Indonesia’s BCA invests $200m in Blu to fend off Gojek and Sea Ltd

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It has been a month since Indonesia’s largest publicly listed private bank PT Bank Central Asia (BCA) launched its digital arm Blu, a branchless digital bank ecosystem aimed to drive financial inclusion in Indonesia through digital banking.

In a recent report by Bloomberg, BCA has announced a $200 million investment into Blu in an attempt to fend off competition from local tech giants Gojek and Sea Ltd. According to BCA President Director Jahja Setiaatmadja, the funds aim to support Blu’s goal of taking a share of the market, ahead of a planned IPO in 2023.

Currently open to Android users and with an iOS version in the works, Blu has already amassed 110,000 customers and is expecting to gain traction speedily over the next few months.

One of the platform’s key features is the possibility to open a savings account without visiting a physical bank branch. Account owners can also divide the account into sub-accounts for granular financial management.

Banking the unbanked

For many years, financial inclusion has been elusive in Indonesia, where around 83 million or one-third of the population remains unbanked and around 47 million are underbanked.

Despite widespread digitalization, a survey released by Mambu last week revealed that Indonesians do not think existing financial institutions have taken the necessary steps to boost accessibility.

Tech players have found this both an opportunity and a challenge, especially amidst an ongoing pandemic that has further highlighted the need for a wide range of financial services.

Fintechs and unicorns like Gojek and Sea Ltd have stepped in to try to bridge the gaps.

In December 2020, Gojek invested an undisclosed amount into digital bank Jago. Six months later, the latter reported a 423% jump in its net interest income of US$9.6 million and a 350% increase in shares.

Meanwhile, Sea Ltd’s subsidiary Shopee acquired Indonesian lender Bank BKE in February this year. As a digital lender, Bank BKE was anticipated to have IDR3trn ($213.64m) in capital and has become a strong competitor of Jago.

The most important challenge for digital banking players, perhaps, is to build an environment where even rural communities outside Java can easily access digital financial services. At present, rural communities still prefer traditional banks due to limited digital infrastructure.

In an interview with KrAsia, Bhima Yudhistira Adhinegara, a digital economy analyst at the Institute for Development of Economics and Finance (Indef), said that digital banks and neobanks will still mostly operate in big cities.

BCA’s recent investment in Blu may help propel the development of digital infrastructure in rural areas. The bank is one of Indonesia’s largest companies in terms of market capitalization and has recorded around 24.49 million bank accounts as of 2020, almost twice the number in 2013.

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