ITEM: Indonesia’s fintech sector has evolved from a handful of mostly payments startups to a fully fledged modern fintech ecosystem driven by payments, lending, and wealth tech. VCs are well pleased.
So says a new report released this week by Southeast Asian VC firm AC Ventures and Boston Consulting Group.
Over the last decade, Indonesia has witnessed a 6-fold increase in the number of fintech players, from 51 in 2011 to 334 in 2022.
Initially, the growth was mainly driven by the payments segment. However, the report says, the fintech landscape in Indonesia is now a diverse and dynamic one, with lending, payments, and wealth tech becoming “clear industries of the future.”
Investment is diversifying
Additionally, new players in segments such as software as a service (SaaS) and insurance activities are emerging, indicating that the Indonesia fintech sector is maturing and moving toward more sophisticated products and services, the report says.
That diversification is also reflected in investment trends – while lending and payments remain important, there is increasing investment into wealthtech, insurtech, and fintech SaaS.
Indonesia’s fintech offerings are also experiencing a surge in customer engagement:
The payments segment, which boasted over 60 million active users in 2020, is expected to have a compound annual growth rate (CAGR) of 20%+ until 2025. In the lending space, there were more than 30 million active peer-to-peer borrower accounts in 2021. Meanwhile, the wealth segment had over 9 million retail investors as of 2022.
Adoption of SaaS platforms is also on the rise, with 6 million SMEs currently using them, representing a 26-fold expansion over the last three years.
Fintech investors remain bullish
Other key bullet points:
- Indonesia’s lending space currently has over 30 million active peer-to-peer borrower accounts.
- Wealthtech saw a 56% CAGR between 2018 and 2022, leading to over 9 million retail investors in the country as of 2022.
- Transaction values continue to surge, with over $20 billion of e-wallet transactions between 2017 to 2021, and more than $17 billion in loans disbursed between 2017 and 2022.
Perhaps unsurprisingly, the report says that investor sentiment remains bullish, with annual equity funding soaring from $353 million in 2020 to $1.51 billion in 2021. More than 80% of deals done in 2020-2022 focused on pre-series C funding rounds, predominantly in wealthtech, payments, and lending. Investors are now looking for clear paths to profitability before a series D.
The full report is here.
Related article: Southeast Asia fintechs break funding record with $3.5b so far this year
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