Fintech activity is accelerating in Indonesia, a trend marked by significant startup venture capital rounds, accelerated growth of local fintech startups, and increased participation of foreign companies in the domestic market.
These past months have been seen a multitude of funding rounds going towards Indonesian fintech startups.
AwanTunai, a point-of-sale financing solution aimed at digitizing Indonesia’s large cash economy, raised US$11.2 million in August. AwanTunai offers digital services including affordable inventory purchase financing, integrated online ordering, and inventory management, serving wholesalers and micro-merchants.
Digital Payments Holdings, the company that operates OY! Indonesia, raised US$44.47 million in its Series A funding round in July. OY! Indonesia caters to enterprises, providing products such as disbursement APIs, bulk disbursements, payment checkout and payment collection service via SMS.
In June, Wagely, an earned wage access (EWA) startup, raised US$5.6 million. The startup, which allows workers to withdraw their earnings on demand instead of waiting until payday, expects to reach more than 250,000 users this year. It aims to build a holistic financial wellness platform for lower- and middle-income workers that includes other financial services including savings, insurance and smart spending products.
Komunal, Indonesia’s first fintech company to offer digital rural banking services, received US$2.1 million in a Series A funding round to launch the country’s first e-bilyet (or electronic bank certificates) for rural bank deposits, while Ayoconnet, a financial API developer platform, closed a US$10 million pre-Series B funding round after witnessing “rapid adoption” of its API stack from over 100 Indonesian companies including banks, retailers, e-commerce and fellow fintech startups.
Additionally, payments firm Xendit and investment platform Ajaib grabbed headlines as they emerged as the two newly minted Indonesian unicorns. Xendit, a YCombinator alumnus, announced the closing of its US$150 million Series C funding round in mid September, bringing its total funds raised to US$238 million since 2015. Meanwhile, Ajaib managed to secure US$153 million in its Series B funding round earlier this month following a US$90 million Series A round in March.
Foreign fintech companies eye Indonesian market
These past months have also seen a number of foreign fintech companies showing strong commitment to break into the Indonesia market.
In the UK, paytech company PPRO announced this month the integration of two of the most popular payment methods in Indonesia – Jenius Pay and LinkAja – into its platform, a move intended at expanding its footprint in a hotspot for digital payments in Asia-Pacific (APAC), the company said in a statement.
In Ireland, global information services company recently teamed up with telecommunications provider 3 Indonesia to facilitate credit risk decisioning through the use of non-traditional data.
The collaboration sees 3 Indonesia becoming an alternative data partner to Experian’s PowerScore, a credit assessment approach that combines ready-to-use alternative data with adaptive learning to support lenders and fintechs in determining and mitigating credit risk, while providing unbanked and underbanked communities with fairer access to credit.
In the US, Logiq, an award-winning provider of e-commerce and fintech business enablement solutions, unveiled this week plans to launch a new super-app in Indonesia.
The super-app will combine all of the firm’s mobile e-commerce and fintech solutions into one mobile app for easier access and greater interoperability, including its PayLogiq e-Wallet, GoLogiq hyper-local food delivery and other mobile commerce solutions, as well as its recently announced mobile fintech platform for microlending, driver’s license testing payments and mental health consultations.
Accelerated development of fintech in Indonesia comes on the back of strong support from the government to encourage digitalization in the financial services industry. In December 2020, the Financial Services Authority (Otoritas Jasa Keuangan, or OJK) launched the Master Plan for the Indonesian Financial Services Sector (MPSJKI) 2021-2025, which focuses on developing the financial services sector ecosystem and accelerating digital transformation in the financial sector, among other top priorities.
In August, new regulations were introduced to facilitate the establishment of digital banks, allowing near-full foreign ownership of local lenders and reducing red tape for new services.
Indonesia is the most populous country and largest economy in Southeast Asia. Indonesia’s booming e-commerce market is projected to surpass US$43 billion this year, while its digital financial services market is expected to soar at a compounded annual growth rate (CAGR) of 34% to reach US$8.6 billion by 2025.