Today, I was invited to be on discussion panel for a webinar held by Medici, global fintech research firm. Along with speakers from Tokopedia, Quona Capital and Koinworks, we discuss P2P lending landscape in Indonesia, challenges and opportunities.
To prepare for this session, i made preparation notes based on the briefing materials. Not all questions made to the discussion, but hopefully its still useful.
Here you go!
Payments as entry point, then lending as profit builder and horizontal financial services as the end game. Do you agree with this model?
Seems like a way to play for Gopay and OVO. I see Investment play as a means for stickiness. People will less likely to churn if they have a portfolio in their wallet. But i believe, mono to multi services play can be from anywhere. Things could also get interesting if the virtual bank license is out. The race for fintech players from any vertical to become a full-fledged bank will be on.
How has P2P lending evolved in Indonesia? Consumer loans are 1/3 of the ~350 bn USD existing loan market in Indonesia. Are SME loans and micro-financing maturing and gearing up for this other 2/3 market share?
I see the trends moving from cash-loan to less-risky non-cash options. Example of this is, P2P partnering with commerce apps to offer credit lines or pay later ( paylater in Mitra Bukalapak & GrabKios).
What’s the difference between Indonesia and China P2P Lending market ?
I presented this topic before in Tokopedia sharing session, here is the presentation material.
What’s the latest in the consumer facing buy now pay later (BNPL) segment? Is it eating the lunch of mainstream retail credit cards or truly expanding the consumer lending market?
Not really. Credit card penetration in Indonesia has been very low (20 mio, less than 10% population) hence paylater services tend to serve untapped credit segments. Lower credit value with higher risk, younger urban population.
How are P2P loans to SMEs and consumers different in your approach to origination, risk modelling and acceptable NPL? Which seems to be better business? Are the three categories of P2P SME loans, micro-financing and consumer BNPL multi-finance getting more distinct or fuzzy and consolidating?
Even though Amartha P2P lending, but from the borrowing side we do Grameen lending. Amartha is also very focused on rural, we operate on kecamatan / village level which is 2-3 level outside big cities.
Hence in terms of product, operational model, credit scoring, we tailored specifically for this segment. For example, we do mix of online-offline operations. Our field apps are designed to be offline-first due to low connectivity especially outside Java.
What are retail commercial banks doing to counter/work with new lending players? Is the unaddressed market (region and segments) large enough for collaboration?
Many commercial banks, especially bigger banks, are jumping in directly in the P2P wave by becoming institutional lenders. OJK has regulations to have 20% of the Bank’s loan portfolio to be channeled to MSME. Hence, channelling loans to P2P is seen as double whammy, compliance and revenue wise.
The one who jumped directly in the online lending competition is BRI, who launched two digital lending app Pinang & Ceria. Pinang is a cash loan app targeting salaried employees using BRI payroll services. Ceria is offering digital installment options apps. Both services however are still only available to existing BRI customers.
In my opinion, there are still plenty of rooms. Half of the country is still unbanked. Out of 500 USD bio total loans, 70% loans are still disbursed in Java island alone. The rest of the island are blue oceans.
Will investments and insurance be the end-game in Indonesia after commerce and lending, and lead to a few large horizontal players by 2025-2030?
I think forecasting is futile these days.
However, investment right now is one of the most exclusive financial services. Registered investors are only 2 million out of 250 million (less than 1 percent). The sector was experiencing the biggest growth last year and it was the first time new investors are dominated by people under 30s.
Opportunities are immense.
For more detail on these, I wrote materials on Investment and Insurance in Indonesia :
How are the needs of modern retail different from the warungs? What’s the latest and greatest at these two ends of the merchant spectrum in Indonesia?
Both are different species in terms of size, reach and challenge.
Smallest modern retail (Indomaret and Alfamaret) have turnover 30-50 mio (2000-4000 USD) revenue daily. Average warung has 1-2 mio (80-150 usd). Indomaret and Alfamaret combined has 30-40k branches nationwide. While Warung, in East Java alone, 1 out of 33 provinces, estimated to have 400k warung.
Warung is cash business, small margins and limited capital. Problems primarily on cash flow. Most of them don’t track their finances hence it is difficult to get financing access.
I wrote more detail analysis on Warung business in this article.
As credit becomes a bigger business, how is customer data being managed? Are there utilities, regulations and frameworks for aggregating, sharing and monetizing customer data? City authorities in West Java have pioneered public sector data analytics.
In P2P lending regulatory framework, POJK 77, there already regulations points regarding customer data protection. POJK 77 also refers to UU ITE (Regulations on Information and Electronic transactions) which also covers technicalities on how to store customer data. This I think is quite standard in terms of compliance and code of conduct.
The one that is still an issue is data governance between government and private sector. For example, electronic id card data.
What will be the top three defining sectors/themes for Indonesia next year?
Edutech, Syariah in fintech and probably widening of e-commerce into Groceries and Fisheries
What should companies expanding into Indonesia look out for? What works? What does not?
Indonesia is not only Jakarta and Java islands. Opportunities to be unlocked are massive in other islands.
Thank you for reading. As disclaimer, opinion stated here are my own and doesn’t represent my employers.
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