In Indonesia, digital bank-hopefuls try new credit-first playbook

Unlike most of Indonesia’s digital banks, which began with a core deposit or savings product, recent entrants are launching through a different entry point: credit cards.

Fintech firms Yup and Honest, for instance, launched credit card offerings in 2021 and 2023, respectively.

In September, Yup raised US$32 million from US investment firms Moore Strategic Ventures and Spice Expeditions. A month later, Honest raised new capital that brought its total equity funding to over US$100 million.

Yup credit card / Photo credit: Yup

Yup says millions of customers use its credit cards, while Honest expects its users to grow from 200,000 in 2024 to 300,000 by the end of the year. For comparison, digital banks Bank Jago and SeaBank each have about 17 million customers.

The idea of these firms is to become more than a credit issuer in the long run. At present, Yup offers both physical and virtual credit cards, though it plans to add deposits and other services later on.

Meanwhile, Honest offers both a credit card product as well as savings services through a partnership with Bank INA.

Honest itself has never publicly stated that it aims to become a digital bank, although the introduction of a savings feature recently could suggest this. The company declined to be interviewed for this story.

Low penetration, no problem

Although traditional banks in the country have offered credit card products since the 1980s, credit card penetration in Indonesia remains low compared to other countries in Southeast Asia. This is largely due to limited banking infrastructure, a cultural tendency to avoid debt, and strict application requirements.

As of the beginning of this year, penetration was at only around 7%, far below Thailand’s 35%, Malaysia’s 30%, and Singapore’s 80%.

Disproportionately more Indonesians use debit cards because these can be used to withdraw cash as well as make payments.

As a result, digital banks in the country typically start with deposit and savings products and debit-based services. A handful of early players have gone on to offer credit cards, such as Jenius and DBS Digibank.

“Even though the penetration is low, that doesn’t mean people don’t like credit cards or don’t want to apply for them,” Yup co-founder and CEO Donny Zhang argues.

“More sustainable” option

Finding the right customers