FinTech Is Helping Unbanked to Bank In Indonesia

 In Fintech, Startup Thought Leaders

Riding on the e-commerce boom and growing internet and mobile connectivity, the economic system of Indonesia, a country which is in dire need of financial innovation, is all set to modernize. The fin-tech fervor is slowly and steadily gripping the country with its wide-ranging benefits.

Indonesian government’s decision to start branchless banking program in 2015 has begun reaping social and financial advantages in the country, but it still has a long way to go to achieve financial inclusion.

What AliPay has done in China, Paytm in India, MoMo in Vietnam, True Money in Thailand, M-Pesa in Kenya and Smart Money in the Philippines, Indonesia also needs a fin-tech leader to turn the tide of economic alienation into financial inclusion.

Statistics suggest that commercial technologies are essential to serve a large population of people who either don’t have any bank account or don’t have any interest to be a part of the formal financial system in Indonesia.

Why banks can’t do what smartphones can do in Indonesia

“Why have banks been unable to inspire youngsters in Indonesia to join formal financial system?” and “How will fin-tech change the mindset of people in the country?” are a few questions need to be looked into.

Economics believe that banks, due to their lengthy document requirements to open an account and slow loan approval process, have failed to attract masses towards its benefits. So the banking system has covered only 30% to 40% people in the country.? Out of total population of 250 million, 60% to 70% of the Indonesian population is still unbanked and only 7% people use a bank account to earn their salaries. The miserable statistics, i.e., 3%, are those individuals who receive government benefits through formal banking process.

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With these statistics, the arrival and proliferation of fin-techs and people’s increasing interest in them are the silver linings. Experts say that small customer base of banks restrict them from expanding their services to the wider area because it’s financially not viable for them to expand. So the problem of low customer base and non-expansions of branches are inter-linked to each other.

On the other hand, mobile connectivity if linked with financial schemes has been proven to generate interest among people due to several reasons. Indonesian doesn’t need to make any additional effort to get an account opened and at the same time they can access all the financial services sitting at home.

Smart-phones outsmart banks

The need for financial technologies can be understood from the fact that when compared with the developing economies like India and China, Indonesia is way behind in extending formal financial facilities to its rural population.

The World Bank’s 2014 Global Findex says 21% people in China and 47% in India are unbanked, but the report finds 64% Indonesian population living without access to banking.

If seen in contrast with the rising number of mobile and smartphone penetration in the country, there seems to be an enormous scope for fin-tech firms to bring the unbanked population into the financial mainstream with innovative apps.

While in 2011 only 11.7 million people used the smartphone, the figure went four times up in three years to 44.7 million in 2014. It is expected that in 2019, the number of total smartphone users will be up to 92 million which will be one-third of the total population then.

As far as mobile connectivity is concerned, according to Ministry of Communication and Informatics of Indonesia, 99% people have access to cell phones and their craze to upgrade themselves to a smartphone is significantly high.

The rise in the number of smartphone users is more than 100% every year since 2011 in Indonesia while penetration of formal banking services has been 27% in 2010 to 37% in 2014 as far as a loan to GDP ratio is concerned. It is lowest among Asia-Pacific countries. Even the credit and debit card adoption rate is equally staggering.

FinTech startups gaining ground in Indonesia

Contrary to the banking sector, the fin-tech scenario is quite encouraging. Be its mobile apps, cloud software or consultation sites, they are catching up day by day.

It is expected that financial services Authority of Indonesia will come out with new norms for fin-tech firms in the country by the end of 2016. Meanwhile, some fin-tech startups have taken innovative initiatives to close the gap between banked and unbanked population.

For instances, HaloMoney, CekAja, Aturduit, Stockbit and Cermati to compare financial products, to provide information tool for investment and data services, Doku, Veritrans and Kartuku to offer mobile and online payments application, to provide free consultation and investment portfolios management are among some fin-tech startups with promising financial transformation in the country.

Mobile apps like Jojonomic and Veryfund are also very popular among online shoppers. Cloud-based products such as Jurnal and Akunting Mudah are helping enterprises manage their financial statements.

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As far as funding to these firms are concerned, local and multi-national Indonesian investors such as Convergence VC, Alpha JWC Ventures and Mountain Kejora Ventures are complementing the efforts of fin-tech startups with financial supports. They are investing both in early as well as growth stage technology.

Regulatory push to digital finance services in Indonesia

Experts feel that financial inclusion needs to be taken up on a priority basis in the country in government policies.

When in December 2013, the government of Indonesia appointed a new regulator Otoritas Jasa Keuangan (OJK), also known as Financial Services Authority, to support the central bank – Bank Indonesia – to promote fin-techs, it was a turning point for digital wallets and peer to peer payment segment. Since then digital finance services are getting more support and attention, however, more regulatory support is needed to be followed after that.

Many experts feel that in the last three years there has been a significant change in the mindset of government to promote FinTech in Indonesia which has resulted in a lot of new innovative ideas taking concrete shape but they argue that incubation and fin-tech eco-system needs much more efforts.


Though some of the fin-tech startups of Indonesia were initiated in 2001 yet the country has leapfrogged on technology scenario in the last couple of years only. The acceptance of fin-tech services is wide among the masses, and if government generates a little more support, it will benefit 200 million population which desperately dependent on mico-finance.

If financial services such as deposits and loans, bill payment and remittances, airtime top ups will start happening digitally, it will change the whole economic environment in the country and the ultimate beneficiaries will be the people of Indonesia.

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