Revenue forecast

The revenue estimate for the base year 2023 is $1,413.4 million, with a CAGR of 10.0% for the study period 2023–2028

The Impact of the Top 3 Strategic Imperatives on the Indonesian Financial Technology Industry

Competitive Intensity

Why

Banks in Indonesia are encountering fierce competition from emerging financial technology (fintech) companies as digital adoption matures and regulation invites more participation from non-traditional financial institutes.

Frost Perspective

In order to thrive and remain relevant, banks invest in, acquire, or build partnerships with fintech startups to provide a range of services and reach more customer segments, including low-value segments and underserved segments. These segments present revenue opportunities, high-volume transactions, and stiff competition.

Customer Value Chain Compression

Why

Consumers, especially those in urban and suburban areas, prefer fintech services that provide a better customer experience and attractive rewards (e.g., a high saving rate, a high credit limit, and a high point reward conversion). Meanwhile, consumers living in rural areas, especially outside Java, prefer services from banks due to accessibility issues and the safety associated with established banks such as BCA, BRI, and Mandiri.

Frost Perspective

Fintech services such as saving accounts, neobanking, credit cards, microloans, and insurance will be extensively used in urban areas in the immediate future, while investment and wealth management will gradually gain traction in the long term. Traditional banking services are still preferred outside of Java, although banks nationwide are leveraging advanced technology to create better value to compete with each other and gradually reshape the overall banking experience.

Industry Convergence

Why

Increasing digitalization in financial services, high internet penetration, and a conducive policy and regulatory environment supporting financial inclusion make fintech services a popular choice for Indonesian consumers. This space fragmented, with over 150 homegrown startups offering fintech services, from payments to peer-to-peer lending.

Frost Perspective

Indonesia, with 187 million adults, presents lucrative opportunities, and growth in the country's emerging fintech industry could be higher than in other fintech industries in Southeast Asia. The convergence of digital and financial services began to see some traction, with companies from the technology and telecom sectors seeking fully integrated fintech solutions that could generate new revenue streams.

Growth Drivers

• Indonesia is undergoing a paradigm shift toward digital economies, moving beyond the traditional approach to integrating financial services and emerging technologies to drive economic growth. Strategic initiatives, such as the National Payment Gateway (Gerbang Pembayaran Nasional), the Quick Response Code Indonesian Standard (QRIS), and BI-FAST, underscore this shift.

• Indonesia’s robust commitment to its financial service industry highlights its ambition to become a leading force among emerging markets in Southeast Asia. The country seeks to tap into the fintech industry’s potential by encouraging collaboration between the private sector (banks, fintech providers) and the government (the Central Bank, the Indonesian Finance Authority), implementing Payment System Blueprint 2025 to accelerate banking digitalization, and empowering small and medium-sized enterprises (SMEs) to boost the economy and create a cashless society.

• Recognizing the important role of information and communication technology (ICT) in digitalization, Indonesia is developing capabilities to modernize its digital infrastructure, including widening broadband access, to fuel the anticipated growth of fintech adoption. Telecom operators are likely to continue to push mobile connection service nationwide aggressively. With telecommunications providers helping bridge the last-mile connectivity gap, Indonesia aims to embed fintech into its broader industrial base, empowering the digital economy.
• As awareness grows about how fintech can streamline product development processes and lead to a shorter time to market, its adoption is set to increase in greenfield sectors that need fintech-based solutions.

Growth Restraints

• Consumers in suburban and rural cities still prefer cash payments and enjoy buying daily necessities in physical stores; this preference often hinders the growth of fintech services, delaying widespread adoption. Such conditions stifle innovation, making it challenging for SMEs and fintech start-ups to penetrate these spaces.

• With an estimated 62.8% banked population, small retailers are still hesitant to invest in a POS system to accept card payments. On average, the initial cost of a POS device can be up to $300, with a merchant fee of 0.15% per transaction. As such, QR code payment, with its low cost and faster onboarding process, is the most viable and popular option for merchants despite the security concerns due to limited data encryption.

• Businesses remain hesitant to adopt fintech-based solutions; concerns such as interoperability issues with legacy systems and different data formats pose a hurdle to fintech adoption. Open application programming interface (API) standards around hardware and software interoperability will be key to addressing this concern.
• While countries actively push the fintech agenda to promote financial inclusion, developing an open API and creating a culture of innovation through industry collaboration requires significant effort and investment. Implementing these solutions for widespread adoption and future business scalability will take time.
• The adoption of fintech in Indonesia will depend on data security. Customer and business concerns are likely to revolve around the risks associated with data protection and loss of personal information.

Companies to Watch

• Payment Gateway

  • Xendit
  • Midtrans
  • Espay
• eMoney
  • GoPay
  • Shopee Pay
  • Flazz by BCA
• Remittance
  • Flip
  • Nium
  • Wise