Fintech continued to lead Indonesia’s startup funding landscape in 2020, making up for most of the money raised that year, ahead of software-as-a-service (SaaS) and e-commerce. 2020 marked the fourth year where fintech dominated the amount of funding in the Indonesian digital ecosystem, according to a report by market research company DSResearch, in partnership with banking institution CIMB Niaga.

Business vertical funding in Indonesia, Source: Fintech Report 2020, DSResearch in partnership with CIMB Niaga, Dec 2020

The annual Fintech Report, released on December 22, 2020, sheds light on the state of fintech in Indonesia and outlines the key trends that emerged in 2020.

According to the report, fintech companies raised US$360 million in disclosed funding in 2020, up more than 65% from 2019’s US$217 million. Deals were larger in size in 2020 and a number of rounds went towards Series B and later-stage investment.

Notable deals that were in 2020 include Investree, Indonesia’s largest business-to-business (B2B) marketplace lending platform for small and medium-sized enterprises (SMEs), which raised US$23.5 million in a Series C funding round in April, and Payfazz, a fintech startup targeting the unbanked populations, which raised US$53 million in a Series B in July – the largest disclosed fintech venture round in 2020.

COVID-19 gives fintech a boost

With COVID-19 forcing consumers to move to digital channels, the fintech sector experienced growth in 2020 amid physical restrictions.

Total volume in alternative financing in 2020 reached IDR 128.7 trillion (US$9 billion) in September, more than doubling 2019’s levels. The number of borrower accounts also doubled in 2020, surpassing 29 million.

Fintech Lending Statistic/OJK, Source: Fintech Report 2020, DSResearch in partnership with CIMB Niaga, Dec 2020

Digital wallets also benefited from the social distancing measures put in place to limit the spread of the virus. LinkAja, for example, saw top-up transactions grow twofold after the outbreak emerged in Indonesia. In terms of transaction volume, the company said in July that its platform had recorded 700% growth.

Total e-money transactions from January to August 2020 reached IDR 126.95 trillion (US$8.9 billion), a 31% increase compared to last year.

A consumer survey conducted as part of the report found that GoJek’s e-wallet GoPay dominated the landscape in 2020 in terms of usage (87%), followed by OVO (80.4%) and DANA (75.6%).

Digital wallets usage in Indonesia, Source: Fintech Report 2020, DSResearch in partnership with CIMB Niaga, Dec 2020

Across all major fintech verticals, digital wallets were found to be the most used fintech solution in Indonesia (70.7%), followed by paylater (45.2%) and investment (28.4%).

Usage of fintech products in Indonesia, Source: Fintech Report 2020, DSResearch in partnership with CIMB Niaga, Dec 2020

For each vertical, the most used fintech solutions in 2020 was: ShopeePayLater (paylater), BiBit (investment/wealthtech), Asuransiku.id (insurtech), CrowdDana (equity crowdfunding), Akulaku (payday loan), Modalku (working capital loan), Doku (remittance) and Kredivo (consumer loan).

Fintech growth momentum to continue in 2021

Fintech is expected to further grow in 2021 on the back of new, favorable regulations.

The country’s Financial Service Authority (OJK) is currently revising existing rules that cover online lending. The changes, which are expected to be formalized by the end of Q1 2021, will introduce stringent requirements for new fintech entrants to ensure sustainable growth of the industry.

A new data protection bill is also in the works. The bill, which is currently being discussed by the parliament and might be passed into law in 2021, will allow victims to sue platforms for violations in the handling of personal information.

As of late-2020, Indonesia was home to 322 fintech companies, in addition to 125 registered but unlicensed online lenders, according to the Indonesia Fintech Report 2020 produced by Fintech News Singapore. Alternative financing dominated the landscape, accounting for half of all Indonesian fintech startups, followed by payments (23%) and blockchain/crypto (8%).

The report names 15 fast-growing fintech startups to watch out for in 2021, among which UangTeman, one of the first P2P cash lenders licensed by OJK, Investree, as well as Pluang, a startup providing digital micro-savings products.

UangTeman is expanding to the Philippines and is in the process of obtaining a license. Similarly, Investree is looking to launch in other Southeast Asian countries, starting with Thailand and the Philippines. And Pluang is working on new savings products after receiving funding from Go-Ventures.

Source: https://fintechnews.sg/47122/indonesia/investors-bullish-on-indonesias-fintech-sector/