How Ovo aims to drive financial inclusion in Indonesia

Financial inclusion is a vital element in lifting people out of poverty and working toward greater economic and societal development. Having the ability to save money, plan for the future, and be prepared for unexpected emergencies goes a long way in improving people’s lives and livelihoods.

As such, financial inclusion is a key part of Indonesian President Joko Widodo’s plans to reduce poverty and promote more inclusive economic growth in the nation.

“Financial inclusion affects the country’s development and also the quality of life of the people who live in it,” says Ershad Ahamed, chief marketing officer at Indonesian digital payments and financial services platform Ovo.

Ershad Ahamed, chief marketing officer at Ovo / Photo credit: Ovo

However, despite the strides it’s made in recent years, Indonesia still has a ways to go.

As of 2019, nearly 140 million Indonesians were unbanked or underbanked, and figures from the country’s Financial Services Authority estimated a financial inclusion index – which measures indicators around various aspects of financial inclusion – of 76.19%, lagging behind many of its neighbors. The challenge is exacerbated by the country’s landscape, which sees its population spread out over thousands of islands.

Laying the foundations

According to the World Bank, private sector innovation has played a crucial role in driving financial inclusion in emerging economies.

In line with its larger vision, Ovo has been working closely with the Indonesian government and other stakeholders in order to expand financial services in Indonesia. The firm’s digital payments service, which was launched in 2017, is Indonesia’s leading digital wallet, according to market research firm Kadence with a user base that spans across the country’s 34 provinces.

One of the fundamental elements of financial inclusion is the ability for individuals to transact money without using cash, so Ovo’s e-wallet has played a critical role in enabling people to access goods and services on a digital platform.

Photo credit: Ovo

“Digital payments is a gateway for people living in Tier 2, Tier 3 cities to experience the same benefits as those in Tier 1 cities,” says Ahamed. “It’s how they can experience services that are online like bill payments, ecommerce, and grocery delivery.”

In his view, digital payments is also an entry point for individuals to familiarize themselves with new financial services and technology, marking a first step toward financial inclusion.

Amid the pandemic, Ovo has enabled more Indonesians to benefit from the government’s social assistance schemes, such as its upskilling initiative Kartu Pra-Kerja (Pre-Employment Card). Through digital payments, even individuals without bank accounts were able to receive the financial assistance they needed.

As Covid-19 drags on, online payments have helped micro, small, and medium-sized enterprises (MSMEs) transact in more efficient and safer ways and avoid managing huge amounts of cash as well.

The question of education

Having built up a strong base of customers through its digital payment products, Ovo began looking at how it could expand its offerings further in order to drive financial inclusion in Indonesia. It began by exploring how it could help address the major issues that many citizens encounter when accessing financial services.

“A lack of education, cumbersome processes, and high costs are the reasons why the penetration of financial services is still low in Indonesia,” explains Ahamed.

According to him, users were also not aware of the importance of financial products like insurance and thought that such services were expensive and unnecessary. As a result, despite Ovo having these products available on its platform, users were initially hesitant to come on board.

Education is part of our strategy [for driving financial inclusion].

The firm decided to address this issue by launching Ovo FinTalk, a series of free webinars where it introduces the core ideas of financial literacy and financial planning to the Indonesian public.

“We’re not talking about specific products, but we’re going back to the fundamentals – having one’s income be more than expenses, the importance of having protection and hedging your risk – things like that,” Ahamed says.

Ovo FinTalk has so far been well-received, with thousands of viewers tuning in.

“Education is part of our strategy [for driving financial inclusion],” Ahamed explains. “Just pushing out a product isn’t going to work.”

The power of an open ecosystem

Aside from addressing the issue of education and the lack of awareness, Ovo has leveraged its open ecosystem approach to make financial products accessible and affordable for Indonesians.

“We collaborate with existing players in Indonesia – for example, banks, lenders, and insurance companies – to provide accessible products for consumers,” shares Ahamed.

This approach has enabled Ovo to roll out several new product lines to help boost financial inclusion in the country. In 2019, the firm acquired lending service Taralite in order to beef up its lending capabilities, and Ovo currently offers loans to MSMEs as well.

In 2021, Ovo launched a sharia-compliant digital life insurance product in partnership with Prudential Indonesia. With contributions starting from around 5,000 rupiah (US$0.34) per month, it’s a far more affordable insurance option in contrast to typical insurance plans on the market. Signing up for coverage can also be done through the Ovo app, which allows people to bypass the tedious paperwork and processes usually involved with purchasing policies.

Photo credit: Ovo | Proteksi

Ahamed says the new offering has seen a month-on-month growth of over 500% on insurance from April.

Ovo’s partnerships also extend to vehicle insurance. In collaboration with domestic insurance company Asuransi Simas, the company launched a vehicle insurance feature on its platform with premiums starting from as low as 15,000 rupiah (US$1.34) a month for motorcycle coverage.

It has also dipped its toes in the investments space through a partnership with financial services company Manulife and online investment platform Bareksa. The investment product, which is an instant-redemption mutual fund offering, allows users to invest and earn interest with as little as 10,000 rupiah (US$0.7) directly through the Ovo app.

“We got around 450,000 users within just three months of launching the investment product in January,” says Ahamed, “it’s quite a huge achievement, considering that the investing population in Indonesia is only about 4 million.”

Making a difference

While Ovo has made significant strides in driving financial inclusion in Indonesia and helping to bring more merchants and consumers into the digital economy, the company believes there is still more to be done.

Moving forward, Ovo will continue to collaborate with different partners in order to bring better financial products and services to Indonesian consumers, expanding its verticals to include new types of insurance, investments, and credit products.

“We are committed to helping the government scale up and support financial inclusion in Indonesia even further,” Ahamed concludes.

Ovo, as the leading digital payment and financial services platform in Indonesia, seeks to open up access to financial services through its products that are easy-to-use, secure, and affordable.

Learn more about Ovo here.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.