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Indonesia Digital Banking

Indonesia has experienced a significant increase in its digital banking market over the last few years, paralleling a similar expansion of the country’s digital economy as a whole. Much of this growth was launched  in 2016 when “Jenius” was introduced by BTPN Bank, quickly becoming the most popular digital bank in Indonesia.

Over the last five years many of Indonesia’s conventional banks and other startup companies have launched competitors to BTPN, including “Digibank (DBS), TMRW (UOB), D-Save (Danamon), and Bank Jago (ARTO) which has received support from the country’s leading ‘unicorn’, Gojek.

Indonesia digital banking App downloads grew 7% in 2020 but many of the sector’s new players have seen quick initial market share growth of 200% – 500% after launching. Digital bank users tend to download multiple digital bank applications, explore options and potentially switch to competitive offerings; consumer loyalty remains a question for many of Indonesia’s start-ups. When choosing a digital bank, consumers in Indonesia often weigh a product’s usability, price, features, and customer service. In December 2020, BCG reported that the trend of digital bank adoption in the ASEAN region was increasing due to high internet penetration, adoption of retail consumer behavior, and limitations arising from the COVID-19 pandemic.

Indonesia is currently home to seven digital banks with seven more waiting for licenses from the country’s financial services authority (OJK). The seven currently licensed digital banks include: (1) Jenius (Bank BTPN), (2) Jago (Bank Jago), (3) MotionBanking (MNC Bank), (4) Bank Aladin (BANK), (5) Wokee (Bank KB Bukopin), (6) Digibank (Bank DBS), and (7) TMRW (Bank UOB). The seven banks that are still waiting to get licenses from OJK are: (1) Bank BCA Digital, (2) PT. BRI Agroniaga Tbk, (3) PT. Bank Neo Commerce Tbk, (4) PT. Bank Capital Tbk, (5) PT. Bank Harda Internasional Tbk, (6) PT. Bank QNB Indonesia Tbk, and (7) PT. Bank KEB Hana.

New banking rules in Indonesia allow near-full foreign ownership of local lenders and reduce tape for new services as regulators move to spur growth in the country’s emerging digital banking industry. Foreign companies can now hold as much as 99% in a local lender; the previous cap was 40%. This improvement in market access is expected to smooth the way for digital banks operating in Indonesia that are partially owned by foreign entities, either directly or indirectly. These could include SeaBank (formerly Bank Kesejahteraan Ekonomi, acquired by Singapore’s Sea Group); Bank Jago, now 22% owned by Indonesia’s largest tech company, Gojek, which boasts Google and Tencent among its investors; and Bank Neo Commerce. Indonesian financial technology startup Akulaku, with investors including Alibaba affiliate Ant Group, is moving to become Bank Neo Commerce’s controlling shareholder.

The new regulations promise banks a quicker process in obtaining permits for new services, this timeframe is now capped at a maximum of 14 working days, down from the 60 days or more previously. As for basic services such as savings and transfers, a permit is no longer needed. A bank is required only to report them to the OJK. Other aspects covered by the new regulations include the definition of a digital bank, which included existing banks that have digitalized their products and services to mainly rely on electronic channels and new fully digital banks. Banks are also now required to submit their five-year strategic corporate plans to OJK.

Currently there are five startups who are interested to enter digital banking market in Indonesia including  Gojek, Grab, Shopee, Youtab Indonesia (owned by Salim Group and Bank of Mandiri), and BukuKas, a digital financial services company for SMEs. The new regulation was listed under Regulation of OJK (POJK) Number 12/POJK.03/2021, the framework under which both traditional and digital banks are regulated in Indonesia.

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