February 26, 2024

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Fintech outperform banks in Indonesia

The role of information and communications technology has been redefined at the onset of the global COVID-19 crisis. Pre-pandemic, ICT was already considered a critical backbone of emerging markets but this was made more apparent today as organisations struggle to get back on their feet and recover from the massive impact of the pandemic.

According to a recent report, the popularity of reloadable wallets has prompted tremendous growth in electronic money payments in at least three large Southeast Asian markets. The digital ecosystem in Southeast Asia is being rapidly developed thanks to key sectors like e-commerce, ride-hailing and entertainment – mainly gaming.

In 2019, itself, electronic money transactions in the region, excluding the Philippines, reached US$ 26 billion. While bank payment services continue to dominate Singapore, Malaysia and Thailand, data indicates that nonbanks are surging in the Philippines and have replaced banks as primary payment providers in Indonesia.

The report ‘Southeast Asia E-Money Market Report’ shows that Indonesians favour payments through financial technology (fintech) platforms over banks. In fact, fintech payment services in Indonesia are the largest in Southeast Asia where digital wallets (e-wallets) from fintech contribute around 72% of electronic money transactions in the country. The total transaction value was US$ 10 billion.

This preference has, in turn, driven a wide range of online transactions including e-commerce, education and entertainment. The services most frequently used include money transfers, bill payments and purchases. Fintech companies in Indonesia have built physical and digital infrastructure to facilitate easy transactions on a platform.

The fintech associated with a leading e-commerce online shopping platform contributed more than 10% of electronic money transactions in Indonesia. However, other research maintains that an established payment gateway is still leading.

Fintech has been greatly boosted in Indonesia by the rapidly increasing number of smartphone users and comprehensive connectivity. A survey by the Indonesian Internet Service Providers Association (APJII) also showed that the number of internet users in the country reached 196.7 million as of the second quarter of 2020. The number increased to 8.9% compared to 2018. S&P estimates that the use of fintech as a payment option in Indonesia continues to increase.

Not to the outdone, banks definitely plan to broaden their portfolio with digital offerings and services. “About 15 banks are very aggressive in exploring digital services,” said Governor of Bank Indonesia (BI) Perry Warjiyo Bank Indonesia. The governor agreed that digital service transactions were given a major boost by the rocketing use of e-commerce during the pandemic.

He estimated that bank digital service transactions reached IDR 27,036 trillion (US$ 2,000 trillion) last year while this year the value is predicted to be IDR 32,206 trillion (US$ 2,284 trillion). Warjiyo pointed out that this figure was much higher than the nominal gross domestic product (GDP), so BI would adopt a highly aggressive approach in digitising the payment system.

Supported by online transactions the total digital banking transactions which were estimated last year at Rp253 trillion (US$ 18 trillion) are expected to climb by 33.2% to reach Rp337 trillion (US$ 24 trillion) this year.

The Financial Services Authority (OJK) noted that the accumulated lending by financial technology companies (fintech lending) reached IDR 155.9 trillion (US$ 11 trillion) as of 2020. The Indonesian Joint Funding Fintech Association (AFPI) targets to provide loans this year at IDR 86 trillion (US$ 6 trillion). If this target is achieved, then the disbursement of financing by fintech lenders will reach around IDR 241.9 trillion (US$ 17.3 trillion) by the end of 2021.

Perry governor outlined four aspects for all banks to take into account while striving to drive open banking.

  • transformation of technology infrastructure, wherein all banking service systems are interconnected, for instance, services related to treasury, credit, and funds
  • building a data warehouse from various information systems owned by the bank, including the metadata of depositors and debtors
  • development of business models based on information technology systems and metadata owned by the bank to offer interactive services online to customers, he explained.
  • changing the mindset, right from the highest levels of the company to subordinates, in bringing about digital transformation

Acknowledging that “the corona pandemic is accelerating the digitalisation of the economy and finance”, Perry said economic growth and digital finance were extraordinary.

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Qlik’s vision is a data-literate world, where everyone can use data and analytics to improve decision-making and solve their most challenging problems. A private company, Qlik offers real-time data integration and analytics solutions, powered by Qlik Cloud, to close the gaps between data, insights and action. By transforming data into Active Intelligence, businesses can drive better decisions, improve revenue and profitability, and optimize customer relationships. Qlik serves more than 38,000 active customers in over 100 countries.

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CTC Global Singapore, a premier end-to-end IT solutions provider, is a fully owned subsidiary of ITOCHU Techno-Solutions Corporation (CTC) and ITOCHU Corporation.

Since 1972, CTC has established itself as one of the country’s top IT solutions providers. With 50 years of experience, headed by an experienced management team and staffed by over 200 qualified IT professionals, we support organizations with integrated IT solutions expertise in Autonomous IT, Cyber Security, Digital Transformation, Enterprise Cloud Infrastructure, Workplace Modernization and Professional Services.

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Planview has one mission: to build the future of connected work. Our solutions enable organizations to connect the business from ideas to impact, empowering companies to accelerate the achievement of what matters most. Planview’s full spectrum of Portfolio Management and Work Management solutions creates an organizational focus on the strategic outcomes that matter and empowers teams to deliver their best work, no matter how they work. The comprehensive Planview platform and enterprise success model enables customers to deliver innovative, competitive products, services, and customer experiences. Headquartered in Austin, Texas, with locations around the world, Planview has more than 1,300 employees supporting 4,500 customers and 2.6 million users worldwide. For more information, visit www.planview.com.

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SIRIM is a premier industrial research and technology organisation in Malaysia, wholly-owned by the Minister​ of Finance Incorporated. With over forty years of experience and expertise, SIRIM is mandated as the machinery for research and technology development, and the national champion of quality. SIRIM has always played a major role in the development of the country’s private sector. By tapping into our expertise and knowledge base, we focus on developing new technologies and improvements in the manufacturing, technology and services sectors. We nurture Small Medium Enterprises (SME) growth with solutions for technology penetration and upgrading, making it an ideal technology partner for SMEs.

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HashiCorp provides infrastructure automation software for multi-cloud environments, enabling enterprises to unlock a common cloud operating model to provision, secure, connect, and run any application on any infrastructure. HashiCorp tools allow organizations to deliver applications faster by helping enterprises transition from manual processes and ITIL practices to self-service automation and DevOps practices. 

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IBM is a leading global hybrid cloud and AI, and business services provider. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Nearly 3,000 government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM’s hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM’s breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and business services deliver open and flexible options to our clients. All of this is backed by IBM’s legendary commitment to trust, transparency, responsibility, inclusivity and service.

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