FinTech Development in Indonesia

The development of Financial Technology (FinTech) in Indonesia is reported through DailySocial annual report. Bank Indonesia (BI), Financial Services Authority (OJK), and Ministries as the regulators keep controlling the development of FinTech which getting mainstream since 2018. Payment and lending are usually said as FinTech as well. In order to ensure consumer protection, a new association is established to accommodate the issues and dynamics of FinTech lending known as Asosiasi Fintech Pendanaan Bersama Indonesia (AFPI).

The ecosystem of the startup is getting mature that assessed between December 2017-November 2018 from various categories of FinTech startups and there were 14 disclosed funding that recorded. It reveals a lower number of FinTech startups from the previous year, but it is improving to late stage (Series B and above) for about 50%. It increases 3% from the previous year for its FinTech investment for about $182.3 million and there is no FinTech that goes IPO in this year.

By December 2018, it becomes the year of peer to peer lending (P2P Lending) because OJK has granted licenses to 78 FinTech lending companies. It categorizes into payday cash loan and peer-to-peer lending. The existence of P2P lending becomes the solution for unbanked and underbanked population and hence it has an important role in promoting financial inclusion. The popularity of FinTech lending among communities has led to more responsibility in terms of customer’s data privacy as it becomes public mainstream.

FinTech players in Indonesia are divided into several categories, such as non-bank payment system that licensed by BI, investment management, capital raising, Insurtech that licensed by OJK, market provisioning that licensed by BI, and deposit & lending that licensed by OJK. A survey was conducted with 2009 respondents in 33 provinces and there are 69% respondents reside in Java. The number increase from 2016 to 2018 for bankable amounted 86.93% to 91.59%, while the unbankable decrease from 13.07% to 8.41%. The FinTech knowledge rapidly change from 26.34% (2016) to 70.63% (2018) with the increasing FinTech users from 18.46% (2016) to 58.14% (2018). The top three reasons for the respondents in using FinTech are easy to use (74.90%), simple (71.03%), and time efficient (62.67%). Finally, among 825 respondents who are FinTech e-money users or mobile payment that installed on their phones, it proves that the digital wallet of Go-Jek, namely Go-Pay is the most popular for about 79%, OVO owned by Lippo comes for the second (58%) and Telkomsel’s Tcash that currently shifting to LinkAja comes the third for about 55.52%.

*source: DailySocial FinTech report 2018

Rewrite by Shinta Amalina. H. Havidz