Indonesia’s fintech startups are gaining momentum

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Indonesia’s middle class is expanding faster than any other socio-economic group. According to a 2020 World Bank report, the country’s middle class grew from 7% to 20% of the population over the past 15 years, covering about 52 million Indonesians.

Despite such progress, Indonesia still lags behind its peers in Southeast Asia in terms of financial literacy and inclusion, according to the country’s Financial Services Authority (OJK). It reported that as of 2019, only 38.03% of Indonesia’s total population were considered financially literate, up from 29.7% in 2016. During the same period, financial inclusion also jumped by from 67.8% to nearly 76.2%, marking an increase of over 8%. These numbers indicate that Indonesia is still a savings-based society, the agency says.

In comparison, a recent regional study found that Singapore scored 78% and 51% for financial literacy and inclusion, respectively.

To become a developed country, Indonesian society needs to shift its focus from savings to investing, according to the Indonesian Fintech Association. It’s not an easy task, though, as low financial awareness results in low investment ratio. But the rise of fintech companies and the number of digital transactions offers hope for the future. As of June 2020, 158 fintech companies were registered and licensed to operate in Indonesia, climbing from 113 during the same period in 2019, according to data from the OJK. The number of fintech users among Indonesians has also skyrocketed, with millennials leading the charge. In fact, over 70% of peer-to-peer (P2P) lenders come from this age group.

Let’s take a look at some of the digital investing assets in Indonesia.

Digital gold

As the price of gold tends to increase over the years, this precious metal is traditionally a safe haven for investors. Thanks to digitalization, investing in gold has become easier than ever. People can get started with just a few clicks and as little as 100 rupiah (US$ 0.007) to invest in platforms like BukaEmas, the digital gold-buying feature of ecommerce player Bukalapak. Unlike in traditional investing, e-gold investors can use an app to follow price fluctuations and don’t need a safe for storage. But they can request to get physical gold once their investment reaches at least 1 gram.

In the last five years, more and more fintech players have entered Indonesia’s digital gold market, from established names like Antam and Pegadaian to renowned tech companies such as Tokopedia and Gojek, which target a younger market. Since Tokopedia’s e-gold service was launched in January 2019, the number of buyers on the platform has climbed over 12x. Bukalapak said that it had 2.5 million gold buyers on BukaEmas in July 2019, up from 600,000 in 2018.

Read: Why are Gojek, Bukalapak, and Tokopedia gunning for digital gold?

 

Peer-to-peer lending

P2P lending has gained popularity in recent years. Aside from offering fund distribution, fintech companies are also looking for ways to attract young investors. According to a 2018 report from asset management firm Schroders, 73% of people in Indonesia bet on sustainable investments instead of funds that don’t consider sustainability.

Apart from seeking to protect the environment and reduce carbon footprint, sustainable investments also support low-income earners and create more job opportunities. For instance, P2P lenders Amartha and Mekar are helping women in rural areas build their own microbusinesses.

WHY IT MATTERS

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