Strategy Note /

The ultimate guide to Indonesia fintech

  • The ecosystem lags other EMs on diversity and profitability but Grab’s US$3bn fund-raising this year changes the game

  • Key strategies: introducing new products, customer segments, technologies. Tackling financial exclusion will spur growth

  • Major growth constraints are distribution, informal competition. Incumbents are responding via technology, cost-cutting

The ultimate guide to Indonesia fintech
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Tellimer Research
15 December 2020
Published byTellimer Research

This 15-page report, part of our series on the risks and opportunities in the key emerging fintech markets, evaluates Indonesia by drawing on the results of three detailed proprietary surveys of 15 local fintechs, 7 incumbent firms and 100 consumers, allied to desk research into 203 local fintech firms.

Our key findings

  • Indonesia’s fintech landscape scores poorly relative to other EMs in terms of its funding access, the diversity of product offerings, and the profitability and scale of individual firms.

  • Major values that fintechs bring to their customers include product quality, convenience and responsiveness.

  • Fintechs are likely to grow market share, mainly by enfranchising financially-excluded customers. Traditional firms are also likely to increase market share, for the same reason.

  • Key strategic priorities for fintechs include expanding their product suites, entering new customer segments and investing in technology such as chatbots and artificial intelligence.

  • Market dynamics, distribution capacity and competition from the informal sector are key growth constraints.

  • Deposit insurance, consumer protection and partnership agreements are the main regulatory hurdles Indonesian fintechs face.

  • Incumbents are primarily responding to fintech competition by investing in technology, and through cutting costs.

  • We throw the spotlight on Gojek, which has secured US$3bn funding so far this year, and is reportedly in merger discussions with Singapore’s Grab.

Indonesia’s fintech landscape

Source: Tellimer Research, Crunchbase



We examine the current fintech landscape in Indonesia, including firms’ success factors, future strategies, innovations and growth constraints, and gauge the impact of fintechs on their customers. We evaluate listed financials, telecoms and technology sector incumbents in the country to assess how they are responding to the fintech threat. We also analyse the results of our survey of Indonesia consumers to ascertain their current financial product preferences and future expectations, and what that means for Indonesian fintechs. We profile Gojek, the leading local firm that now has the financial firepower to drive the industry forward. And lastly, we highlight some interesting innovations from selected local fintech firms.

Indonesia’s fintech landscape scores poorly compared to other emerging markets. Funding access is limited, fintechs are concentrated in traditional segments such as payments and lending, and industry profitability is also poor, with only 13% of fintechs currently in the black. The top values Indonesia’s fintechs offer their customers are product quality, convenience and responsiveness. The most important factors driving these firms’ success to date include first-mover advantage and funding access.

Looking ahead, Indonesian fintechs are likely to increase their market share (by around 5ppts, in line with global EM peers), primarily through increasing the size of the pie (ie enfranchising financially-excluded customers). To achieve this growth, fintechs are planning to introduce new products, enter new customer segments and undertake technology investment; targeted innovations include introducing digital banking, chatbots/ virtual assistants and artificial intelligence.

Overall market dynamics, distribution and competition are the major constraints to fintech growth, while deposit insurance, consumer protection and partnership agreements are the key regulatory hurdles.

Technology investment and operational efficiency are the main strategies being pursued by incumbents in Indonesia to better compete with fintechs.

The fintech landscape in Indonesia is dominated by payments and lending firms

The Indonesian fintech ecosystem is not well-diversified and primarily comprises of payments and lending firms, which together account for 73% of total fintechs compared to the 56% global EM average. Blockchain is underdeveloped in Indonesia relative to other large emerging markets.

Indonesia's fintech product mix

Indonesia’s level of fintech sophistication is poor

To evaluate Indonesia’s fintech sector, we assessed the country relative to six other emerging markets (Brazil, China, India, Kenya, Mexico, South Africa) across a range of metrics (fintech density; scale of fintechs; ecosystem diversity & profitability; funding access; positioning and strategy).

Indonesia fintechs score poorly, ranking last among the seven assessed countries. The major areas of weakness are a lack of funding access, poor ecosystem diversity, weak profitability and the generally small scale of the country’s fintechs. Only 27% of fintechs are outside of payments and lending, lower than EM average of 44%, and only 13% of surveyed fintechs are currently profitable (37% for EMs). However, firms’ positioning and growth strategies are broadly comparable to global peers, in our view.

Fintech sophistication scores

Funding analysis – Indonesia lags peers...

Indonesia’s fintechs raised cUS$350mn funding in 2019 across 25 deals. This quantum is much lower than for other emerging markets such as India, China and Brazil and is also less diversified, being concentrated in payments and lending. Gojek (a ride-hailing and mobile payments company) raised the most funding in both 2019 (US$100mn) and 2020 (with several injections totalling a massive US$3bn). Other top funding deals last year include FinAccel (US$90mn, a credit risk and consumer lending platform), Akulaku (US$40mn, lending platform).

Top fintech funding deals in Indonesia

...but Gojek’s US$3bn 2020 funding round could prove transformational

Compared with the levels of funding Indonesian fintech firms have historically been able to attract,  Gojek’s 2020 funding raising, led by high-profile investors including Facebook, Google, Paypal and Tencent, is on a completely different level. We think this transaction could prove transformational, not just for Indonesia’s fintech industry, but for the south-east Asia region.

With Singapore-based rival Grab also successfully raising large amounts of capital, both companies' long-running merger saga could finally move forward, with listed firm Sea’s cUS$100bn valuation pointing the way to an attractive exit route for existing shareholders. Two principal factors support a merger: the combined firm would benefit from greater scale and reduced competition in Indonesia (where both companies are leaders in payments, ride-hailing and deliveries); and Grab is on the hook to pay Uber US$2bn if it does not list by March 2023.

Gojek started life in 2010 as an Indonesian motorcycle ride-hailing firm, but now offers a suite of more than 20 different products and services. The firm has ambitions to become a super app for south-east Asia, mimicking the success of Alipay and WeChat in China.

Source: company data, Tellimer Research

 As highlighted above, the firm now has five key business areas:

  • Transport logistics: motor-bike and car ride-hailing, taxis, delivering parcels and heavy goods

  • Food & FMCG: food delivery, healthcare, online shopping

  • Payments: digital transfers, bill payments, credit products, insurance, investments, philanthropy

  • News & entertainment: video streaming, event ticketing

  • Business: helping businesses digitally connect and transact with consumers

Last month, Gojek’s co-CEO Andre Soelistyo indicated that the firms’ annualised gross transaction value for the year had risen 10% to US$12bn, despite the negative impact of covid on certain key business lines, such as ride-hailing. He said that all four core business areas delivered operational profit in the period.

According to our survey, Gojek considers product quality, innovation and distribution network as key factors for its success. Its strategic priorities are geographical expansion, introducing new products and technology investments (like chatbots and blockchain). Competition (both from formal FIs and informal channels) is a key growth constraint.

Given its sizeable war chest, we think the firm could look to extend its product and geographical footprint through acquisitions, while also investing heavily in organic growth to lift market share.

The fintech customer value-proposition: quality, convenience and responsiveness

According to Indonesian fintechs, the top values they deliver for their customers are high product quality, convenience and responsiveness. Relative to fintechs in other emerging markets, we observe there is more emphasis on product quality and less on pricing.

Product quality is a very broad term that includes factors like ease-of-use, product innovation, seamless execution and speed of service. This may explain why it is mentioned as one of the top values by both fintechs and consumers, not only in Indonesia but in most of our surveyed markets. Some Indonesian fintechs highlighting this as their key value proposition include Cashlez (payments) and Akulaku (lending).

Convenience. Accessing financial services from their smartphones is much easier for customers than visiting brick-and-mortar channels such as branches, or even ATMs. Convenience is a key value of investech and blockchain fintechs. This could be a key area of competitor differentiation, given that most fintechs place less emphasis on this area than their customers. Fintechs that cite convenience as their key value include Ovo (payments) and Pundi (blockchain).

Customer responsiveness. We think many incumbent firms are failing to address customers’ specific needs (due to difficulties in tailoring products/services), which is opening up opportunities for fintechs such as M-Cash (payments) and FinAccel (lending).

Key fintech values

Key factors for fintech success: first-mover and funding access

The top success factors cited by Indonesian fintechs are first-mover advantage and funding access. These factors are broadly in line with other emerging markets.

First-mover advantage. When consumers become familiar with using the product (such as in insurtech, where insurance plans can range from one month to lifetime) and as the userbase of a given network grows (eg a payments product), it becomes more difficult for customers to switch. Examples of firms citing this advantage include: Cermati (insurtech) and Ovo (payments).

Funding access. Some fintech products have a market structure where a few firms dominate, while other competitors have a very small market share. Therefore, to effectively compete with big industry players and achieve scale, start-ups may need significant funding for marketing, infrastructure and network-building. Overall funding access is limited in Indonesia compared to other EMs, as highlighted earlier, but is considered one of the essential factors for success, as noted by firms like Pundi (blockchain) and Cekaja (comparison platform).

Key fintech success factors

Fintechs’ plans: new products, customer segments and technology investment

Our survey shows that the top three strategies for Indonesia fintechs are introducing new products, entering new customer segments and technology investment. Compared with those in other emerging markets, Indonesia fintechs are more focused on introducing new products and less focused on enhancing management expertise.

Introducing new products. Payments and lending fintechs dominate Indonesia's fintech ecosystem, so there is a lot of scope to grow in other product areas such as insurtech, investech, blockchain etc. Fintechs planning to launch new products include Ovo (payments) and Tunaikita (lending).

Entering new customer segments. Indonesia is one of the world’s most populous countries with a diverse customer base, geographically, demographically and in relation to income, so it makes sense for fintechs to modify their existing offerings to appeal to new customer segments. Kinjerpay (payments) and Bareksa (investech) are among the fintechs planning to adopt this approach.

Technology investment. Technology like machine learning and artificial intelligence can improve the speed, cost and quality with which services are delivered to consumers. Cermati (insurtech) and Pay Ok (payments) are among the Indonesian fintechs planning more technology investment.

Fintechs’ future plans

Fintech innovations: Digital banking, chatbots and artificial intelligence

Considering their plans over the next three years, Indonesian fintechs, in line with other EMs, are focused most on digital banking, chatbots/ virtual assistants and artificial intelligence.  

Digital banking encompasses the full suite of products offered by traditional banks, but via digital channels. By adopting this approach, fintechs are simultaneously trying to capture a greater share of existing customers’ wallets and attract new customers to their franchise. Fintech companies with digital banking in their innovation plans include Gojek (payments) and SuperAtom (lending).

Chatbots and virtual assistants help improve the customer experience by automating customer service/education and simultaneously allow fintechs to reduce their operating costs by limiting the staff required to handle customer queries. Fintech companies with plans in this area include Cashlez (payments) and Koinworks (lending).

Artificial intelligence improves the efficiency of the industry and also enhances the customer engagement level and speeds up the query resolution period. Some firms targeting greater use of AI Pundi (blockchain) and Tunaikita (lending).

Targeted fintech innovations

Fintechs will gain market share by improving financial inclusion

We asked consumers which types of providers were meeting their current financial services needs for different products, and which ones they expect to use in three years. We used this data to estimate current and likely shifts in share of wallet for different types of firms. Currently, fintechs in Indonesia have a 10% share in the overall financial services industry, which is well below the 26% level for global EMs. Looking ahead, Indonesia fintechs are likely to gain 5ppts market share, in line with the average gain expected in global EM. The shift is mainly driven by offering services to financially-excluded customers. Note that these responses are unweighted; we think formal financial institutions would have a much higher share if our survey were volume-weighted.

Financial services provider market shares

Key constraints to fintechs’ growth: Market dynamics, distribution and competition

Market size and growth, distribution and competition are the three biggest growth constraints cited by Indonesia fintechs. Compared to fintechs in other EMs, distribution capacity appears to be a bigger challenge in Indonesia, possibly because of the geographical dispersion of the country, while the in-house skillset represents less of a concern.

Size and growth of the market. It can be difficult for industry leaders to outgrow the overall market, particularly as the number of competing fintechs rises. We think market size is impacted by customer awareness; for example, insurance is a less-penetrated product in low-income countries, and blockchain is still an area where corporates and individuals have minimal understanding. Kinerjapay (payments) and Cermati (insurtech) are among fintechs that cite market dynamics as a concern.

Distribution capacity. Smaller/ newer fintechs, like those in the insurtech sector, can struggle due to a lack of distribution capacity, particularly if they have been unable to develop partnerships with established companies or agent networks. For example, blockchain is still in its infancy, which is why many blockchain companies have failed to successfully partner with agent networks. Fintech companies citing this growth constraint include Tunaikita (lending) and Bareksa (investech).

Competition from the informal sector. Informal enterprises can benefit from lower operating costs, giving them a pricing advantage. Indonesian fintechs highlighting this growth constraint include Gojek (payments), SuperAtom (lending).

Key constraints to fintech growth

Fintech regulatory hurdles: Deposit insurance, consumer protection and partnership agreements

According to our survey deposit insurance, consumer protection and partnership agreements are the key regulatory hurdles that Indonesia fintechs face. Relative to other emerging markets, partnership agreements seems more of a regulatory hurdle for Indonesia fintechs while KYC/AML are less of a concern.

Deposit insurance. This challenge is cited more frequently by fintechs active in payments and lending. Since digital wallet accounts are one of the most frequently used financial products for low-income customers, they play a key financial inclusion role in emerging markets. This is drawing the attention of local regulators, who are understandably concerned about protecting customers’ balances. Affected fintechs include Cashlez (payments), and FinAccel (lending).

Consumer protection. Fintechs usually invest consumers' funds and collect and utilise customer data to gain competitive advantage. Regulators are actively focusing to protect consumers, both in terms of their money as well as data, which limits the extent to which fintechs can benefit. Fintechs citing consumer protection regulations as a hurdle to their growth include Ovo (payments) and Akulaku (lending).

Partnership agreements. Partnerships are key in the fintech business as it is often difficult for a single firm to provide all services. Regulations are often in place which create hurdles in forming such partnerships or the way these arrangements work. Some fintechs that cite partnership agreement as a key regulatory hurdle include Pundi (blockchain) and M-Cash (payments)

Fintech regulatory hurdles

How incumbents are fighting the fintech threat: Investment in technology and cost-cutting

Technology investment is the main tool used by incumbents in Indonesia to fight off fintech competitors, followed by cost-cutting. These strategies are broadly in line with what incumbents are doing in other emerging markets.

Investment in technology/automation. To boost process efficiency, financial institutions are adopting SaaS applications in areas such as accounting, human resources and KYC verification. They are also using cloud technology for data storage and security. According to Autonomous Research, AI technology will allow financial institutions to reduce their operational costs by 22% by 2030. Bank Rakyat and XL Axiata are among the companies in Indonesia that are boosting technology investment.

More focus on cost-cutting. This helps incumbents price aggressively to compete with fintechs; our survey indicates that financial sector consumers are very price sensitive. Cost efficiency also allows incumbents to increase profitability to build-up capital. Companies focusing on cost-cutting include Bank Mandiri Persero and Telkom Indonesia.

Incumbents’ steps to counter the fintech threat

Innovative fintech practices

In the table below we highlight some innovative approaches highlighted by our desk research:

Indonesia fintech innovative practices