Feb, 2019     

Indonesia Fintech Report


Indonesia FinTech- USD 50+ Bn up for grabs by CY23

In tandem with the growth of the e-tailing and other consumer internet sectors, RedSeer research shows that Indonesia FinTech is also ready for rapid growth in next few years to reach USD 50+ Bn by CY23 from the current USD ~7 Bn.

With growth of digital consumption, e-wallets expected to grow 16x by CY23 while P2P lending is also expected to grow dramatically in this period, catering to the finance needs of both consumers and sellers. Additionally, with growing digitization, we see strong opportunity in the digital remittance market as well as consumers shift from both informal channels and traditional formal channels to fully or partially digital modes of remittance.

Market size of key fintech segments will likely reach USD 45-50 Bn by CY23, with large share coming from Type B customers

 

Type B/unbanked customer/micro SMEs expected to be a USD 5 Bn opportunity by 2023 in payments (20% of market), and USD 0.6 Bn in lending (~8-10% of market)

Additional RedSeer findings also show that a significant chunk of the market growth will be driven by ‘Type B/unbanked consumers. While their share in the market will grow relatively slowly from current ~10% to ~20% by CY23, in overall terms it means USD 6 Bn of opportunity, which is large by any standards. Seeing this large opportunity, we see many players across segments trying to cater to this market and applying innovative approaches on their product design and marketing.

Double click on E-Wallets- Market in flux and ready to shift orbits

Our findings on e-wallets in Indonesia show that the market structure is poised for rapid change going forward. From a market dominated mostly by ride hailing category, we see other categories coming up rapidly over next 5 years as consumer grow more comfortable with digital payments. With categories like Offline especially likely to see strong growth as digital payments gets acceptance across malls, smaller retailers and other segments (see below chart).

…with market structure also fundamentally poised to change; this changing structure brings many opportunities 

 

Our past work in digital payments has shown that such shifts in the market structure are typically accompanied by a shift in the customer segments as well as the type of players in the market. For example, this was seen in Indian digital payments and Google Pay came almost out of nowhere to grab pole position in P2P payments category.

We expect to a see a similar shift happening in Indonesian e-wallets. Early signs of a competition structure change are visible as many new players have come up which are targeting the Type B segments and focusing on smaller fast-growing categories like public transport for example. These players are focused on expand the market and have limited overlap with each other’s plays. As a result they are each playing in relative blue oceans vs red oceans that the larger incumbents are operating in (see below chart).

These larger players are aggressively competing vs each other (with high cashbacks), but emerging players driving growth in new areas

 

We expect these new age players to continue to build consumer awareness and drive acquisition and repeat usage via innovative tools like offline agent network, partnerships with telcos etc. Together with the efforts of the larger players, this should see the overall wallets market growing to USD 25 BN BY CY23, out of which a large chunk will come from Type B consumers.

Solving for these challenges will drive rapid wallet growth, with Type B expected to be a USD 5 Bn opportunity by 2023

 

These Type B consumers will have significantly different needs throughout the whole consumer funnel vs Type A consumers. Thus, larger players will have significant challenges in driving this market, which is likely to thus have a strong presence from smaller/specialist players, which would be competing for a USD 5 Bn pie by 2023.

 

The above are sample findings from our comprehensive report on Indonesian FinTech. These findings were presented at an event held in Singapore on 15th Feb.

 

Our full covers the below areas, please reach out to query@redseer.com for a copy of the same.

 

What does the report cover?

 

 

E-wallet was a $1.5 billion business in Indonesia last year and its value will reach $25 billion by 2023, according to a recent report from Bengaluru-based research firm Redseer.” –  The Jakarta Globe