga Negara (National Securities). The government also struck a deal with fintech companies to distribute cash relief for at-risk citizens during the peak of the Covid-19 pandemic.
3. Huge Investment
Investment is an instrumental factor for the success of a company, and fintech company in Indonesia is no exception. According to Statista, global fintech financing went from USD 59.2 billion and almost quadrupled to USD 320.2 billion in 2021. This upward trajectory is also evident in Indonesia which is constantly rising. In 2018 there were 46 fintech financing being done with a total valuation of USD 300 million.
A year after, the number of deals increased to 65 with a total valuation of USD 700 million. In 2020, the number of deals went down to 57 with a total valuation of USD 500 million, this could be seen as the impact of the Covid-19 pandemic.
After the temporary downfall, the numbers substantially increased to 97 deals worth USD 1.6 billion in 2021, tripling the previous numbers. Throughout the first half of 2022, the number of deals went down to 51 but the total valuation increased to USD 1.8 billion. This constant growth in investment shows the confidence of the market to the Indonesian fintech ecosystem. As Indonesia progresses closer in its quest to become one of the world’s biggest internet economies, fintech company in Indonesia will reportedly continue to prosper and excel.
The Conversation suggests that there are more than 60 million SMEs in Indonesia. They contribute to 60% of the country’s economy and absorb 97% of the workforce. This shows that SMEs are one of the linchpins of the country’s economy, However, only 12% of them were able to get financing or bank loans. The Covid-19 pandemic made the situation worse, considering approximately 50% or 30 million SMEs were closing because demands are diminishing. This becomes a huge opportunity for fintech company in Indonesia, especially for those operating in loan services/P2P lending. With millions of SMEs looking to bounce back, the fintech ecosystem will be back to its absolute peak.
How can Double M help?
Fintech company in Indonesia play a huge part in Indonesia’s economy. Double M can help you establish your own fintech company or link you with existing fintech company for business matchmaking.