Inside the digital bank race in Indonesia

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Hi readers,

Yesterday, I learned what a “cashier order” is. For those of you who don’t know what that means, here’s a TIL for you: A cashier order is like a check but issued by a bank rather than an individual.

In order to obtain a cashier order, you will need to head down to a physical bank and request for one. My first thought when I was asked to do so was, “Why can’t we do an internet transfer instead?” That’s how reliant I am on online banking.

With more people relying on digital transactions – and even more left out of the traditional banking system – this could be one of the reasons why digital banking is rising and heating up in Indonesia.

Today we look at,

• Why is everyone gunning for the digital banking space in Indonesia
• A Pakistani startup raised money to support mom and pop stores
• Other newsy highlights such as China’s Meicai plans to move its IPO to Hong Kong and Mynt aims to double its valuation to US$2 billion.

PREMIUM SUMMARY

Why tech giants are breaking into the banking biz

Digital banks are having a moment in Indonesia: Gojek invested in Bank Jago late last year and Sea Group acquired a boutique Indonesian bank and rebranded it as SeaBank. Other companies including Line and Akulaku, as well as other banking incumbents, are also joining the race. But achieving profitability is a challenge in the segment, so why is everyone jumping in?

• The Big Bank Theory: Online banking has a huge potential in Indonesia because the country’s banking sector has higher net interest margins – the amount of money that a bank earns from its assets – compared to regional peers like Singapore.
• Dropping bangers: Digital banking also comes naturally to tech giants looking to expand their super-app offerings and leverage on their user bases. But the big banking incumbents will put up a fight, especially Bank BRI – not only is it the country’s second largest bank by total assets, it is also a tech power player via its VC arm BRI Ventures.
• Just three digital banks globally have managed to turn a profit, but when they have, it’s massive. The three banks – MyBank, WeBank, and KakaoBank – all banked in over US$100 million in net profits for their most recent financial year, and KakaoBank is also due for an IPO next month.

Read more: Why Indonesia’s tech giants find digital banks irresistible

STARTUP SPOTLIGHT

This Pakistani startup raised money to support mom and pop stores

Dastgyr, a marketplace that connects suppliers with mom and pop retailers in Pakistan, has raised US$3.5 million in a seed round led by venture capital firm SOSV.

Standing on the shoulders of giants