TIL adalah singkatan dari Today I Learned. Di sini gue menulis penjelasan singkat istilah baru seputar startup, teknologi dan fintech. Nama TIL terinspirasi dari subforum reddit .Semua edisi TIL bisa dibaca di link berikut.
Edisi hari ini akan membahas tentang bank yang baru, berbasis aplikasi dan tanpa kantor cabang.
Neobank adalah versi milenial dari bank reguler : lahir dengan teknologi, desain warna warni dan minim aset. Definisi resminya, neobank adalah layanan perbankan sepenuhnya berbasis aplikasi, dari pendaftaran hingga transaksi. Biasanya tidak punya kantor cabang dan beroperasi layaknya tech startup ketimbang institusi finansial yang formal.
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 ?
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.
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.
Out of nowhere, Whatsapp launched payment features in Brazil. Users in Brazil now can send money through chat by linking-in their bank accounts in Whatsapp. The app currently supporting both debit and credit cards of 2 major banks and 1 neobanks : Banco de Brazil, Sicredi and NuBank. They also partnering with Cielo, largest payment operator in Brazil.
Indonesia is on the pipeline. Earlier this month, Facebook alongside Paypal put money in Gopay, solidifying their intent to enter financial services. Gopay wallet might be able to be synced to Whatsapp numbers sometimes soon. In fact, money transfer feature in Gopay already designed like a chat.
In my opinion, Whatsapp or chat in general could be a better and more inclusive vehicle to deliver digital financial services. Especially for unbanked population, which are half of the country.
In this article, ill write about the downside of app, opportunity of chat, learnings from other markets and potential use cases. Lets start!
Early this year, i was working on personal consultancy project to explore opportunity, landscape and way to play in Personal Finance space in Indonesia. Its one of the niche market in Indonesian fintech which havent been dominated by unicorns or established financial institutions.
I believe in this hard economic times, more people will be conscious about their expense hence opportunity for personal finances startup to tap into this needs.
Heres the report on presentation format. You can also download it in pdf, in a link below
Feel free to comment or reach me out if you have feedbacks on this. I hope its useful. I will write full essay on this sometimes soon, be sure to subscribe into my newsletter to get notification when its out.
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In the past decade, the insurance industry in Indonesia has been growing from IDR 125 trillion in 2010 up to nearly IDR 500 trillion this year. Despite this growth, penetration in population is still very small. In terms of economic contribution,, insurance spending only account for 2.3% of GDP while the number of private insurance policy holders also less than 3% of the population. In 2014, national health insurance (BPJS Kesehatan) was established by SBY Administration. Current coverage for this is estimated around 75% of population or ~180 million people. With the rate of growth and low penetration of private policy holders, Insurance market in Indonesia is a massive untapped opportunities.
Current market value are still majority contributed from Life Insurance. Based on Insurance Association data, more than 80% of gross written premium are from Life Insurance product such as Term-life, Whole-life and Investment Bundled Product (Unitlink). Unit Link is the most sold product of all life insurance, with contribution of more than half of premium sold in 2014. For general insurance, market size are driven by car and motorcycle insurance.
In terms of distribution and sales channel, majority of insurance sales are still driven by agents and banc assurance. Agent solve the needs of consultation and product knowledge due to the complexity of insurance products. While for banc assurance, insurance companies are helped by bank agents and customer services to advocate their product to banks existing customer base.
Recent surge in insurtech makes many people buy insurance online. However they mostly buy simple, one-time product such as flight, delivery or gadget insurance which have simple straightforward policy. Price is usually very cheap as well. Online channel drive high-frequency, low-value transactions. Hence in terms of total market gross premium value, it will still likely contributed by life-insurance sold by agents.
Insurance principal can be divided into two big categories : Life insurance and general insurance. Both have distinct market dynamics. Life insurance are quite concentrated with Prudential as clear market leader. Most of the big players in Life Insurance also foreign entities such as Allianz and Manulife. General insurance on the other hand is quite fragmented with Sinarmas, Jasindo and Astra closely competing to be top 3. Sinarmas and Astra premiums are driven by auto and property insurance while Jasindo and other state-owned insurance (Tugu, Askrindo) are contributed by industry insurance supporting other SOE (e.g Marine, Oil & Gas insurance).
With low market penetration and sales mainly driven by offline channel, Insurance market are just prone to be disrupted by digital players. From big insurance principal who goes digital up to rising startup who try to break through using innovative products.
This month marks my 2 years tenure in Amartha. After almost decade of experience in telco industry and straight outta Manchester Business School Innovation studies, in late September 2017 i jumped headfirst into fintech startup world. It was challenging and exciting ride with constant learning every single day of the week.
One of my key learning from leading Amartha’s Business Development team is how to design loan product. Amartha core business is micro-loan for rural women and as bizdev, my task is to explore new loan product opportunities. In this post, i will brain dump my learning in developing loan product for micro-business segment.
LinkAja has officially grand-launched last June. It represents collective efforts of Indonesian BUMN (state-owned enterprise) to gain market share in emerging digital payment space. Clashing with the likes of Gojek, Grab-backed OVO and Alibaba-backed DANA.
Things are not starting smoothly for them. The grand launch has been delayed couple of times due to technical issues, experts doubts their agility to compete and they’ve slouched to 4th place below DANA. Even though a year ago, T-Cash was fighting head to head with OVO to gain 2nd place.
So whats the move going forward ? Heres my quick thoughts on how LinkAja can win
Gopay, Ovo and DANA all require smartphone to use. On the other hand, telco-based wallet such as T-Cash can be operated from dumb phones using USSD command. LinkAja can leverage this to offer more inclusive experience.
To process payments, user can just provide their mobile phone and approve payment via sms-delivered OTP. This could be beneficial to push LinkAja usage in rural areas where mobile internet coverage is spotty.
Digitizing Government Payments
In my experience, government payments are mostly in cash. From paying traffic fines, renewing your driver license or paying annual vehicle tax, LinkAja could be leveraged to make all of this cashless. Toll-road, Commuter Line and TransJakarta has been successfully converted to 100 percent cashless hence its not impossible to expand this into any sort of government payments.
For government institutions, cashless payments could make their payment processing more efficient and reduce fraud as well. This could be incentives for policy makers or public institution leaders to push LinkAja adoption in their organization. LinkAja could capitalize this putting registration and cash-in booth on every government institution that accept cash payment.
Leveraging Combined User Base
LinkAja is an evolution T-Cash. Telkomsel has 100 million existing user base. There also four state banks backing LinkAja up : Bank Mandiri, BNI, BRI and BTN. The four combined (also known as HIMBARA) represented almost 200 million accounts. Not to mention user contribution from Pertamina and Jiwasraya.
As i mentioned in my previous article, massive user base dont mean much if there are no clear benefits for Telkomsel or HIMBARA to use LinkAja over other wallet provider.
Good example of this is initiative to link integrate current account to LinkAja balance. Hence if you are one of HIMBARA bank users, you dont have to constantly top up, just link your account and LinkAja app could substitute your card as payment method.
Another ideas might be to use LinkAja as easier method to do peer to peer transfer. User can transfer money from any of HIMBARA bank to any mobile phone number since primary identifier for LinkAja (0r any other wallet) is mobile number.
Loyalty points is another angle that state owned enterprise could collaborate with LinkAja. Points from Telkomsel top-up, Pertamina petrol station, any payments from HIMBARA banks will be consolidated in LinkAja.
The key is to make the experience using LinkAja much much better for existing BUMN customer base compared to non-user. If its not, then LinkAja would not have advantage over other big 3 wallet provider no matter how many state enterprises backing them up.
In current Indonesian context, when somebody talk about fintech they mostly refer to lending. In DailySocial surveys, more than half of respondent associated fintech with online lending services with payment as a close second. Number of fintech funding activities also skewed toward this direction with 60% of total 14 deals in 2018 went to P2P lending startups. If you browse through fintech list in OJK website, only P2P lending are listed even though insurance and investment fintech falls under OJK supervision. There are currently 113 registered lending fintech as of June, far more than any other types of fintech combined.
Two things from this: Indonesian fintech growth so far still contributed by lending thus other financial services is underutilized. This leaves lots of room to grow for fintech ecosystem going forward. Second, with lending companies already reach hundreds, fintech players need to think hard what will be the next play.
So what could be the next phase for Indonesian fintech ? my take is on investing. Of all the financial services, it is the least inclusive with less than 1% registered investors in a 270 million population. Number of investors has been growing double digits for four years straight and most of the growth are contributed from younger segments.
In this article, i wrote overview on investing landscape in Indonesia, challenges and how this sector has big potential to drive further fintech growth going forward.
This is series of study case analysis that i like to write from time to time. I am a big fan of Ben Thompson’s Stratechery and these essays are inspired by Ben’s work. Check out my last post on LinkAja.
On second week of April, Dealstreetasia broke the news that Indonesian payment wallet provider OVO has acquired online mutual fund startups, Bareksa, for 20 mio USD. This news came just merely a month after OVO acquisition of P2P Platform Taralite. Taralite acquisition has enabled OVO to offer credit-card-like Paylater which at the moment only available in Tokopedia. Bareksa on the other was used to power OVO Invest feature which can be accessed after user do advanced KYC by submitting their E-KTP.
As a country with massive unbanked population and asymmetric banking industry , Indonesia is a lucrative ground for fintech. These recent developments is a clear attempt to expand into wider financial services and having Lippo and Grab as their backer, OVO have ample warchest to start landgrab in multiple fronts.
In this essay, i will share my analysis on rationale, challenge and predictions on OVO next step in Indonesia financial industry.