Global Investors ‘Bullish’ on Indonesian FinTech StartUps
Indonesian FinTech startups have attracted global venture capital giants, such as the Japan-based venture capital firm CyberAgent Ventures.
Indonesian FinTech startups have attracted global venture capital giants, such as the Japan-based venture capital firm CyberAgent Ventures. Earlier this month, the firm announced that more than half of their new US$50 million fund will be dedicated to Indonesian startups.
Steven Vanada, Vice President of the firm announced:
“We are very bullish, especially on Indonesia. In the next few years, I think we will see a tipping point.”
The VC fund will most likely focus on bitcoin startups like Blossom that utilizes an innovative technology such as the blockchain to solve problems of locals that the banks cannot. For example, Blossom attracts global investors to fund small business in Indonesia that are ready to launch. Twelve months later, the profits of the funded business will be distributed to the investors, with an additional 7.5 % of return.
According to the World Bank inclusion Data published in 2014, the percentage of Indonesians above 15 years of age with a bank or a financial account stood at about 36%, which was substantially lower than most countries in East Asia and the Pacific.
Indonesia’s low bank account and credit card penetration rate lies in banks failures to understand the financial problems that the majority of the country’s population suffers from. Not only in Indonesia, but in most countries, banks require a list of qualifications and documents in order for a person to apply for a bank account or a credit card, which often is hard to obtain for people with low income, or those wanting to send or receive small payments.
By recognizing such problems, FinTech startups in Indonesia have developed faster, cheaper and more secure ways to transfer money around the country and across the globe — as well as alternative ways to pay online, especially at e-commerce stores — without undergoing the complicated process of setting up credit cards and paying high transaction fees.
Mohit Mehrotra, an executive director at Deloitte Consulting, told local media:
“Asia has a huge potential for FinTechs. Countries like India and Indonesia, with their low financial services penetration and large unbanked and underserved populations, are perfect breeding grounds with several white spaces for FinTechs to play an important role.”
Cheap and secure methods of transaction settlements developed by FinTech startups, that could be easily availed by the unbanked, have aroused the interests of large financial institutions. Mehrotra stated, “Big banks, by nature of their legacy set-ups, find it increasingly difficult for forging new digital-enabled business models that FinTechs specialise in.”