Riding the wave of fintech in Indonesia

Photo “Big Wave Surfing Teahupoo Tahiti” by Flickr user Trev Grant licensed under Creative Commons (CC BY-NC 2.0)

Let me start with a disclaimer. I was in the banking industry for a while. That glamorous career with pretty good pay and a lot of perks was very difficult to leave.

Salary was comfortable, not to mention the additional perks such as family medical coverage, corporate car and (heavily) subsidised mortgage. Sometimes I still imagine what life would be like had I stayed in banking.

I don’t meet my old colleagues in person too much nowadays. Jakarta is that cruel. You know they’re around but we’re all too busy with our own jobs. And we seldom cross paths. The network of investors and startups don’t mix well with the network of banks. That is, until earlier this year when JP Ellis (founder of Cekaja.com) initiated a financial technology (fintech) meetup which we hosted at our coworking space Comma.

Fintech is the new sexy category. Everyone is talking about it. For startups and investors, it’s exciting because of the opportunities ahead. For banks and other financial services, it’s scary because you feel like Indiana Jones being chased by a boulder, you have to keep running without knowing what other dangers lie ahead. It’s that Temple Run game in real life.

Everytime I meet my old colleagues in banking now, they ask what is happening in fintech. I think it’s great that they want to learn and try to adapt and ensure they keep being relevant. A bank invited me for a chat with some of their senior management to find out more. An organisation based overseas connected to see what is happening in Indonesia. An embassy of a neighbouring country wants to link up their fintech industry to Indonesia.

All of a sudden fintech is as trendy as a heavily-pomaded-pompadour haircut.

Is it the end of financial services as we know it?

You may have read about some media writing headlines such as “A massive wave of startups is coming to crush the big banks”  and “What banks can learn from media companies that were hit by the digitization tsunami a decade ago”

After print media, telcos, radio and TV, are banks the next to lose their dominance? Bill Gates went as far as saying, “Banking is necessary, banks are not.” So is it really the end of the (financial service) world? And specifically for Indonesia, is the change really coming that fast?

Indonesian banks have the telcos as a great example. Back in 2000, the mobile revolution started and most Indonesians now have access to mobile phones without ever experiencing landline connections.

It isn’t impossible that the 80 percent of Indonesians currently without bank accounts will be transferring money to each other in the near future, without having a bank account.

The disruptions are real

Has there been any real examples of financial disruption? In more mature markets, we have seen quite a few of them. Let’s look at some memorable ones.

In most markets, the digital revolution starts with media and ecommerce. The ecommerce revolution during the first ‘dot com’ boom (late 90s) in the US was led by Ebay and Amazon. US has the highest credit card penetration in the world so payment was actually not a big problem for B2C ecommerce like Amazon. It’s a different story with ebay’s C2C ecommerce model. Only a few sellers had the capability of accepting credit card payments.

Then came Paypal.

What’s happening in Indonesia?

What can banks and other traditional financial institutions do?

“Let’s start tomorrow then!”

Enjoy the ride!