The combination of Indonesia’s large underbanked population, a strong economic growth trajectory, political stability, transparency in regulation, and increasing openness to foreign investment makes the nation a leading focus market for investors - particularly from Japan and China.
Indonesia is gaining the necessary momentum to attract global investment – particularly in the financial sector - riding on the country’s success during last year’s G20 presidency.
And heavyweight State-run pension funds and Sovereign Wealth Funds – from as far afield as North America, Western Europe, and the Middle East – are also looking to channel investment funding into Indonesia over the next two years.
These funds will be directed at public markets such as the Indonesia Stock Exchange (IDX) as well the private sector - with digital businesses being a primary target.
In this latest Industry Snapshot from Wellington Capital Advisory <here>, we examine the investment outlook for the dynamic and rapidly-evolving Fintech sector in Indonesia, which follows on from our previous report on payment platforms The State of Financial Services Innovation in Indonesia: Payment Platforms.
The digital payment industry continued to grow steadily last year, and yet there are some underlying competitive distortions that are serving to constrain the maturation of the market.
Sub-scale digital service providers are competing head-to-head with each other, while simultaneously taking on the conventional banking giants that in turn are establishing their own-brand platforms.
Industry observers are proposing that consolidation - through mergers and acquisitions – amongst the new generation providers would result in bigger opportunities for them by levelling up the competitive landscape.
The alternative option for these operators is a ‘collaborate-to-grow’ approach, whereby they combine their respective capabilities – digital payments, peer-to-peer loans and credit cards for instance – in order to create an integrated portfolio of services to the market.
This moves the sector in the direction of establishing a scalable and extensible eco-system that offers greater choice and enhanced security for users – both consumers and MSMEs.
We lay out the current structure of the Fintech market place in this Wellington Snapshot and highlight some of the major opportunities and challenges for the current providers in establishing a sustainable competitive position.
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