Indonesia’s start-up financial technology (fintech) industry is a hotbed of innovation. In 2016, the Indonesia Fintech Report 2016 reported that there were more than 150 fintech startups in Indonesia, and that this number had increased by 78% from 2015. 
By September 2017, the fintech industry was assessed in a CNN Indonesia report as having the greatest potential for growth in Indonesia, which is itself the largest country in South East Asia with a population of over 261 million – twice the size of the Philippines.
Analysts in the CNN report projected that every digital business in Indonesia will eventually need fintech services. Fintech is especially considered a high-growth sector in Indonesia because:
1. Indonesia is a country of Small and Medium Enterprises (SMEs)
Indonesian SMEs contributed 60.6% of Indonesia’s GDP in 2015. Deloitte (2015) highlights that Indonesian’s SMEs have created a total of 107.6 million jobs in Southeast Asia.
In light of this, the Indonesia Government under current President Joko Widodo has in recent years rolled out a slew of packages and measures aimed at supporting the growth of its SMEs, including digital startups, to boost the country’s status as a startup destination.
2. Indonesia has fewer banks (and branches) compared to other economies
According to Data World Bank (2015), banks with fewer branches are unable to maximise customers’ usage of their services, particularly in rural areas. 
Financial technology can help these banks improve their delivery of services to existing customers in rural areas. Additionally, fintech is expected to provide Indonesian SMEs with wider and cheaper access to loan facilities, money transfers and other financial services, hence galvanising the growth of the economy in tandem with local fintech.
3. Cash is still King in Indonesia
Both traditional and online purchases in Indonesia are still dominated by cash payments. According to Emarketer, Indonesian online shoppers are not familiar with digital payments, and 65.3% of them are more comfortable with cash on delivery (COD).
In fact, only 36 percent of Indonesian adults have bank accounts, according to the World Bank’s 2014 Global Findex database. This presents multiple opportunities for fintech startups to bring banking services to those who are not currently being served – the unbanked and unbankable – which together make up over 60% of Indonesia’s adult population.
4. However, The Future of Indonesia Is Cashless
Even while over 60% of online shoppers in Indonesia prefer cash on delivery, fintech is creating more ways for Indonesian citizens to go cashless.
The rising popularity of various local online marketplaces such as Tokopedia, Bukalapak, Blibli, Mataharimall and Elevania, is leading to ever more online shoppers using e-payments services or virtual wallets to pay for their purchases.
Customers are encouraged to use these e-payment services via cashbacks and marketplace discounts.
5. The Indonesia Government Is Long On Digital Startups
In Indonesia Fintech Report 2016, Bank Indonesia defines Fintech as a transformative business model that combines financial services and technology, allowing both unregulated start-ups and regulated financial institutions to provide banking services.
In 2014, Bank Indonesia announced the launch of a national cashless movement called the National Non-Cash Movement, which aims to build public awareness of non-cash payment instruments, thereby gradually fostering a less-cash society.
In 2016, the Indonesian government launched a 1000 Digital Startups National Movement program (Gerakan Nasional 1,000 Startups Digital) https://1000startupdigital.id/i/. This program aims to turn Indonesia into ‘The Digital Energy of Asia’ by developing 1000 digital startups by the end of 2020, with an expected total valuation of around $10Bn.
The government has also announced plans to establish a dedicated section within its main stock exchange to host initial public offerings by startups. This would lead to the set up of a new trading market at the Indonesia Stock Exchange called the ‘technology board”, to make it easier for founders and investors to take their startups public, thus enabling even easier access to capital.
By November 2016, the Indonesian government had also, through its Central Bank, launched new regulations on Payments Transaction Processing to provide legal assurance for new and existing payments business activities.
In addition, the Indonesian government has created a Fintech Office (through Bank Indonesia) to facilitate discussions, share ideas, provide market intelligence, and assess the benefits, risks and potential of fintech startups. The Fintech Office will also provide assistance to fintech startups with regards to government policies.
Under the framework of the Fintech Office, a regulatory sandbox has also been established which allows fintech startups to test and develop their business models in a safe space before roll-out to customers (Jakarta Globe, 2016).
Conclusion: Indonesia’s Fintech Industry Is Set For Explosive Growth
With the government’s support, and digital payments set to grow along with e-commerce in one of the world’s biggest markets by population, Indonesian’s fintech space is now one of the most potentially rewarding places in the world for fintech investment.
And with a wide footprint in Australia and Asia, R3D Global Limited is well positioned to provide pertinent information and research on Indonesian fintech companies. Contact us at +61 2 8880 3688 or email us at firstname.lastname@example.org to discover more about this sector.
 Indonesia’s Fintech Report 2016
https://dailysocial.id/report/post/indonesias-fintech-report-2016, extracted 8 Jan 2018
 Fintech Diprediksi jadi Bisnis Paling Potensial di Indonesia
 Indonesian Economy: Micro, Small & Medium Sized Enterprises
 Indonesia’s Tech Sector: A Look At Government Policies, Promises To Buoy The Emerging Economy
https://inc42.com/indonesia/indonesia-government-policies-tech/, extracted 8 Jan 2018
 World Development Indicators 2015
https://blogs.worldbank.org/opendata/release-world-development-indicators015, extracted 8 Jan 2018
 Cash On Delivery Still Wins Among Digital Shoppers In Indonesia
 Indonesia Reaches Out To Unbanked
http://www.thejakartapost.com/news/2016/10/29/indonesia-reaches-out-to–unbanked.html, extracted 8 Jan 2018
 Bank Indonesia Launches National Non-Cash Movement
http://www.bi.go.id/en/ruang-media/siaran-pers/Pages/sp_165814.aspx, extracted 8 Jan 2018
 Aksi Perdana Gerakan Nasional 1000 Startup Digital Di Kota Surabaya
https://1000startupdigital.id/i/guide/press-release-ignition-surabaya, extracted 8 Jan 2018
 Indonesia plans to create startup IPO market to draw investors
 Bank Indonesia Issues Rules for Payment System Service Providers