Foreword by Ajisatria Suleiman, Founding Director at Indonesia Fintech Association and Co-founder of PrivyID
As the largest economy in Southeast Asia, Indonesia is a promising country that has gained the attention of many investors. With four unicorns (Tokopedia, Bukalapak, Go-Jek, and Traveloka), it is the country with the most unicorns in Southeast Asia. At the moment, Indonesia has nearly 147 million internet users (55% of the total population). The booming digital growth lays the foundation for Indonesia to reap significant economic benefits. According to McKinsey, e-commerce sales only account for 5% of Indonesia’s total retail sales. The figures are expected to rise to 17-30% in the next five years.
For investors and startups looking to enter this market there is good news: (1) many existing successful players are foreign entities which shows that the government is keen to draw help from all quarters and (2) authorities are taking steps to ensure clear regulatory requirements to boost confidence.
Some government initiatives include:
BKPM (Badan Koordinasi Penanaman Modal: Indonesia Investment Coordinating Board): A department that provides support specifically for foreigner investors. It connects investors to the government and facilities communication between them. (Source: BKPM)
Indonesian Startup Database: A central startup database developed by the Indonesian Creative, Information Technology, and Communication Industry Society (MIKTI) and Indonesian Creative Economy Agency (BEKRAF). It helps stakeholders and the government make better policies and programs, and attracts more investors. (Source: Indonesian Startup Database)
- USD 100 billion internet economy market by 2025, and with that the largest market size in SEA
- The average Indonesian spends 4 hours per day on mobile internet which is the 10th-highest worldwide for internet engagement
- Very young population with a median age of 28 years
- Uncertain political environment
- Tightening of regulations such as limiting payment company licenses
- Unstable currency: the Rupiah has been one of Asia’s worst-performing currencies in recent years, especially in 2018
Sources: E-conomy Report SEA by Google and Temasek; Emerging Markets Tech Investment Index by Momentum Works
Investors will continue to be excited, but cautious, about the Indonesian dream: Overseas companies should not cut-and-paste the US or China model into Indonesia. Companies that are just focusing on making a quick profit will find their options limited soon. Only companies that have a vision to be integrated into the local ecosystem will succeed. Further, the pace of innovation will be slower, given that barriers to entry are much higher.
Collaboration with incumbents will increase: Instead of fighting head-on-head, we believe that established players, in particular banks, will start to collaborate with new tech players.
Regulations will stabilize: Indonesia’s openness to engage players is a demonstration of their commitment to innovation. We expect that the regulations will further tighten as the market matures, and will stabilize during 2020. Weak, non-compliant players will be forced out of the market, while stronger ones will continue to thrive.
Promising startups to look out for
Fintech, E-commerce | Jakarta
Akulaku is a multinational e-commerce platform that offers online services such as cardless installment shopping, cash loans, bills payment, mobile and game top-ups on installment, and travel and leisure packages on installment. Akulaku is also the largest online financing company in Southeast Asia and the first online mobile installment application with operations in Philippines, Vietnam, Malaysia, and Indonesia.
Fintech | Jakarta
Investree is an Indonesian financial technology firm acting as an online marketplace which enables people with financing needs to meet with people open to lending out their money. Not only does Investree improve the lender’s yield, they also make credit much more accessible and within reach to borrowers.
E-Signature, Identity Verification Service | Jakarta
PrivyID is a digital signature application that provides document management and identity verification solutions. PrivyID provides a secure way for customers to share, sign or send documents to be signed by others, anytime and anywhere from the customers’ devices. Originally designed to be catering to all sectors of the industry, PrivyID recently has been gaining traction in financial services, as financial regulators have been driving compliance of companies (including banks and fintechs) to adopt legal and secure ways of non face-to-face customer onboarding and paperless signing of financial documents, especially loan and credit documentation. Compliance has been the key to PrivyID’s growth, as more regulators require financial companies to partner with certified digital signature providers.
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Disclaimer: all content within this startup ecosystem overview is written by and reflects the personal perspective of the editor.