FinTech in Indonesia: A Brief Overview and Its Viability
FinTech in Indonesia has passed 150 startups, with 78% growth since 2015. See what drives the boom and why lending and payments have room to grow.
FinTech, or financial technology, is a fast-growing industry that delivers financial services and products to consumers. The innovation is set to create a better financial landscape for businesses and consumers alike. FinTech companies are usually startups, founded to disrupt the incumbent financial system and the companies that rely less on software.
It is known as disruptive innovation because it changes existing markets or systems by introducing accessibility, ease, convenience and low cost across the board. FinTech in Indonesia has existed only recently, and it is growing rapidly today thanks to smartphone and internet users.
The Early Picture
The rapid growth of FinTech in Indonesia is mainly due to the openness of banks and regulators, not to mention the growth of the upper-middle class in this archipelago nation. Infrastructure investment of up to US$500 billion is planned over the next five years. Indonesia not only has high internet penetration but has also proven to be fertile ground for FinTech markets such as payments, credit cards and loans.
Today, Indonesian FinTech has passed 150 startups, marking growth of 78% since 2015. In general, the country's FinTech ecosystem covers investment and savings, payments and money transfers, lending, comparison services, accounting, point of sale (POS), crowdfunding, financial planning and cryptocurrency. The largest share goes to money transfers and payments, reaching as much as 50%.
Read also: Types of Fintech Startups in Indonesia
Its Viability
Consider that Indonesia has more than 17,000 islands, along with limited infrastructure and credit information. Clearly, FinTech has a promising future in the country and the ability to tackle the challenge of financial inclusion. One FinTech sector in particular, lending, is bound to keep growing as it expands to cover and support small and medium-sized businesses across the country, since the main reason for their low productivity is poor access to financing. Lower costs will contribute greatly to the overall growth of FinTech in Indonesia, as companies reach underserved segments and offer lower transaction costs to everyone.
There is also a clear positive shift in customer attitudes toward digital financial services. This may stem from the proven convenience that comes with them. A person can access them anywhere, at any time, on any device, and it takes less effort than going to a bank.
The fact that small and medium-sized businesses struggle to use certain banking services because bank lending is so limited must also be taken into account when looking at the factors behind the growth of FinTech in Indonesia.
