For years, social networking giant Facebook has shown interest in the fintech market, partnering with PayPal to build digital payment capabilities into its Messenger app, testing and introducing payment services on its various messaging platforms, and exploring blockchain and cryptocurrency through its Libra initiative.

While many who are unfamiliar with the scene will reasonably think that Facebook’s focus into fintech is relatively new, those who are privy of the scene will know that there are initiatives in this space dating back to as far as 2014.

In this piece, we’re looking to break down and contextualise Facebook’s fintech and blockchain play.

Facebook’s Libra initiative

In June, Facebook unveiled its vision for a global cryptocurrency intended to be used to purchase products, send money internationally and make donations. Called Libra, the project was launched in collaboration with 27 companies, including Visa, Mastercard, PayPal, Uber, Spotify and Vodafone, and has sparked both enthusiasm and criticism.

Supporters have argued that the project could bring greater legitimacy to cryptocurrencies and blockchain, while opponents have voiced their concerns over the project’s highly centralized nature and the monetary risks related to a global digital reserve system backed by such powerful companies.

Two months in and Libra is still under great pressure from regulators and politicians. The European Commission (EC) said last week it was “currently investing potential anti-competitive behavior” related to the Libra Association, the non-profit organization based in Switzerland that oversees the initiative, and this month, government officials from the US, EU, UK, Australia and Canada, among other countries, released a statement over privacy concerns.

“To date, while Facebook and Calibra have made broad public statements about privacy, they have failed to specifically address the information-handling practices that will be in place to secure and protect personal information,” the statement reads. “Given the current plans for a rapid implementation of Libra and Calibra, we are surprised and concerned that this further detail is not yet available.”

The regulatory scrutiny of Facebook’s Libra initiative has scared some of the project’s early backers. Now at least three of them are considering distancing themselves from the venture, reports the Financial Times.

Two of Libra’s early backers told the media outlet they were concerned about the regulatory spotlight and were considering cutting ties. Another backer said they were worried about publicly supporting Libra for fear of attracting the attention of regulatory agencies.

Since May, Facebook has set up at least two separate fintech subsidiaries for the Libra initiative: Libra Networks, which focuses on payments, investing, financing, blockchain, and an array of other fintech solutions, and Calibra, which is in charge of building a digital wallet of the same name for storing and exchanging the Libra cryptocurrency.

Meanwhile the in response to Facebook’s Libra, China has also sped up the launch of their own cryptocurrency.

Facebook’s Whatsapp Pay state of play

Meanwhile, in Asia, Facebook’s messaging app WhatsApp has confirmed that it will be launching a payment system later this year, starting in India.

WhatsApp Pay, which allows for peer-to-peer (P2P) payment, is currently available to select users in India as part of the beta test which has been ongoing since 2018. The company is now awaiting approval from regulators for the official launch, which has been delayed due to local data storage rules.

India is WhatsApp’s biggest market by number of users, which is estimated to be between 350 million and 400 million, according to the Economic Times.

Simultaneously, WhatsApp has been in advanced talks with multiple Indonesian digital payment firms, including ride-hailing unicorn Go-Jek, mobile payment firm DANA, and fintech startup OVO, to launch in the Southeast Asian country, sources told Reuters. Deals with the three companies are expected to be finalized soon.

WhatsApp has also been approached state-owned Bank Mandiri, which operates a digital wallet, the people said.

Unlike in India, WhatsApp’s payment service in Indonesia will only serve as a platform supporting payments via local digital wallets. This is due to tough licensing regulations, sources told the media outlet.

WhatApp’s payment functionalities were initially planned to start at the end of the year, but sources said they expected it to be delayed by several months, as WhatsApp would not want to launch in Indonesia before India.

Facebook’s discontinued payments experiment with Messenger

Facebook began expressing its intentions to expand into financial services in 2014. In 2015, the company launched a payment feature  for Facebook Messenger that allows users in the US to connect their Visa or Mastercard debit card and send friends money on iOS, Android and desktop with zero fees. The feature was expanded to support group payments in April 2017.

In December 2016, the firm was granted an e-money license from Ireland to expand the service to Europe, but later pulled away from its ambition to provide P2P money transfers via Messenger in Europe.

Facebook discontinued the P2P payment service in the UK and France in June.

As the world’s fourth most populous country in the world, with more than 60% of its population of working age, Indonesia has unique economic potential. However, one of the key elements needed for the country to reach its full economic potential is access to financing, according to a recent PwC report.

In a report titled Indonesia’s Fintech Lending: Driving Economic Growth Through Financial Inclusion, the firm points out Indonesia’s large pool of financially underserved individuals and micro, small and medium-sized enterprises (MSMEs), stressing that the traditional financial services industry’s incapacity to serve these segments of the population represented a unique opportunity for fintech lending.

Overcoming the challenges faced by traditional lenders

Infrastructure and risk management have been among the main reasons conventional lending providers have had difficulties in providing credit access to untapped individuals and MSMEs.

But fintech lending players, which leverage digital technology, innovative business models and novel approaches, are able to address the challenges that conventional lending providers face and achieve wider coverage within remote areas. These have the unique opportunity to tackle the credit gap, the report says.

Using innovative approaches such as online-to-offline (O2O) channels as well as alternative data for credit assessment, fintech lenders are able to reach people who are “credit invisible.”

Digital identity and footprint are used as a substitute for physical documents to define eligibility, which lowers operational costs, while digital platforms are designed to give retail and institutional investors greater access to investment opportunities, the report says.

Furthermore, different business models, such as peer-to-peer (P2P) versus institutional-to-peer lending, as well as productive versus consumption loans, are matching different risk appetites for lenders with different risk levels of borrowers to fulfill the borrowing needs of the broader segments of Indonesia’s society.

via Indonesia’s Fintech Lending: Driving Economic Growth Through Financial Inclusion, PwC, July 2019

Entering the “Third Wave”

According to the report, Indonesia’s fintech lending industry has entered the “Third Wave,” which is characterized by greater collaboration.

The start of this new era in the country’s fintech lending landscape was marked by the establishment of the self-regulating organization known as the Indonesian Fintech Lenders Association (AFPI), which has become the center of collaboration between players and regulators, the report says.

Moving on, the sector is expected to witness a greater number of acquisitions as well as partnerships.

via Indonesia’s Fintech Lending: Driving Economic Growth Through Financial Inclusion, PwC, July 2019

PwC estimates fintech lending will reach IDR 223 trillion (US$15 billion) of accumulative loan disbursements in 2020, growing by 214% from 2018 to 2020.

By 2020, fintech lending has the potential to add IDR 19.4 trillion (US$1.3 billion) to the MSMEs financing gap, while increasing credit access for individuals by 12,4%, the report says.

via Indonesia’s Fintech Lending: Driving Economic Growth Through Financial Inclusion, PwC, July 2019

Key drivers of this growth include mobile phone subscription growth, which will continue to support the awareness and adoption of fintech lending, the increasing number of use cases of fintech lending as a result of greater collaboration between industry stakeholders, and the development of supportive IT infrastructure and digital identification solutions resulting in wider coverage and faster know-your-customer (KYC) processes.

Indonesia’s fintech lending ecosystem currently counts more than 267,000 lenders and 5.2 million borrowers, according to PwC. The country’s 99 registered players have so far disbursed IDR 25.9 trillion (US$1.8 billion) worth of loans.

The top ten fintech lending platforms in Indonesia, according to KPMG, are Akseleran, Amartha, Crowde, Crowdo, Danamas, Gradana, Investree, KoinWorks, Mekar and Modalku.

Singapore-based insurtech firm Axinan announced today their partnership with leading Indonesian e-commerce unicorn Bukalapak during a press conference.

The collaboration between Axinan and Bukalapak will mark the first alliance between the two parties, amalgamating Axinan’s proprietary tech capabilities with Bukalapak’s rich understanding of its local eCommerce landscape. The two firms will be collaborating in the area of electronics and transit protection, with Sompo Insurance Indonesia (Sompo Indonesia) as the underwriter.

Through this partnership, there will be solutions for both merchants and customers on Bukalapak’s platform. Featuring a suite of fully-digital operations with dynamic pricing and claims management, merchants on Bukalapak’s platform can opt to protect their goods against the risk of total loss or damage during transit through igloo – Axinan’s consumer brand. For purchases of gadgets and electronics from Bukalapak, customers can buy protection against accidental damages.

Headquartered in Singapore, Axinan has operations in Australia, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and development offices in China and Taiwan.

The insurtech startup recently secured General and Reinsurance license, issued by Labuan Financial Services Authority (Labuan FSA) a mid-shore jurisdiction in Malaysia.

Featured image credit: From left: Susanto Halim, head of product service development at Sompo Insurance Indonesia; Victor Lesmana, director of payment, fintech and virtual products at Bukalapak; Wei Zhu, CEO of Axinan; and Pradityo Anggoro Kusumo, country manager for Indonesia at Axinan, at a joint press conference in Jakarta | image via sgsme.sg

Home-grown cross-border payments platform TranSwap today announced that it has successfully obtained its money remittance Fund Transfer Operator license from Bank Indonesia, which will enable them to provide services for outbound cross-border payments in its third Asian location, after Singapore and Hong Kong.

With the ‘stamp of approval’ from the regulatory authority, TranSwap plans to expand into the market and launch inter-country fund transfers for Indonesian businesses, which includes SMEs and e-commerce companies within the next 1 month.

Mr. Benjamin Wong, co-founder and CEO of TranSwap, said,

Benjamin Wong

“There are many inefficiencies in the way that foreign payments are settled. The license allows us to bring our value-added, cross-border payments solution to SMEs in Indonesia that are seeking cost-effective and convenient ways to send money internationally. These fast-growing businesses will be able to leverage on our transaction portal to increase efficiency and drive opportunities, and in turn, support Indonesia’s efforts to bolster their economic growth.”

Featured image credit: Transwap Facebook page

Jakarta-headquartered Kredivo, a digital credit platform for retail borrowers across Indonesia, and Partners for Growth V, L.P. (PFG), a  venture debt firm in the U.S. and Australia, announced today the closing of a debt line of up to US$20m to fund loans for Kredivo’s borrowers in Indonesia.

The deal marks a major milestone for both firms: for Kredivo, it is the largest deal in its history with an offshore (international) lender; for PFG, this represents one of their largest deals in Asia Pacific (APAC) and their first in Indonesia.

The closing of this deal will help to fuel momentum that Kredivo has enjoyed in the past 18 months, where its transaction value and loan book have been growing at 40% and 35% per quarter, respectively.

In addition, Kredivo will use the funds to diversify its loan book, currently predominantly domestically originated. The partnership between the two firms is structured in the form of a credit line where Kredivo will be able to access up to US$20m of debt, on-demand.

Indonesia is one of the most credit-starved countries in Asia, with less than 3% of its population in possession of a credit card and less than 5% having access to unsecured credit from banks.

The gap has led to the growth of the digital lending industry, which is filling the gap opened up by the lack of lending from banks from other traditional financial institutions. While the industry is primarily fueled by peer-to-peer lending models, the deal between Kredivo and PFG represents a significant departure from the norm.

Indonesia based SuperAtom has closed its latest funding round of US$24 million. The round was led by Gobi Partners through the Meranti ASEAN Growth Fund with NYSE-listed Cheetah Mobile as a co-investor.

Founded in 2018, SuperAtom is a startup incubated by and spun off from Cheetah Mobile. The company is best known for its P2P consumer lending platform UangMe, which was launched in collaboration with local banks and have been downloaded five million times since.

The platform Uang Me received official approved to operate in Indonesia from Otoritas Jasa Keuangang (OJK) on July 2018.

In a media statement, the company said that its mission is to make financial services more accessible to the masses by integrating global resources: taking low-cost funds from more mature markets such as Europe, Japan, Singapore, and the US, combining them with proven technology and business models from China, and then localizing it for Southeast Asian markets such as Indonesia.

Commenting on the round,  Kay Mok Ku, Managing Partner of Gobi, said,

“SuperAtom is a TechFin startup; they are a technology company providing financial services. These services are especially relevant in markets such as Southeast Asia, where traditional banking penetration is low and the proliferation of smartphones is high. Tech companies are able to reach out to underserved consumers in this region with their innovative services, and essentially win the day.”

Scarlett Xiao, Founder and President of SuperAtom, explained the startup’s decision to enter Southeast Asia and set up their business in Indonesia,

“Our mission is to provide hardworking people in this region with easy access to credit via a convenient platform. A market’s credit system reaches an inflection point once the GDP per capita reaches US$4,000. Southeast Asia is now fast approaching that turning point, where Fintech will start to take off. Countries like Indonesia will see GDP per capita grow from US$3,800 to US$7,000 in the next ten years, so the market potential is enormous. Beyond Indonesia, Philippines is also a very attractive market as it has a population of 100 million, and their GDP is growing at 6.2%. We are getting ready to enter this exciting market as we have just been awarded the financial license by the Philippines Securities and Exchange Commission.”

Ride-hailing giant and super-app aspirant Grab is rumoured to be in talks to merge Indonesian digital payments firm OVO with DANA in which Grab is eyeing to acquire a majority interest in.

Currently, Grab already own shares in OVO and the company is reportedly looking to acquire shares in DANA from Indonesian media conglomerate Emtek.

Grab’s exact stake in OVO is uncertain, but reports from Reuters indicate that the stake is sizeable, while Emtek currently owns over 50% of the company that owns DANA, which was formed in 2017 through a tie-up with Ant Financial.

Both OVO and Go-Jek have been fiercely competing for the top spot in Indonesia’s digital payments market. If the deal goes through it puts Grab’s newly merged entity in a good footing to overtake Go-Jek in their own home turf within the digital payments space

The same report also indicates that Grab’s major investor, SoftBank is in favor of the deal.

This news follows Grab’s announcement that it will invest US$2 billion into Indonesia over a period of five years with the capital invested by SoftBank.

Image Credit: Teknologi ID

Pluang, a fintech startup providing digital micro-savings for Indonesians (formerly known as EmasDigi), officially announced today its US$3 million Series A funding led by Go-Ventures.

Prior to the investment, Pluang primarly focused on a gold savings product. With this fresh capital, Pluang plans to launch other products, including US dollar savings and fixed return products.

At present, Pluang’s gold product allows investments starting from 0.01 grams (equivalent to roughly USD$0.50). Pluang claims to provide users real-time liquidity and peace of mind as the gold is kept in a government-backed institution through the official Indonesian commodities exchange.

Claudia Kolonas

“In terms of investment solutions, Indonesians are underserved, and there is a lack of access to financial products that have people’s interest at heart. We want to help Indonesian consumers see that better possibilities exist for growing their savings.”

“Whether coming from privilege or from the base of the pyramid, everyone deserves access to a better financial product that can ensure a brighter future.”

Featured image credit: Claudia Kolonas, Founder of Pluang and Aditya Kumar, Go-Ventures VP of Investments.

PinjamWinWin, a Peer-to-Peer (P2P) lending fintech company, today announces that it has raised funding from SOSV.

The P2P lending firms claims to have successfully disbursed over US$9 million in loans, PinjamWinWin aims to continue providing the 185 million unbanked Indonesians with fast and easy loans, backed by insurance.

The investment from SOSV will enable the company to scale its operations and work towards greater financial inclusion in Indonesia.

Founded in 2015, PinjamWinWin claims that it is already profitable. With less than a day processing time, no collateral and great interest rates, the platform has been able to quickly deliver short-term loans for small and medium-sized businesses.

PinjamWinWin finances personal loans of US$35-350 and invoice financing of US$3500-150.000. Through the platform, users also have the option of placing their funds and becoming lenders to enjoy a fixed annual interest of 12-48%.

“The investment from SOSV will accelerate our growth and help us focus on gathering more lender funds with special interest in institutional funds. These funds would be the ammunition used to further dominate the US$60 billion P2P lending market opportunity in Indonesia,”

shares James Susanto, founder and CEO of PinjamWinWin.

Recently, PinjamWinWin signed an insurance deal with a prominent insurance company in Indonesia, making any funds placed guaranteed and secure.

“Indonesia is still lacking a credit rating infrastructure. Farmers couldn’t get enough financing and middlemen would buy for low and sell for high. I witnessed all this firsthand and wanted to find a solution,”

Susanto adds.

The fintech lending industry in Indonesia is highly regulated, with the government body actively blocking illegal fintech companies and holding a high barrier of entry to foreign funds, allowing only registered companies such as PinjamWinWin to operate.

PinjamWinWin recently graduated from SOSV’s Mobile Only Accelerator (MOX), an accelerator program that focuses on emerging markets such as Southeast Asia and South Asia. William Bao Bean, General Partner at SOSV and Managing Director at MOX, is optimistic about the future of this fintech company:

“The opportunity for PinjamWinWin, who focuses on short-term loans, is massive. We look forward to supporting James Susanto and the team at PinjamWinWin as they improve financial inclusion in Indonesia and beyond.”

Traveloka and Indonesia’s Bank BRI entered into a partnership to launch PayLater Card. The card can be used in Indonesia and around the world for both online and offline transactions by leveraging the network of Visa.

Henry Hendrawan, President, Traveloka Group of Operations told Fintech News Singapore in a media statement that, through this partnership, they are attempting to solve the issue Indonesian consumers are forced to book their flights and hotels last minute due to lack of credit access typically provided via credit cards.

PayLater Card will provide users with a simple application and verification process that will only take a maximum of 1 day. The approval will be based on a proprietary credit assessment engine powered by Bank BRI and Traveloka after which, users will be able to activate and manage their PayLater Card directly from Traveloka application.

Apart from being able to buy all Traveloka products and services ranging from extensive travel and lifestyle tickets, enjoying Traveloka Eats and even purchasing insurance for themselves and their families, users will also be able to use the PayLater Card to do online and offline transactions in more than 53 million merchant locations worldwide that accept payment by Visa.

Henry added expressed his confidence that they will be able to collectively achieve the target of 5 million PayLater Cards by 2025.

Peer-to-peer (P2P) lending is a booming sector in Indonesia’s rapidly growing fintech industry, representing 43% of the country’s fintech companies, according to a paper by the Asian Development Bank Institute released earlier this month.

Indonesia fintech landscape, Fintech development and regulatory frameworks in Indonesia, Asian Development Bank Institute, October 2019

In December 2018, disbursement of credit through P2P lending platforms reached IDR 22.67 trillion (US$1.62 million), a 645% year-on-year increase. These funds originated from 101 local P2P platforms that registered with the Financial Services Authority of Indonesia (OJK).

Since then, the sector has continued growing, reaching IDR 41 trillion (US$2.92 billion) in May 2019, a 44% rise from January 2019.

Total P2P lending, Fintech development and regulatory frameworks in Indonesia, Asian Development Bank Institute, October 2019

Indonesia’s healthy P2P lending sector has attracted the attention of local and foreign investors who have poured millions into domestic startups this year. Some recent funding rounds include Julo’s US$15 million Series A, Akseleran’s US$8.5 million funding round, and KoinWorks’s US$12 million Series B.

Investree is reportedly in talks with investors from Japan, China and South Korea to raise a Series C funding round to boost its regional expansion. The funding would also support the company’s business in Indonesia, Thailand and Vietnam.

But there’s also a dark side to Indonesia’s booming P2P lending sector: the rising number of unchecked online lending services with increasingly aggressive debt-collection methods, including intimidation and sexual harassment.

P2P lending regulatory framework in Indonesia

To prevent abuse yet enable the growth of a healthy P2P lending sector, the OJK has released a set of rules P2P lenders must comply with and has also been actively cracking down on illegal platforms, stopping the operation of around 1,073 illegal fintech companies in Indonesia so far this year.

P2P lending companies in Indonesia are regulated under the OJK Regulation No. 77/POJK.01/2016 on information technology-based lending. The regulation limits the foreign shareholding limitation to a maximum of 85%, prohibits the balance sheet lending model, sets a two-tier licensing mechanism and mandates customer protection, among other things.

In February, the OJK issued an updated “checklist” for licensed P2P lending platform providers and those looking to get licensed. The checklist imposes a new restriction on the choice of name for P2P companies, which are no longer allowed to use words such as money, rupiah, cash, installment, express, fast, bank, credit and finance in their name.

Another requirement is that P2P lending services providers must be members of the Indonesian Fintech Association (AFPI), the umbrella organization representing the industry, and must comply with the organization’s code of ethics and related commitments.

Additionally, P2P lenders are required to go through an interview with the OJK as part of the registration and business license phase. They are also only allowed to enter into a cooperation with a credit information management institution that has obtained a license from the OJK, and must have an agreement to mitigate the credit risk of lenders and borrowers by, for example, entering into an agreement with a credit insurance provider.

The OJK is planning to issue a new OJK regulation to replace the current OJK Regulation No. 77/POJK.01/2016 on P2P lending services, but it is still unclear when the new framework will be issued. It is however expected to introduce stricter requirements for companies involved in the sector.

Booming fintech sector

Indonesia’s fintech industry has boomed over the past couple of years. As of August 2019, there were 48 fintech companies listed in 15 clusters of digital financial innovation, 127 registered P2P lending companies, and one registered equity crowdfunding company, according to OJK’s chairman Wimboh Santoso. As of September 2019, the AFPI had 280 members, of which 250 fintech companies.

To spur Indonesia’s fintech development, the OJK is preparing several new policies, Wimboh told the Jakarta Post in September. “We will launch them before year-end,” he said, without elaborating on the proposed policies further.

The OJK is also exploring possible fintech partnerships with other Southeast Asian countries, Wimboh said.

Singapore-headquartered FinAccel, a fintech firm that enables Indonesian consumers to buy online and pay later under the brand Kredivo, has raised US$90 million in a Series C equity funding round to expand in Indonesia and the region.

Since inception just over three years ago, FinAccel has evaluated more than three million applications, disbursed nearly 30 million loans and created one of the largest credit-based payment platforms for ecommerce in Indonesia.

Kredivo App

FinAccel plans to use the funds to double down on growth in the region, hire talent, and expand its range of financial services dedicated to creating a generation of financially savvy customers in Indonesia and the rest of Southeast Asia. Other investors participating in the over-subscribed Series C fundraise include Singtel Innov8, TMI (Telkomsel Indonesia), Cathay Innovation, Kejora Intervest, Mirae Asset Securities, Reinventure, DST Partners and others.

It aims to serve 10 million users in the next few years through Kredivo and other financial services. Near-term plans include the rollout of low-interest education, healthcare and Shariah loans and partnerships with banks for joint product development.

Akshay Garg

Commenting on the transaction, Akshay Garg, CEO of FinAccel, said,

“We are very excited to have Mirae Asset and Naver join our growth journey. These highly entrepreneurial companies bring deep domain expertise in financial services and consumer internet, Kredivo sits at the intersection of both areas. Additionally, we are very pleased that our incoming investors share in our vision of building a wide set of financial services that are fast, affordable and accessible for millions of customers in the region.”

 

The round was jointly led by Asia Growth Fund (a joint venture between Mirae Asset and Naver) and Square Peg. This funding round brings the total capital raised by the company in 2019 alone to more than US$200 million, across both debt and equity, with the debt being provided by a consortium of lenders including banks and credit funds.

Kredivo ranks among the top 10 most funded fintechs Indonesia, the top-funded Indonesian fintech is Akulaku, who similarly offers credit-based payments for e-commerce platforms.

Featured image credit: FinAccel Core Team

The Southeast Asia Internet Economy Report 2019 by Google, Temasek, and Bain & Company predicts that Indonesia’s digital economy will more than triple to US$133 billion in 2025, driven largely by increasing acceptance by its more than 260 million population. In the four years between 2015 and 2019, the number of internet users in the archipelago rose from 92 million to a whopping 150 million.

By Kaspar Situmorang*

Rather than becoming a victim of disruption, traditional banks in Indonesia must evolve digitally if they hope to continue to be a driver of the Indonesian economy. The opportunity here for banks sits in propelling basic financial inclusion, as less than half of all Indonesians still do not have a proper bank account.

With hundreds of thousands of apps across different digital ecosystems already available in the country, Indonesia’s big banks would be foolish to try to reinvent the wheel with similar apps or services. Instead, both the government of Indonesia and the central bank have encouraged traditional banks to undertake digital transformation initiatives and adopt open banking.

This sounds excellent in theory, but where to start? While there are many important digital ecosystems that the formal financial sector should look to tap, expert stakeholders like to discuss two in particular that are already demonstrating massive contributions to the local digital economy, as well as one other that has clear and significant untapped potential.

Fintech and e-commerce

Source: fintechnews.sg

In August 2017, President Joko Widodo launched the e-commerce roadmap which continues to introduce regulations for technology and offers solutions to problems that face e-commerce expansion, including logistics, cybersecurity, taxation, human resource development, and consumer protection.

On the payments end, that same year the central bank went ahead and launched the National Payments Gateway (or GPN), a shared payments infrastructure on a nationally-integrated electronic channel. As of August 2018, 60 banks were connected to the GPN.

Bank Indonesia also aims to standardize open banking and initiate the development of a national database for creating a unified national payment system by 2025.

The country’s big banks need to learn from the government’s play book by unleashing their own application programming interfaces (APIs) and open banking initiatives from their own systems. This is particularly true in the fintech space, where thousands of apps offer niche services to different parts of the ecosystem.

Indonesia’s traditional banks have a golden opportunity to provide a platform for local fintech players to develop further while ensuring protection of data and alleviating cybersecurity concerns. An open banking platform will see traditional banks help niche players reduce technical costs for instance, if it shares its know-your-customer (KYC) metrics or loan affordability metrics in an API.

On the e-commerce end, bigger players like Tokopedia, Bukalapak, and Lazada Indonesia are wading into the payments space, whether via integration of fintech startups or by rolling out their own services. Bukalapak teamed up with online lenders Amartha, Modalku, and PohonDana to provide loan facilities for its “kiosk partners.”

In a 2017 report,McKinsey noted that the growth in e-commerce offers financial service providers opportunities in two key areas: non-cash transactions, as consumers migrate to digital payments; and lending, especially to smaller enterprises.

Via API and open banking, traditional banks can tap into this ecosystem to offer micro, small, and midsized business loans based on creditworthiness tied to a merchant’s e-commerce records. At the same time, e-marketplaces can outsource KYC and credit management services to banks and offer merchants lower interest rates.

Transport and logistics

This ecosystem involves thousands of startups that provide ride-hailing, courier, trucking, and warehousing services across more than 17,000 islands that make up Indonesia’s 5 million square kilometer area.

The Ministry of Industry has taken the lead in creating Indonesia’s Logistics 4.0 platform, based on blockchain, cloud, big data, and the Internet of Things technologies. This digital transformation is expected to reduce the nation’s logistics costs, which currently account for 24% of local GDP. The government hopes to see this reduced to 13.5% in the industrial sector, inevitably with more competition.

An open banking API centered around financing or loan metrics can help apps like Kargo, a Sequoia-backed Indonesian startup which works with truck operators and third-party logistics players. Kargo can tailor an invoice financing or similar working capital loan for its shippers and warehouse merchants based on their track records and orders on the app.

On the transportation front, sharing data with transport apps like Grab and Go-Jek can give banks insights into consumer behavior so they may tailor and promote products such as fuel cards and travel credit cards directly to consumers. Grab and Go-Jek, meanwhile, can add value and increase customer loyalty via personalized rewards systems.

These apps can also offer riders and drivers added value through tailored insurtech or working capital loans based on their points (how safe they drive) and mileage covered.

Healthcare

Source: Deloitte, Bahar & Chapters (2017)

Within the digital healthcare ecosystem, Indonesia’s public sector is focused on payments and data management, while private sector apps concentrate on things like e-prescriptions, telemedicine, and other mobile health services.

A large part of healthcare-related time and costs are spent rationalizing hospital and patient records with insurance claims and payments. Banks, with the help of blockchain, can come in and improve the data handling process. This would create unique opportunities in the healthcare ecosystem, especially by bringing about an overall improvement in health information exchange.

With data management APIs, banks can work hand-in-hand with insurtech players like Jakarta-based Qoala to relieve hospitals and doctors from paperwork and administrative duties while building personalized health profiles of individuals. This in turn can help insurance players offer improved products and expedite the claim process through KYC practices.

Meanwhile e-prescription and e-pharmacy services like HaloDoc have a treasure trove of customer data. This data, paired with banks’ expense tracking metrics, can create personalized customer profiles which can then lead to targeted marketing of medical cards or specific insurance policies.

KPMG has defined 5 ecosystem requirements for successful open banking: application program interfaces (APIs), enabling assets, use cases, killer apps, and partnerships.

To figure out more use cases and understand how partnerships can best work, banks need to narrow down the digital ecosystems that involve the most Indonesians — both banked and unbanked — while playing to individual banks’ strengths. Only then can the goal of 80% financial inclusion in Indonesia be achieved.

Kaspar Situmorang,

Author: Kaspar Situmorang is the Executive Vice President of Bank BRI, the largest microfinance institution in the world and Indonesia’s first digital bank. 

Featured image credit: Unsplash

Ovo, one of Indonesia’s leading digital payment and digital financial services platform kicks off its collaboration with Bareksa, an integrated online mutual fund marketplace. From early February onwards, OVO users can purchase mutual funds through the Bareksa platform seamlessly.

Jason Thompson, OVO CEO stated,

“We are very excited to announce the partnership as we are solving the friction in going cashless and bringing financial literacy in Indonesia to a higher level. We believe that a seamless integration with Bareksa will drive impact towards consumer adoption of digital financial services and enforce sustainable growth on the OVO platform.”

 

The rapid growth in the adoption of digital payments in Indonesia is indicative of an increased level of trust from consumers and players across various industries. The parties involved expects this new partnership is expected to accelerate progress towards the government’s financial inclusion target.

Both OVO and Bareksa are also open to exploring the potential for further cooperation and other synergies in order to further improve customer service.

Karaniya Dharmasaputra

Co-Founder/CEO Bareksa, Karaniya Dharmasaputra explained,

“The partnership with OVO is the first step in Bareksa’s big plan to synergize the e-investment platform with e-money. By using OVO as a new payment method, customer transactions will be easier and will be the next driving force for national mutual fund penetration. This breakthrough will accommodate the preferences and needs of many Bareksa customers, of which 70% are millennials.”

Karaniya also added that this collaboration is expected to further increase the number of transactions and the value of funds managed by Bareksa in 2020 which is projected to increase twofold compared to last year.

“To date, the number of customers registered at Bareksa has reached nearly 800,000 people with managed funds of around Rp 2 trillion,”

he explained.

The mobile payment scene in Indonesia is burgeoning, with research indicating that it will exceed US$ 15 billion by this year. This trend is largely driven by heavy investments into the space by major players like GoPay and OVO, alongside supportive regulatory initiatives from Bank Indonesia.

South East Asia has long been a proxy battleground between payment giants like Alipay and WeChat Pay, it should come to no surprise to most that these two players have got their eyes set on Indonesia.

In May 2019, BI introduced a nationwide QR code payment standard called the Quick Response Indonesia Standard (QRIS) code in a bid to boost cashless payments by providing a common format for QR code payments.

Since January 1, all digital payments services providers operating in Indonesia have been required to adopt QRIS.

With QRIS in place and adopted, users from one digital payments services will able to transfer funds to any rival service, enabling interconnectivity and interoperability amongst Indonesia providers.

WeChat Pay gets regulatory green light

In January, Bank Indonesia granted WeChat Pay regulatory approval to operate in the country after it formed a partnership with Bank CIMB Niaga, which will serve as an “acquirer” in charge of processing transactions taking place on the platform.

Prior to this license, WeChat Pay was already actively providing services to Chinese travellers to Indonesia.

However, as a foreign digital payments service provider, WeChat Pay is required to partner up with local banks and comply with Indonesia National payment QR code. The central bank together with provincial government had taken action against retailers that facilitated WeChat Pay’s operations in Indonesia,

With the regulator’s blessing, WeChat Pay will now be able to serve Chinese tourists in Indonesia without running into trouble with laws. So far, WeChat Pay is the only foreign payment service in Indonesia that has secured permission to operate in the country.

Alipay seeks a piece of the action, but approval is delayed

Alipay, the digital payments platform of Ant Financial, the financial affiliate of Chinese e-commerce giant Alibaba, has also been looking to tap into Indonesia’s rising digital economy and digital payments sector.

The company plans to begin operation in Indonesia soon though launch is currently being delayed due to paperwork and incomplete documents, Jakarta Globe reported on January 28. Alipay was told by BI to rework its application for a license.

“We’ve asked for corrections in the application and returned it to them,” Sugeng, the deputy governor of BI, told the House of Representatives’ Commission XI overseeing finance and banking in a hearing in January. “Some of the documents were incomplete.”

Alipay has formed partnerships with Bank Mandiri and Bank Rakyat Indonesia.

The Chinese aren’t alone

But WeChat Pay and Alipay aren’t the only foreign players looking for a piece of the pie.

WhatsApp, Facebook’s messaging service, has been in talks with Bank Mandiri as well as multiple Indonesian digital payments firms to offer its mobile transaction services in the country, according to an August 2019 report by Reuters.

The company has reportedly approached ride-hailing giant Go-Jek, which operates the popular Go-Pay payments platform, as well as DANA, a mobile payments firm backed by Ant Financial, and OVO, a fintech startup owned by Indonesian conglomerate Lippo Group. All three are amongst the country’s leading mobile payments platforms.

Today, Standard Chartered launched its “Banking as a Service” solution, nexus. Through nexus, digital platforms and ecosystems like e-commerce, social media or ride hailing companies, will be able to offer loans, credit cards and savings accounts co-created with the bank to their customers under their own brand name.

This follows a trend of banks turning to banking-as-a-service as they push for a platform strategy. Industry observers have pointed out that in order to be competitive in 2020, the platform business model has become imperative for banks and financial institutions alike.

Standard Chartered is starting off with a major e-commerce platform in Indonesia as their first partner and expect to co-create and launch products powered by nexus in 2021, subject to regulatory approvals.

Indonesia has the highest e-commerce adoption rate in the world (88%) and piloting nexus here gives Standard Chartered the opportunity to reach the unbanked and expand its customer base in the world’s 4th most populous country. The bank intends to further roll out the service to markets in Asia, Africa and the Middle East with the right regulatory frameworks and established digital platforms.

The USD29 trillion e-commerce market and the fast-growing platform businesses space are constantly looking for innovative solutions that offer customers more choice and greater convenience. nexus will help these businesses benefit from Standard Chartered’s strong balance sheet and world class banking technology to deepen customer loyalty and grow revenues.

Bill Winters

Bill Winters, Group Chief Executive of Standard Chartered said:

“nexus is potentially transformational for the bank and our customers. We will actively partner with leading consumer platforms in our markets to enable convenient access to financial services to millions of new, tech-savvy customers. We are starting with Indonesia, as part of our strategy to grow digitally and expand our business in this important, fast growing market.”

The “Banking as a Service” solution was incubated at SC Ventures, Standard Chartered’s innovation, fintech investment and ventures arm. It started from a business plan mooted by an employee, who now leads the venture with a team of over 100 developers, engineers, and business development professionals across three markets.

In Hong Kong, it is set to launch a standalone digital retail bank in Hong Kong, Mox, in partnership with PCCW, HKT and Trip.com.

Featured image credit: Standard Chartered Bank

The Indonesian fintech industry witnessed steady growth in 2019 with several companies in the sector reaching notable scale and recognition. Ovo, a digital wallet, emerged as the country’s fifth startup unicorn, while several others, including Akulaku, a consumer installment loan platform, Kredivo, a digital credit platform, and Modalku, a crowdfunding platform for small and medium-sized enterprise (SME) financing, reached valuations of over US$100 million, according to DSResearch’s Fintech Report 2019.

With Indonesia’s fintech sector reaching new highs, we look today at six Indonesian fintech startups to watch out for in 2020. These startups are either fairly new or have remained in the dark so far, but have made significant strides in 2019, including raising funding from notable investors, launching new products and services, or gaining notable recognition.

Pluang

Founded in 2016, Pluang, formerly EmasDigi, provides digital micro-savings products with the mission of democratizing financial products for Indonesians.

The startup raised more than US$3 million in its Series A funding round from Go-Ventures, the venture capital arm of Indonesian ride-hailing firm Go-Jek, in September 2019, which it said it will use to launch new products including fixed return products and US dollar savings. Pluang provides only one right now, a gold savings product.

Indonesia’s fintech industry is primarily made of startups operating in the payments and lending sectors, and Pluang is one of the few startups in the country that’s trying to improve savings.

Alami

Established in late-2017, Alami started as an aggregator platform focused on the Islamic market in 2018 before expanding to providing small and medium-sized enterprise (SME) financing in 2019 after receiving regulatory approval from Otoritas Jasa Keuangan (OJK), the Indonesian Financial Services Authority.

In November 2019, Alami raised an undisclosed amount of investment commitment led by Golden Gate Ventures, with participation from Agaeti Ventures and RHL Ventures. It said it would the fresh funding to support talent acquisition and product development as well as strengthen its operational structure.

As of March 2020, Alami had disbursed over US$7.5 million in sharia-compliant financing to SMEs. The startup now plans to become a digital bank.

Halofina

Founded in 2017, Halofina is a goal-based robo-advisor platform. The platform helps users manage their personal finance based on their goals, lets them receive investment strategy recommendations from artificial intelligence (AI), and allows them to invest directly from the mobile app.

Halofina raised pre-Series A funding from Mandiri Capital Indonesia and European venture capital firm Finch Capital in November 2019, which it said it will use to develop its online financial services platform.

Halofina will start its Series A round at the end of Q2 2020, and in the meantime, plans to increase its user base to 500,000 users over the next year, develop a premium subscription program, and provide them better financial advice.

Pintek

Established in 2018, Pintek is a fintech platform providing loans focused on the educational sector, targeting students from kindergarten up to postgraduate education, as well as those in informal education programs specifically vocational courses. Borrowers can apply for loans from IDR 3 million (US$218) to IDR 500 million (US$36,439) with tenures of up to two years.

SoCap, Pintek’s parent company, raised pre-Series A funding in November 2019 which it plans to use to “drive technological and financial innovation needed to support Indonesia’s education sector to achieve international standards for the country’s economic development.”

As of January 2020, the company had channeled more than IDR 27 billion (US$1.9 million) in loans to 1,700 students across 25 provinces in Indonesia. Going forward, it plans to expand its product offering and partnership coverage. By the end of 2020, the company wants to have the number of borrowers and loans disbursed grow by at least 10x.

SuperAtom

Founded in 2018, SuperAtom is a technology company that provides financial services designed for the Southeast Asian region. The startup received approval from the OJK in 2018 and launched that same year, UangMe, a P2P consumer lending platform.

SuperAtom raised US$24 million in a funding round led by Gobi Partners through the Meranti ASEAN Growth Fund in September 2019. The startup is currently preparing its expansion to the Philippines as it recently obtained the relevant financial license from the Philippines Securities and Exchange Commission.

SuperAtom is incubated by and a spun off from Cheetah Mobile, a Beijing-headquartered mobile Internet company.

You can check the Indonesia Fintech Report 2018 here.

IDC Financial Insights today released the 2020 update of its FinTech Fast 101 research which details a list of fast-growing fintechs in Asia/Pacific excluding Japan (APEJ) from 11 key markets.

IDC’s FinTech Fast 101 research refers to fast-growing fintech players based on extensive on-ground analysis of fintech players from China, India, Indonesia, Singapore, Hong Kong, Thailand, Malaysia, the Philippines, Vietnam, South Korea, and Australia.

10 Fast Growing FinTechs in Indonesia

AKULAKU

Akulaku is focused on e-commerce and online financial services in Southeast Asia. They have established offices in five countries, providing localised services to users, including online shopping and instalment. Akulaku is the first ever online instalment shopping mall.

AMARTHA

Operating since 2010, Amartha’s platform focuses on investors funding rural micro-enterprises through lending, providing investors with potential returns, and social impact. Amartha mitigates default risk by joint liability group, life insurance, and credit insurance. Investors can also monitor their funding activities through Amartha’s dynamic dashboard.

BAREKSA

Bareksa.com is the first integrated online mutual fund marketplace in Indonesia, under PT Bareksa Portal Investasi which was established on February 17, 2013. This portal, in addition to providing a platform to conduct mutual fund trading online, also provides data services, information, and investment tools of mutual funds, stocks, bonds, and others, to facilitate the public to invest.

CEKAJA.COM

CekAja.com is the finest and most comprehensive financial store in Indonesia that provides loan, credit card, investment and insurance services to over 20 million customers, and is committed to providing access to financial services throughout Indonesia.

DANA

DANA is a technology company, a highly secured and scalable payment service platform in Indonesia.

GOPAY

GO-JEK (PT. Aplikasi Karya Anak Bangsa) is an Indonesian-owned and run technology start-up that specialises in ride-hailing, logistics and digital payments. GO-PAY is not only to pay for GO-JEK services but also available to help you with new features and products. In October 2017, GO-PAY transactions have contributed 30 percent of overall e-money transactions in Indonesia.

INVESTREE

Investree is a financial technology company in Indonesia with a simple mission: as an online marketplace that brings together people who have funding needs with people who are willing to lend their funds. Not only do we increase our lenders, we also make loans more affordable and accessible to Borrower.

LINKAJA

LinkAja is an application-based electronic financial service.

OVO

OVO (PT Visionet Internasional), a fintech startup that builds a digital platform aiming to simplify your life by providing amazing rewards & deals through our merchant partners, simple payment and smart financial services. In December 2017, Ovo officially announced their partnership with GrabPay in Indonesia.

UANGTEMAN

UangTeman offers micro loans in Indonesia for both consumer and business needs. It is currently available in Jabodetabek, Yogyakarta, Solo, Magelang, Klaten, Bandung, Surabaya, Semarang, Bali, Makassar, Palembang, Lampung, Jambi dan Balikpapan.

Note: The list is arranged alphabetically. Source: IDC, 2020

AppsFlyer released its first edition of the State of Finance App Marketing report, which tracked 4.6 billion app installs across more than 3,000 different apps globally since H2 2017 to H2 2019, including the Southeast Asian markets of Indonesia, Philippines, Malaysia and Vietnam.

The data found that finance apps has one of the highest growth rates across all apps, forming 4.5% of all apps installed globally, and almost doubling (87% growth) in the past year (from 2.4% in H2 2018 to 4.5% in H2 2019).

Finance apps are especially installed in developing markets – Asia Pacific (APAC) saw a 106% increase from 2018 to 2019 for installs, just after LATAM at a 128% increase.

Specifically, in Indonesia, Finance Apps saw significant increase from 2.3% of all app installs in the country in 2017, to 11.3% in 2019, showcasing the mobile-first nature of Indonesians.

This trend towards finance apps is especially prevalent in Southeast Asia – globally, four Southeast Asian countries are in the top 15 markets by the number of finance app installs in 2019: Indonesia (no. 2), Philippines (at no.6), Vietnam (no. 7), and Malaysia (no. 13).

Image copyright: Appsflyer

“Asia Pacific, and Southeast Asia in particular, is home to a large unbanked population. However, it also has one of the fastest growing digital and mobile-first populations in the world. People in the region use their mobile phones for a whole range of lifestyle activities, including for their financial needs. This is especially relevant today, as the global COVID-19 pandemic is affecting access to financial services. People across the world are staying at home, and app usage is on the rise, especially with payment, lending, investment and banking apps,”

said Ronen Mense, Managing Director & President, APAC, AppsFlyer.

In Asia Pacific, loan apps form the biggest segment of finance app categories, at almost half or 49%.

Image copyright: Appsflyer

This is the same in Indonesia – with Loan apps forming 49% of all finance app installed in the country, followed by Investment apps (28%), Financial Services (16%), and Traditional Banking apps (8%).

In Asia Pacific, this growth of finance apps has also led to increasing competition, with many different apps with similar offerings. This has led to a decreasing number of installs per app in the region, with a 19% drop in the number of installs per app since 2018 as compared with 2019. The competition has resulted in increasing App Marketing Budgets – the report shows a high share of non-organic installs amongst apps with a marketing budget. In Indonesia, overall non-organic installs represent an average of 63% of installs per app.

At the same time, finance apps – with their opportunities for massive scale and high payouts – are an extremely attractive target for fraudsters. Mobile app install fraud rate is high in APAC, with almost 30% of all Finance App installs in the region are fraudulent. In Indonesia, this is higher at 46% – an indication that fraudsters are taking advantage of marketers who are using a Cost Per Install model, where marketers have to pay for the number of installs. Methods commonly used are using bots, device farming, install hijacking and click flooding.

This is followed by Investment apps (25%), Financial Services (18%), Digital Banking (5%), and lastly a small share of Traditional Banking apps (3%), showing that the region has a large unbanked and underbanked population.

image copyright: Appsflyer

Qoala an insurtech headquarted out of Jakarta, today announced its successful US$13.5 million Series A fundraise. The round was led by Centauri Fund – a JV between funds from South Korea’s Kookmin Bank and Telkom Indonesia.

New investors in the round included Sequoia India, Flourish Ventures, Kookmin Bank Investments, Mirae Asset Venture Investment and Mirae Asset Sekuritas, with participation from existing investors, MassMutual Ventures Southeast Asia, MDI Ventures, Surge, SeedPlus and Bank Central Asia’s Central Capital Ventura.

This fundraising round is happening amid a global slowdown of fintech deals, Qoala is the second South East Asia based insurtech startup to have raised a significant amount this month following Axinan who raised US$ 16 Million and rebranded itself to Igloo.

In its media statement, Qoala said their vision is to provide customers with a multi-channel insurance solution. The company shared that it has two business models; to drive awareness to underinsured Indonesians by working with large scale platforms, and to be a digital enabler for agents and brokers.

Qoala is hiring across teams as the business looks to build on its exponential growth, with plans to double its headcount to 300 over the next year.

Harshet Lunani

Harshet Lunani, Founder and CEO at Qoala, said:

“As a relatively new entrant in the space we are delighted to partner with leading global investors whose tremendous thought leadership as well as operational experience will allow us to maintain our innovative edge. This truly demonstrates the ecosystem’s belief in what Qoala is trying to achieve – humanizing insurance and making it accessible and affordable to all.”

Just over a year after launch, Qoala said that it has processed over 2 million policies per month, up from 7,000 policies in March 2019, and has diversified its partnership portfolio to serve five core industries: travel, fintech, consumables, logistics, and employee benefits.

Tommy Martin

“The funding will allow us to invest further into technology, people and brand to fuel our multi-channel strategy, enabling us to better serve our customers, platform partners, and insurers. In particular, during the present crisis we are seeing an increased demand for innovative and scalable services to support the industry as physical contact restrictions are impacting traditional offline sales of insurance. We have also accelerated our new COVID offerings for consumers and MSMEs across Indonesia to provide pay-outs to those affected by the pandemic, including those who have had their treatment partially or fully subsidized by the government and are hence ineligible per usual insurance plans. We will roll this out on a larger scale within the next 4 weeks ”,

added Tommy Martin, Co-founder of Qoala.

The startup has a number of partnerships with prominent brands across Indonesia, including GrabKios, JD.ID, Shopee and Tokopedia. Qoala’s customers also include other industry leading digital platforms such as Investree, PegiPegi and RedBus, as well as traditional giants such as MAP Group. Their unique go-to-market approach is supported by over 20 insurers including global players such as AXA Mandiri, Tokio Marine, Great Eastern as well as local insurers like ACA, Adira and BRI Life.

Featured image: Tommy Martin and Harshet Lunani, Founder – Qoala