Indonesian Fintech Players Enjoyed Better Ecosystem in 2017

Report from Indonesia FinTech Association

Photo courtesy of AFTECH

JAKARTA (TheInsiderStories) – Indonesia’s financial technology players enjoyed a stronger business growth last year, thanks to a more supportive regulations and a better collaboration with financial industry players, a report from Indonesia FinTech Association (AFTECH) showed.

The association recorded there are 235 financial technology companies operating in Indonesia last year. More than a third of this number are active in the payment system and the rest are involved in the fintech subsectors like loan-to-customer, market provisioning, investment management, insurance-technology, and equity capital raising.

The report also showed that users of fintech services mostly come from those in 25-35 years of age, have monthly revenue in average of between Rp 5 million to Rp 15 million and have good digital literation. It said the millenials are known to have good knowledge of technology and they easily adopt new innovations based on technology.

Ajisatria Suleiman, a director at AFTECH, said in a statement on Tuesday that several regulations released by authorities recently gave more certainties for players in the industry. Meanwhile, financial literacy of Indonesians also improved, especially among the millennial group.

*) AFTECH report also showed a regulation issued by the Financial Service Authority, or OJK, last year regarding peer-to-peer lender have helped the value of transaction in the fintech industry. OJK data showed transactions categorized as P2P lending were recorded at Rp 2.2 trillion.

*) The report also showed that last year of the total fintech players 77 percent of them have established direct collaborations with banks and 67 percent of them sealed indirect collaborations. About 63.9 percent of players in the country have also been connected to banks through application program interface (API), which refers to a system that allows applications talk to each other without human intervention.

*) Thanks to a better ecosystem, AFTECH report also said 49 percent of fintech companies were willing to spend capital expenditure to develop solutions over data security, while 34 percent of them were willing to spend on data warehousing and 23 percent of them were serious in developing digital signature solution. This will be inline with what regulators are demanding from players, so that they can offer innovative digital financial services, but also carries a good mitigation ability for possible hacking, or frauds.

*) The report also unveiled that based on annual reports of the recorded players, 41.4 percent of them have implemented international standard for keeping information assets secure and they are hoping that the requirement for them to comply with the ISO/IEC 27000 about information assets security, which was set by the Information, Communication and Technology (ICT) Ministry, can be elaborated into more details.

*) With regards to scale of business, despite most players were established from the period of 2015-2017, almost 32 percent of them now have more than 100 employees. “This shows that the scale of business of fintech companies is getting bigger. This also proofs that employment creation are getting more prospectives,” the report said.


Despite all the good news above, AFTECH noted some challenges in this industry. They are:
*) Human resources. Players are still struggling with skill gap, especially for data and analytics aspects, financial industry knowledge, back-end programming, user experience design and risk management aspects.

It said as the umbrella organization that seeks to improve fintech ecosystem in Indonesia, AFTECH continues to expand its networks and cooperates with a number of parties, including recently forging a cooperation with the Australian government that facilitated human resources exchange, offer some expertise, help teach about the technology aspect and give aid in capital. Indonesia’s fintech industry also in a dire need for human resources qualified in data science, AFTECH director Aji said.

The association also expects to improve communication with the central bank, Bank Indonesia, which regulates the country’s payment system and OJK, the regulator for the banking system.

AFTECH also noted that 62.3 percent of fintech players saw that verification of potential customers without meeting them in person, or related to the know-your-customer (KYC) aspects remain a homework to be further regulated.

AFTECH secretary general Karaniya Dharmasaputra pointed out that the main obstacle of players is how to make presence-less and paperless verification. He also pointed out that Indonesia’s archipelagic geopraphical position may pose a great challenge for players to extend their services into the far out regions.

What Is the Future FinTech ?

The report also offers prediction of where the fintech industry is heading and what type of services still dominate in the future.
*) Transportation application, e-commerce and independent fintech companies are expected to dominate the line of businesses that players offer.
*) With regards to competition landscape, the report predicts that the biggest players will be dominated by those already offering internet platform services, part of the global technology chain, part of the conventional financial institutions, or companies that are already backed by technology infrastructure, including in this category is telecommunication companies.

Want to Know More About AFTECH?

AFTECH is an association that serves as an umbrella organization of technology-based companies offering financial services. It was established on September 2015 and was officially registered at the Ministry of Justice and Human Rights as an organization in March 2016. AFTECH opened its door for members from May 2016 and now is supported by 114 pioneer of fintech companies and 23 financial institutions.