The Emergence of Fintech in Indonesia

The Indonesian capital of Jakarta. (Photo source: Pixabay/tpsdave)


Jakarta, – Financial technology, or more popularly called ‘fintech’, can be defined as a phenomenon in which technology and financial features go hand in hand in altering the traditional financial institution business models and discovering solution alternatives to customers’ financial experience.

Like other businesses, fintechs are established to answer consumers’ needs, challenges and wants. In this case, the emergence of financial technology is no exception. There are at least four main challenges surrounding the potential and necessity of fintech in Indonesia.

Firstly, the large amount of unbanked population. It is estimated that only 40% of Indonesia’s 250 million population currently have access to banking services. Secondly, the large amount of underserved small to medium enterprises. SMEs need funding to expand their wings, yet many of them do not have the necessary financial history nor collateral to secure bank loans. This presents an untapped market for fintech companies.

The third challenge is inefficient banking infrastructure. The number of bank branches, which is estimated at 10 bank branches per 1,000 square kilometers is far too low to serve Indonesia’s vast geography. This is connected to the fourth challenge, which is geographical barrier. The fact that there are remote and inaccessible areas in the country poses an even greater challenge for bank penetration.

But at the same time, such challenges provide a greater opportunity for fintech.

Fintech bring benefits?

As an industry, financial technology is divided into various sectors pursuant to the financial solution it is trying to provide. The payment sector is by far the largest, accounting 43% in total.

Four main categories of fintech service are described below, which is according to a recent Bank Indonesia fintech researchers’ forum. Note that this review do not represent their market share in each category, yet it merely present samples and their core products.

Deposits, Lending, and Capital Raising

This category allows consumers to obtain loans or funds for numerous purposes such as for business, social project and marriage. Both crowdfunding and peer-to-peer lending technologies fall into this category. A few players in this category are as written below.

taralite facilitates financial loans with relatively low interest, starting from 1%, for education, marriage, childbirth, house renovation, vehicle purchase, property & housing. It also provides loans without collateral.

MODALKU is an online-based financial loans, up to Rp. 2 billion, with relatively affordable interest, mainly focusing on the development and loans of small-medium enterprise with a minimum of 20 million per month gross revenue and 1 year of operation. is a social crowdfunding platform on which anyone can initiate campaigns and request for donations, as well as view and choose the campaigns to which they can donate.

Market Provisioning

Provisioning, in general, translates to the process of providing users with access to data and technology resources. Market provisioning covers the process of providing the users or customers with relevant data, assistance, and guidance regarding various markets. is a platform that provides comparisons of various financial products. They include but not limited to vehicle and health insurances, credit cards, housing loans, internet and cable TV packages, and SME loans.

TaniHub is an e-commerce platform that connects farmers and buyers. Farmers have been facing difficulties in marketing their products and unfavorable pricing by middlemen. This platform aims to ease the burden of the farmers and connect them directly to customers, for instance, F&B businesses.

DutyPlant is a soil assessment mobile application designed for farmers to facilitate them in assessing what plants to grow on a certain soil. Easier than manual and book-based assessment.

Investment & Risk Management

This category specializes itself in automated processing and dissemination of investment and risk management advice for individuals and companies.

JOJONOMIC realizes that employees’ reimbursement processes have been done manually, which can cause miscalculation and lengthy processing time. It offers an application-based reimbursement system to minimize the company’s miscalculation risk and accelerates the reimbursement processes.

RajaPremi is an online insurance marketplace. Users can search for the specific insurance they desire, receive comparisons, and finally purchase the most suitable insurance for them.

Bareksa is an online and integrated marketplace for mutual funds. It makes investing in mutual funds easier, as they provide the necessary options, tutorials, and tools for mutual funds investments.


This category introduces customers to novel ways of both online and offline payments, and other related opportunities in regards to payments.

Kudo is a website and mobile application that enables anyone to be an online entrepreneur without having to personally stock the items. Verified sellers or ‘agents’ are free to choose from roughly three million types of products to be sold. Buyers will pick their products, contact the respective agents and agree on the payment method.

DOKU is an online and offline payment gateway tailored for businesses and individuals. DOKU e-wallet is an electronic wallet which is equipped with links to credit card and electronic money. Users can utilize DOKU to shop online and offline at merchants who have been enlisted by DOKU.

t-cash is an electronic money service provided by Telkomsel. Users are required to install T-Wallet app on their mobiles and equip their mobiles with the t-cash stickers. The stickers are to be scanned at merchants with t-cash scanning machines upon payment. Other forms of payment can also be done, such as utility bills, train tickets, and concert tickets.

“Even though Indonesians have not fully embodied the very concept of fintech itself, the number of fintech services continues growing.”

Getting familiar with fintech

According to Indonesian Fintech Report 2016 that was released by Fintech Indonesia and DailySocial, both the awareness and adoption rate of fintech in Indonesia are fairly low.

In a survey that was conducted with 1,000 respondents, majority of which are millennials between 20 and 25 years of age, almost 72% of the respondents have not heard of the word ‘fintech’. Moreover, only 18.5% of the respondents are using fintech services.

One primary issue arises – Indonesians still do not see how mobile money, and other fintech services can benefit them in real terms. Around 10-15 percent of Indonesians, who surprisingly stem from the middle to upper-income brackets, either don’t see the benefits of saving or don’t comprehend the very concept of banks itself.

If we refer to the product life cycle, the very first stage of the cycle is the introduction. Here, companies try to familiarize the products and their benefits. As the survey showed, the fintech market has not fully introduced their existence and advantage to the Indonesian market.

Nonetheless, even though Indonesians have not fully embodied the very concept of fintech itself, the number of fintech services continues growing. In the past two years, the growth of fintech players reached 78%, in comparison to 9% in 2013-2014.

Socialization therefore becomes a key aspect, and the Indonesian Fintech Association along with the government can work together to address the issue. One of the aspects that can be tweaked to favor the fintech infrastructure is education, whether formally or informally.

Schools and universities do have curricula in which economics, market theories, financial system, and international trade are taught. But most of them do not teach the basic mechanics of economic activities, such as how to choose the right insurance, how to apply for credit cards, where to apply for loans, how to pay and calculate personal taxes, and others.

Surely, it might be a reversed logic to bombard the market with advanced and hi-tech alternatives, even when the market itself are not well-educated with the basic mechanics. If the policy is considered, the benefit attained by the education sector will also spill over to the fintech sector.

Asymmetric information is a phenomenon in which one party possesses a greater knowledge than the other party in an economic transaction. Quoting Investopedia, “growing asymmetrical information is a desirable outcome of a market economy.”

For instance, a patient doesn’t possess the knowledge to heal themselves, therefore making the presence and service of doctors economically valuable.

But only to some extent is asymmetric information desirable. Referring to the fintech case, the Indonesian market is not well-educated enough in the basic and hands-on economic activities and mechanics, posing a greater barrier to fintech adoption since the fintech companies have disproportionately larger knowledge than the targeted market.

Banks and fintech

For established banks, fintech brings a double-edged sword to the table. Its technological advances extend to those of the underbanked, and those in need of personal finance management assistance. But, at the same time, the new technology may disrupt traditional brick-and-mortar banking services.

Recently, Bank Tabungan Pensiunan Nasional (BTPN) launched its own fintech service, called Jenius, which allows users to open bank accounts via a mobile device and manage their own personal finances. Users can also give a nickname to their bank account, instead of the conservative lengthy account number. This is an example of a bank which embraces fintech as a market adjustment strategy.

According to Sachin Mittal of DBS Group Research, as reported by the Jakarta Globe, fintech’s tech-savviness brings about higher efficiency. Hence, fintechs can provide more affordable loans for customers as higher efficiency translates to less operational cost, which can pose a threat to the existence of banks, especially to those that are still reluctant to provide digital services and deeply understand the customers’ needs and touch points with their services.

Nonetheless, the current penetration rate of fintech services in Indonesia is below 2%. And according to a prediction by DBS Group, there will still be around four to five years for the country to reach a tipping point. Hence, for the mean time, there will not be a significant disruption and threat to large and established banks.