JAKARTA (IndoTelko) AC Ventures (ACV) and Boston Consulting Group (BCG) jointly released one of the most comprehensive reports to date on Indonesia’s fast-growing fintech sector.
The report’s launch took place at The Langham Hotel in downtown Jakarta, with a variety of high-profile fintech founders and banking leaders, as well as government and institutional stakeholders in attendance.
The report is titled "Indonesia's Fintech Industry is Ready to Rise" and charts the progress of financial technology in the country across multiple sub-verticals, starting from the inception of fintech startups and the local digital economy in 2011, up until 2022. It highlights and unpacks payments, lending, and wealthtech as the main driving forces of Indonesia's observable fintech ecosystem today.
Over the last decade, Indonesia has witnessed a 6-fold increase in the number of fintech players, with the count rising from 51 in 2011 to 334 in 2022. Initially, the growth was mainly driven by the payments segment. However, the fintech landscape in Indonesia is now diverse and dynamic, with lending, payments, and wealthtech becoming clear industries of the future.
Additionally, new players in segments such as software as a service (SaaS) and insurance activities are emerging, indicating that fintech in Indonesia is maturing and moving toward more sophisticated products and services.
Fintech offerings are also experiencing a surge in customer engagement in the nation. The payments segment, which boasted over 60 million active users in 2020, is expected to have a compound annual growth rate (CAGR) of 20%+ until 2025. In the lending space, there were more than 30 million active peer-to-peer borrower accounts in 2021. Meanwhile, the wealth segment had over 9 million retail investors as of 2022. The adoption of SaaS platforms is also growing, with 6 million SMEs currently using them, representing a 26-fold expansion over the preceding three years.
Investment trends also echo the diversification of Indonesia’s fintech market, with lending and payments no longer being the primary areas of interest. While lending and payments remain important, there is increasing investment into wealthtech, insurtech, and fintech SaaS.
The fintech market is expanding rapidly, with emerging players alongside established ones. Equity is targeted based on an operator's or vertical's maturity. Early-stage funding deals are receiving over 80% of the total invested capital. Funding from 2020 to 2022 reached US$5.4 billion, 2.7 times more than the period of 2017 to 2019. Growth and monetization are the main focus in series D+ funding rounds.
In light of the current economic climate, investors are now looking for clear paths to profitability before a series D. More than 80% of fintech deals done from 2020 to 2022 were for pre-series C funding rounds, indicating strong support for early innovation. These trends are likely to continue driving innovation and disrupting the existing financial services landscape.
Adrian Li, Founder and Managing Partner at AC Ventures, said, "I am pleased to say that we are one of the most active investors in Indonesia's thriving fintech industry, which offers immense prospects for growth. The exponential rise in the number of fintech players, burgeoning customer engagement, and escalating equity funding are all indicative of the sector's vast potential. Our investment strategy aligns with this space's most impactful and innovative enterprises. With this joint report designed to serve the financial ecosystem at large, AC Ventures is proud to sustain its support and investment in the flourishing local fintech sector."
“As our comprehensive analysis shows, the fintech scene in Indonesia is booming, underscoring the tremendous growth potential of the country’s digital economy,” said Sumit Kumar, Managing Director and Partner at Boston Consulting Group. “It’s an exciting time for innovation led by customer needs, collaboration between fintech players and traditional financial institutions, regulatory bodies, and regulatory foresight. We hope our insights will equip industry players with a deeper understanding of the fintech ecosystem, putting them in a stronger position to seize new opportunities and gain competitive advantage.”(es)