Hong Kong online finance group WeLab is to acquire control of a small Jakarta bank with an eye toward launching nationwide online banking in Indonesia.
WeLab, which opened a virtual bank in Hong Kong last year, said it has raised USD 240 million from new and existing investors to pay for a majority shareholding in Bank Jasa Jakarta and for upgrading its technology.
“With our success in Hong Kong, we feel that we should fast track our growth in Southeast Asia,” chief executive Simon Loong told Nikkei Asia. “Hence, the next step is acquiring a bank in Indonesia re-platforming it into a digital bank.
“(Indonesia) has a booming digital economy,” he said. “Young people have embraced the digital economy, e-commerce, ride-hailing, and everything.”
Bank Jasa Jakarta, run by businessman Iskandar Widyadi and his family, sold an initial 24% stake to WeLab last month.
The bank, which has 11 branches around Jakarta and had IDR 6.37 trillion (USD 438.06 million) in assets as of December 31, launched its own mobile and internet banking services early last year. It generated IDR 62.45 billion in net profit last year, down 37.1% from a year before, according to its annual report.
The deal is the latest in a flurry of acquisitions of Indonesian banks by foreign-backed financial technology companies seeing opportunity in the country’s sizable unbanked population.
Earlier this year, Singapore’s Sea acquired Bank Kesejahteraan Ekonomi while local fintech group Akulaku, backed by China’s Ant Group, bought a controlling stake in Bank Neo Commerce. Last month, local online brokerage Ajaib, which is backed by SoftBank Group and DST Global, bought a 24% stake in Bank Bumi Arta.
Only half of Indonesia’s adults have a bank account while mobile phone penetration is almost 70% among the 270 million populace.
“We recognize that Indonesia is a very robust market,” Loong said. “We don’t want to be the only one there because digital banks are a new concept. With more players, the market will flourish as customers get educated faster.”
WeLab originally entered Indonesia in 2018 with an online lending joint venture with conglomerate Astra International. Their app Maucash has over 3 million users, enabling the joint venture to break even this year, according to WeLab. It added that loan volumes are running at five times last year’s level.
WeLab’s Hong Kong virtual bank has about 150,000 customers and Loong said it is on track to break even in 3-5 years. The company also provides online financial services in China.
The group now has about 50 million customers overall after expanding its loan volume in the first 10 months of the year by 52%. Looking ahead, Loong is eyeing Thailand, Vietnam, and the Philippines.
“We have proven that we have a successful formula of how we can scale from a test bed in Hong Kong to multiple markets,” he said. With COVID-19 accelerating the shift to digital financial services, Loong aims to build a pan-Asian presence within a decade.
WeLab’s backers include Germany’s Allianz Group; China Construction Bank International; the World Bank Group’s International Finance Corp. arm; a unit of Alibaba Group Holding; Malaysian sovereign wealth fund Khazanah Nasional; Li Ka-shing-backed TOM Group; and US venture capital group Sequoia Capital.
Loong expects to build links between Bank Jasa Jakarta and WeLab’s existing partnerships with Astra and Allianz.
Nikkei Asia previously reported that WeLab was preparing for an initial public offering as soon as this year. Loong said an offering is “still the plan.”
“We actually need to complete this acquisition before we can start, so we will probably look at studying it again in the second half of next year,” he said.