New Report Spotlights the Indonesian Fintech Opportunity for Swiss Firmsby Fintechnews Switzerland October 15, 2021
With a population of 267 million people, a large pool of financially underserved businesses and individuals, and high mobile and Internet penetration rates, Indonesia has seen its fintech industry rapidly expand over the past years, bringing huge opportunities for Swiss fintech startups and companies alike.
In a new Market Report, Swiss export and promotion agency Switzerland Global Enterprise gives an overview of the Indonesian fintech industry and shares arguments on why now is the right time for Swiss startups to consider entering the market.
The Indonesian fintech opportunity
In Indonesia, digital financial services revenues is projected to grow at a remarkable compound annual growth rate (CAGR) of 34% to reach US$$8.6 billion by 2025.
The past couple of years have witnessed a surge in fintech adoption, with McKinsey estimating that between 2014 and 2017, digital banking penetration had increased by 1.6 times.
The payments sector, one of the key segments of the Indonesian fintech ecosystem, has witnessed strong growth over the past years. Today, the industry is dominated by a number of well-established players backed by leading Internet companies in the region and in Asia.
The sector’s rapid growth is providing opportunities for fintech startups operating in fields related to payments security, customer authentication, detection/prevention of transaction fraud, consumer data privacy and cross-border regulatory compliance for fund transfers/payments, the report says.
In addition to that, there are many untapped opportunities in the cross-border payments space, notably when it comes to lowering costs and improving the efficiency. Indonesia is one of the world’s top recipients of global remittances, and yet the cost of sending money to the country still stands as a striking 6.12%, as of Q1 2020, the report notes.
Another booming fintech segment in Indonesia is peer-to-peer (P2P) lending. P2P lending is currently the country’s largest fintech segment, accounting 61.4% of all fintech firms. But the sector’s phenomenal success has brought with it a fair share of scandals and scams ranging from aggressive collection methods, to misuse of users’ data.
This, coupled with increasing concerns over defaults, makes it a good time for Swiss fintech startups offering solutions that address customer data verification, electronic know-your-customer (eKYC) procedures, as well as credit scoring/rating with non-traditional data sources, to enter Indonesia.
Investment and wealth management, a segment present in the Indonesian fintech industry though less developed than payments and P2P lending, is another sector highlighted in the report for its growth potential.
The sector has already seen rising demand and is poised for momentum as the number of riches is expected to significantly increase over the next few years.
This landscape is giving the opportunity for Swiss firms to provide not only local fintechs but also banks and traditional wealth management firms with the necessary backend technology for building innovative digital investment platforms, and robo-advisors.
With digitalization in the banking space expected to set to accelerate, Indonesia is an appealing market for Swiss business-to-business (B2B) fintech solution providers and fintech enablers.
Notably, the report highlights those offering solutions in the areas of modernization of legacy core banking systems and IT infrastructure, data cleansing, quality and accuracy, data analytics, data privacy and robotic process automation. Those operating in the areas of cloud accounting, software-as-a-service (SaaS), e-procurement and digital tax and compliance, will also benefit from the Indonesian banking sector’s digitalization race.
Fintech funding and M&A activity in Indonesia
In 2019, Indonesia ranked third in fintech funding within ASEAN, accounting for 12% of the total, according to a report by United Overseas Bank (UOB), PwC and the Singapore Fintech Association. Unsurprisingly, most of that amount went towards companies in the payments (22%) and alternative lending spaces (56%).
Indonesia’s fintech sector has witnessed signs of consolidation over the past few years. Tech giant GoJek acquired no less than three Indonesian fintech startups in 2017, just a year after it launched its mobile wallet service GoPay.
Last year, Bank Rakyat Indonesia, the country’s largest lender by assets, purchased a fintech company as part of its expansion to become an integrated financial services company. The bank had already taken over insurance firm Bringin Sejahtera Artha Makmur that year, and had been a shareholder of Fintek Karya Nusantara (Finarya), the company behind mobile payments platform LinkAja.
M&A deals are expected to accelerate as travel restrictions related to the COVID-19 pandemic continue to hamper players’ ability to enter the market in conventional ways. And as the health crisis continues to put a toll of many young, cash-strapped startups, a takeover could allow foreign players looking to pursuing the Indonesian fintech opportunity to easily and cheaply get ahold of an operating license and existing client base.
THE TEAM AND CONTACT DETAILS
Switzerland Global Enterprise | Headquarters
Stampfenbachstrasse 85 | CH-8006 Zurich | T +41 44 365 51 51 | s-ge.com
ANGELA DI ROSA
Senior Consultant South East Asia
T +41 44 365 54 73
M + 41 79 680 08 44
Senior Consultant Asia
S-GE Renens office
T +41 21 545 94 97
M + 41 79 634 2057
Head S-GE Southern Switzerland
T +41 91 601 86 85
M +41 79 220 40 71
Swiss Business Hub Indonesia
c/o Embassy of Switzerland | Jl. H.R. Rasuna Said | Blok X 3/2 | Kuningan | Jakarta 12950 | Indonesia
Head Swiss Business Hub Indonesia
T +41 58 480 38 55
M +62 811 870 9013
Senior Trade Officer
T +41 58485 0466
M +62 812 953 7355