Indonesia’s government keeps nudging its state-owned enterprises to digitalize their operations by tapping the local tech startups. The two sides have started to cooperate on projects and new products, while the corporate venture capital arms of the SOEs—BRI Ventures, Mandiri Capital, and Telkom Group’s MDI Ventures—are funneling money into the tech firms.
Bank Mandiri on Wednesday launched a co-branded Visa card together with Sea Group’s e-commerce unit Shopee, reaching for the latter’s “massive user base,” as Mandiri’s director Aquarius Rudianto explained it. Shopee users can apply for the card on the app, and the bank will follow up separately for data verification.
For Mandiri it isn’t the first co-issued credit card with a startup. The lender also linked up with travel platform Traveloka in February last year. Similarly, Bank Rakyat Indonesia (BRI) partnered with the travel unicorn offering a Traveloka PayLater Card.
Fithra Faisal Hastiadi from the University of Indonesia welcomed the initiatives. “In the beginning, we saw that SOEs tried to create an exclusive digital ecosystem by launching their own products,” he said. “But since their approach is top-down, the products didn’t really fulfil the users’ needs. It’s not really sustainable.”
Meanwhile, startup companies chose the bottom-up approach, developing products based on market needs. And they managed to catch larger user bases. By collaborating with the startups, Hastiadi said, SOEs benefit from the broad user bases while the startups gain support from the government. “This is good for the growth of the local startup ecosystem,” he added.
But on the other side, the state-owned banks might also grow their future competition. Shopee itself entered the ring through the acquisition of Bank Kesejahteraan Ekonomi (BKE) in February. Still, Hastiadi believes that it might not necessarily turn out that way. When Gojek started offering ride-hailing, Indonesia’s largest taxi operators Blue Bird Group complained how it destroyed the market. In the end, both joined hands and Gojek users can now order Blue Bird taxis from the app. The decacorn even bought a minority stake of the taxi firm.
Hastiadi thinks that there could be a similar relationship between incoming digital banks and state-owned institutes. “Rather than competing and be in a lose-lose situation, better collaborate and create a win-win situation,” he said.
With the co-branded credit cards, the established lenders got their foot in the door, Hastiadi said. So even if the tech firms launch their own banks and services, they already have their product in it.