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JAKARTA (TheInsiderStories) – Financila technology (FinTech) startups in Indonesia have initiated a revolution in the way financial institutions, including banks, in the country are intended work. The presence of the FinTech company has given an opportunity to citizens who have so far never had access to a bank, including those who have no banking saving accounts (because of deposit limits), by offering digital payments  based on smartphone applications.

According to Pricewaterhouse Cooper research, digital payments have become so big across the archipelago that the total transaction value in the “Digital Payments” segment amounted to US$18 million in 2017. Additionally, this total transaction value is expected to show an annual growth rate between 2017-2021 of 18.4 percent, resulting in a total of $36 million in 2021.

Popular FinTech categories in Indonesia are lending platforms, capturing 17 percent and marketplaces for financial products, that have occupied 13 percent.

Based on Indonesian data from the Global FinTech survey, FinTech is seen to be either ‘very important’ or ‘important’ by most industry and technology players in Indonesia. Payment systems and fund transfers are seen as the two areas most at risk to move to FinTech over the next five years.

In Indonesia, FinTech participation in digital payments was first set up on 2001, by Kartuku. Kartuku is one of Indonesia’s oldest electronic payments companies, a Third Party Processor and Payment Service Provider offering hardware products such as payment terminals, network access equipment, and card printers and encoders, and software solutions such as transaction processing switch, Internet payment gateway, smart card applications, and terminal line encryption.

Joining the company in 2006, Kartuku Chief of Executive (CEO) Niki Luhur explained how he wants to restructure and overhaul the whole concept with a focus on building payment infrastructure systems. Despite the company’s success in acquiring millions of consumers into its debit card network, it became evident that under-performing acceptance infrastructure compromised the user experience and consumer adoption.

Luhur set out to build a mission-critical infrastructure that was desperately needed to deliver electronic payments for the modern retail market. He believed in driving acceptance to a wider merchant base through shared infrastructure. Ten years later, he has managed to build the leading independent payment acceptance platform in Indonesia. Kartuku is now focused on further driving value by creating integrated omni-channel offerings and merchant prepaid platforms.

“Our dream is to increase the number of merchants and continue to develop better systems, considering there is great potential where many Indonesian people are likely to have bank accounts as the financial inclusion program progresses,” Luhur told TheInsiderStories.

Biggest Indonesia cellular operator PT Telkom Selular, unit of state-owned telecommunication operator PT Telkom Indonesia Tbk (IDX: TLKM) has launched Tcash: instead of paying with cash or a debit card, customers can now use T-Cash with a cellular phone to pay for various services and goods and to transfer money.

Besides Telkomsel, in 2013 other telecommunication company, PT XL Axiata Tbk (IDX: EXCL) launched Tunai, that allows XL customers to make financial transactions by only using their phones. Types of transaction that can be used are XL credit purchase, billing payment, shopping at merchants, online shopping, also national and international remittances, all of which can be carried out at anytime and anywhere.

Surprisingly, ride-hailing services are also disrupting the country’s banking industry by offering electronic wallets as the first step to introduce banking products to previously unbanked residents.

With a valuation of about $1.3 billion, Go-Jek has emerged as one of Indonesia’s largest and most promising internet service companies. Mobile wallet GoPay now handles payments for many Go-Jek transactions.

Not only Go-Jek, Singapore based ride-hailing Grab is making a big push to seize the opportunity. The company recently pledged to invest $700 million into its Indonesian operations, which includes building out its team, localizing its tech and making investments.

Grab recently snapped up Kudo Payments with estimating cost of $80 million to $100 million. The acquisition is designed to boost Grab’s own payment platform, GrabPay, which is following GoPay’s footsteps and taking Grab into services beyond just car rides.

According to Google and AT Kearney research, Indonesia’s startup market is rising with investment growing 68 times over the past five years to reach $1.4 billion in 2016 and jumping to $3 billion in the first eight months of 2017.

“We can see that the momentum of start-up investment has doubled from 2016. The findings of this report are very useful and we hope this can help increase investment in the start-up ecosystem even further,” said Managing Director of Google Indonesia Tony Keusgen.

Due to massive growth, the value of startup investments in Indonesia may surpass the nation’s oil & gas investments, which was $5 billion in 2016. Based​ ​on​ ​both​ ​a​ ​comprehensive​ ​analysis​ ​of​ ​the​ ​Venture Capital ​ ​landscape​ ​and​ ​investment​ ​flows,​ ​as well​ ​as​ ​a​ ​broad​ ​range​ ​of​ ​interviews​ ​with​ ​over​ ​25​ ​local​ ​and​ ​foreign​ ​Venture Capitals,​ ​the​ ​study​ ​seeks to​ ​understand​ ​investor​ ​outlook​ ​and​ ​priorities​ ​in​ ​Indonesia​, and​ ​is​ ​the​ ​first​ of​ ​what​ ​is expected​ ​to​ ​become​ ​an​ ​annual​ ​publication.

The results of Google and AT Kearney research also concluded that future investment is highly dependent on investor confidence in market conditions, referring to the response of investors in looking at the Indonesian market, both in the long and short term.

Writing by Elisa Valenta, Email: