Posted on

Indonesia fintech: opportunity, competitors, and trends

Bar chart showing top 10 countries by number of startups in January 2021. The U.S. lead the tally followed by India, the United Kingdom, Canada, Indonesia, Germany, Australia, France, Spain, and Brazil.

With a significant unbanked population, a burgeoning e-commerce market, and a tech savvy, young population, Indonesia’s fintech growth story is unfolding with a number of startups disrupting an industry that has traditionally been dominated by big banks and financial institutions.

Indonesia is among the top five in the world in terms of number of startups. According to Startup Ranking, with 2,200 startups, Indonesia is ranked fifth in the world and second in Asia in terms of number of startups.

Bar chart showing top 10 countries by number of startups in January 2021. The U.S. lead the tally followed by India, the United Kingdom, Canada, Indonesia, Germany, Australia, France, Spain, and Brazil.

Apart from e-commerce, fintech is a major segment in Indonesia’s startup scene. According to the Financial Technology Association in Indonesia, the country had 362 fintech startups as of end-January 2020.

However it is not just startups jostling for a share of Indonesia’s fintech pie. Incumbent financial giants such as Bank Mandiri, Bank Tabungan Negara,  Bank Rakyat Indonesia, are increasingly flexing their muscles too, either through organic market entry strategies or through inorganic growth, such as through investments and acquisitions. A notable example is Bank Mandiri, Indonesia’s largest bank, whose venture capital subsidiary Mandiri Capital Indonesia which was launched in 2016, has already invested in at least 13 fintech startups and is reportedly on the hunt to invest in more, armed with about USD 5 million available for investment. Startups in Bank Mandiri’s portfolio include microfinance startup Amartha (a peer-to-peer (P2P) lending platform focused on micro enterprises owned by women, and Crowde, a P2P lending platform focused on farmers.

State-owned Bank Tabungan Negara (BTN) has taken a partnership route, striking an agreement with homegrown online lending platform Koinworks to lend IRD 75 billion in loans to SMEs in the property sector.

Bank Rakyat Indonesia (BRI), Indonesia’s oldest banking institution, meanwhile has so far adopted a mixed strategy through partnerships as well as acquisitions. The bank struck a partnership with Investree, a homegrown P2P lending marketplace, to support the working capital requirements of entrepreneurs in the creative industry which includes handicrafts, fashion, design, architecture and ad agencies to name a few. Businesses in these industries are often overlooked by the formal financial sector as they often have little in the way of assets, inventories or machinery to pledge as collateral. Their people and “ideas” are difficult for banks to consider as collateral, and consequently they often lack access to capital from traditional lending and financial institutions compared to other industries. The BRI-Investree partnership aims to solve this problem, with Investree assessing the credit worthiness of the company, before getting a final approval from BRI for funds to be released to the loan applicant.

BRI has also been active in the acquisitions space, through its venture capital arm PT BRI Ventures Investama which reportedly has USD 250 million of available capital for investment.

Growth drivers

Indonesia’s burgeoning e-commerce market is a key growth driver towards digital payments adoption. Cards and cash are currently the most popular payment methods for online shopping accounting for 33% and 16% of e-commerce payments respectively in 2019 according to data from JP Morgan.

Digital wallets meanwhile accounted for just 16% of e-commerce payments that year, making it the third most popular online shopping payment method along with cash. By 2023, it is forecasted that digital wallets will surpass cash accounting for 22% of e-commerce payments for the year, remaining as the third most popular e-commerce payment method while cash drops to fourth position.

Column chart showing the most popular e-commerce payment methods in Indonesia in 2019, and forecast for 2023. In 2019, card was the most popular payment method followed by bank transfer, digital wallet, and cash.

Indonesia’s demographic segments offer tremendous potential to drive an expansion in the country’s fintech industry in the years ahead. The country’s rising middle class, and its young, tech-savvy population are expected to continue driving the country’s digital economy, and digital payments is expected to be a major beneficiary of that growth. Out of its massive population of more than 250 million, about 40% are aged 24 and below, while 42.56% are in the working age group of 25-54 years according to data from the CIA World Factbook. Like the rest of the world, this working age generation stands to drive the country’s GDP per capita which bodes well for the economy.

Internet penetration in the country rose to 73.7% in 2019 (amounting to 196 million people), from 64.8% (or 171 million people) the previous year according to data from Indonesia’s Statistics department, with an overwhelming 95% of them accessing the internet through smartphones.

Regulatory environment

With the country having a large unbanked population, the government is actively pushing to increase financial inclusion, a positive regulatory environment for the country’s blossoming fintech industry.

According to a report by Google, Temasek, and Bain & Company, Indonesia has around 47 million underbanked (nearly a fifth of its population), and 92 million unbanked adults (representing about a third of its population), which indicates a sizeable market for fintech.

A key component of the Indonesian government’s push to nurture the fintech sector and encourage innovation is the OJK Regulatory Sandbox (POJK 13/2018), which is closed testing environment aimed at entrepreneurs and startups for the safe experimentation of new technologies which do not currently fall under OJK legislative protection. Participating in the sandbox temporarily exempts companies from OJK’s non-prudential requirements. The sandbox period lasts one year, after which time participating companies are eligible for a six month extension. Upon completion of testing, the OJK will determine if the fintech is (i) recommended (ii) requires improvement; or (iii) not recommended. If recommended, the fintech company may proceed to register with the OJK.


Much of this underbanked and unbanked population reside in rural areas, where financial literacy is relatively low compared to residents in urban areas. Lower financial literacy levels lead to trust deficits which in turn present challenges to increasing adoption rates of fintech solutions among this demographic.

Digital payments

Cash is king in Indonesia, and in fact, Indonesia is the second-largest cash based economy in the world. However, this is poised to change as its youthful tech, savvy population and its growing digital economy serve as catalysts for growth in the digital payments space.

Riding on the country’s e-commerce growth which has been a major beneficiary of the pandemic, digital payments in Indonesia is on the rise. A 2017 survey found that 84% used online wallets for online shopping purposes and as the country’s e-commerce sector continues to grow, online payments is poised for growth as well.

Merchant partnerships are key to e-wallet adoption, particularly to capture “low hanging fruit” such as mobile air time top-ups.


Indonesia’s digital payments space is quite crowded with more than 30 players vying for a slice of the market. Notable players include GoPay (owned by homegrown ride-hailing giant Gojek which is aiming to become Indonesia’s answer to China’s super app WeChat), Doku, OYO, and LinkAja (owned by Indonesian wireless operator Telkomsel and local banks Bank Mandiri, Bank Tabungan Negara, Bank Negara Indonesia, and Bank Rakyat Indonesia.

Going forward, these payment processors are likely to have to face competition from foreign rivals as well.

With e-wallets having relatively little room for differentiation, it is likely that e-wallets that are deeply entrenched a vast ecosystem will find greater success compared to standalone payment apps with limited reach. Examples include GoPay (owned by Indonesia’s ride-hailing giant GoJek which is aiming for superapp status), and OVO which cannot boast an ecosystem to rival GoPay but does have significant reach thanks to partnerships with Singapore-based ride-hailing giant Grab and Indonesian e-commerce giant Tokopedia, after both failed to secure licenses for their respective payment platforms. Both are reportedly the number 1 and number 2 e-wallets in Indonesia, followed by Dana, and LinkAja according to figures from AppAnnie and iPrice.

GoPay is currently the leading e-wallet in Indonesia with a market share of 60% according to a survey conducted by market research firm Ipsos, which was commissioned by Gojek (which owns GoPay).

Looking at the e-wallet duopoly in China which is dominated by Alibaba’s Alipay and Tencent’s WeChatPay, both of which grew their respective platforms thanks to the popularity of their own ecosystems, it is likely Indonesia will follow a similar trend with just a handful of e-wallets commanding meaningful market share. GoPay with its ride-hailing platform looks poised to continue commanding a market leading position going forward, as the startup continues to expand its platform to other areas beyond its core ride-hailing business such as video streaming.

Online investment platforms

Indonesia’s online investment platforms had a bonanza year in 2020 as the number of retail investors surged, providing a buffer for the local bourse and foreign investors exited Indonesia which is considered to be an emerging market (which is riskier than a developed market). Thousands of individuals, stuck at home, and numerous others among the millions of Indonesians who lost their jobs as a result of the pandemic (more than 9.5 million people were unemployed as of August 2020, an unemployment rate of 7.07%), turned to online trading as an additional source of income. Mandiri Securitas, a leading stockbroker in Indonesia reportedly acquired 11,000 new retail customers in the four months up to April 2020, adding to the brokerage firm’s 133,000 existing retail clients. Mandiri Securitas also saw a two-fold increase in average transaction value for its retail customers in April compared to January.

By June, the Indonesia Stock Exchange (IDX) reported that retail investors dominated stock trading, accounting for 52% of trading value that month.

Yet, with the number of retail investors standing at just 1.2 million as of June 2020 according to data from (representing less than 0.5% of Indonesia’s total population of 250 million), there is tremendous opportunity for further growth in the years ahead In Southeast Asia’s largest economy.

Investors aged between 18 and 30 made up the fastest-growing investor segment over the past few years, and their ascent up the income ladder, along with government-endorsed education and campaigns, the number of retail stock investors is poised for growth.

Domestic investors made up 55.71% of investors at the end of 2019 but as of 08 January 2020, domestic investors made up more than 80% of total investors according to statistics from the Indonesia Stock Exchange.


Sensing a long term opportunity, venture capital firms and online investment startups have been quick to capitalize, with a number of them successfully raising millions of dollars in funding.

Ajaib, an online investment platform that enables investors to invest in stocks, ETFs and mutual funds raised USD 25 million in Series A financing in January 2020, in a funding round led by Horizons Ventures, a venture capital arm founded by Hong Kong billionaire Li K-Shing, and Alpha JWC. Founded in 2018, the startup is less five years old, and claims to be the fifth largest stock brokerage firm in Indonesia. The startup had acquired stock brokerage firm in May 2020 Primasia Unggul Sekuritas (Primasia Sekuritas) as part of its efforts to expand from providing investors with mutual fund investment services, to providing share investment services as well.

A week earlier, Indonesian investment robo advisor Bibit raised USD 30 million from Sequoia Capital India who led the round, along with participation from existing investors East Ventures, EV Growth, AC Ventures and 500 Startups. Found in early 2019, Bibit’s robo-advisory platform builds customized mutual fund portfolios based on the users’ risk profiles and investment goals. Barely two years old, the startup has already seen phenomenal growth with more than a million first time investors joining in 2020 alone, and transaction volume rising ten-fold. Having implemented a strategy of targeting millenials early on the platform’s launch, the startup is likely to have benefited tremendously with more than the Indonesia Stock Exchange reporting that the number of retail investors jumped 56% in 2020 compared to a year ago, driven largely by millenials with 92% of new investors in 2020 coming from the 21-40 age group. The startup owners sensed an opportunity to offer a quick, easy, investment platform for mutual funding investing after observing that the millennial generation are simply not inclined towards opening wordy, time-consuming accounts at traditional investment firms and brokerages. Bibit CEO Wellson Lo along with parent company Stockbit acquired Bibit in 2018 for an undisclosed amount, after the latter had obtained a license as a mutual-fund selling agent from Indonesia’s Financial Services Authority (OJK) in 2017.

The Stockbit team then pivoted the platform from mutual fund marketplace to robo advisory, using Modern Portfolio Theory principles introduced by economist Harry Markowitz to design optimal portfolios for their investors.

Regulatory environment

Even before the pandemic, the Indonesian government had taken steps to increase retail participation. For instance, trading rules such as minimum lot size and minimum trading price were eased in 2019.  And several years before, the government initiated national campaigns as part of a strategy to attract middle-class citizens to invest.