Seizing the Opportunity: The Future of Fintech in Southeast Asia

Uzone.id — The fintech industry in Southeast Asia, particularly Indonesia, is poised for significant growth. While the country has made strides in financial inclusion, the gap between inclusion and literacy remains a challenge. 

Future trends, such as embedded finance, blockchain, and open banking, are expected to further shape the industry. By addressing these factors and capitalizing on the region’s digital potential, fintech can continue to drive economic growth and improve financial access for millions.

As reported from Techinasia.com, the latest data from research results compiled by Google, Bain & Company, and Temasek in 2023 stated that the potential of the fintech industry reached US$ 293.2 billion in 2022. This figure is expected to continue to grow to US$ 841 billion in 2030.

The high number of users and the significant increase in digital transactions have certainly made fintech currently at its peak. This extraordinary surge in fintech growth is an impact of the new normal era due to the COVID-19 pandemic in 2020. In addition, easier internet access, increased digital literacy, especially about finance, and various financial inclusion campaigns have also contributed to the high number of digital transactions in Indonesia.

Even so, the results of the National Survey of Financial Literacy and Inclusion (SNLIK) conducted by the Financial Services Authority in 2024 together with the Central Statistics Agency (BPS) showed a significant difference in numbers. The SNLIK aims to measure the financial literacy and inclusion index of the Indonesian population as a basis for programs to improve financial literacy and inclusion in the future. SNLIK 2024 is the main factor for OJK and other stakeholders in formulating financial policies and services according to consumer needs to improve the welfare of the population.

As a result, SNLIK 2024 showed the financial literacy index of the Indonesian population at 65.43%, while the financial inclusion index was 75.02%. In addition, SNLIK 2024 also measures the level of Sharia financial literacy and inclusion. The results obtained show that the Sharia financial literacy index of the Indonesian population is 39.11% and the Sharia financial inclusion index is 12.88%.

As stated in the East Ventures – Digital Competitiveness Index (EV-DCI) 2023, the fintech sector in Indonesia has a very promising future and is predicted to drive the country’s transaction value. The report in 2023 showed a 32% increase in digital transactions compared to 2019, accompanied by a 17% increase in financial literacy and a 20% increase in financial inclusion. With the presence of this data, it indicates progress in terms of awareness and access to financial facilities.

The increasing need for more accessible financial services such as the many fintech companies that offer various services, ranging from online loans, and digital payments, to investments by adopting technology is also a major driver.

Aries Setiadi as Executive Director of the Indonesian Fintech Association (AFTECH) in his event with OY! Indonesia, Bank Danamon, and BRI in early 2024, once expressed his opinion on how fintech development could be one of the drivers of the digitalization process of the economy throughout Indonesia by utilizing local economic potential. He also mentioned the increase in fintech adoption which can be seen from the high number of digital transactions.

“The development of fintech is one of the drivers of the digitalization process of the economy throughout Indonesia. Indonesia’s large digital economic potential is supported by equal infrastructure, this is reflected in the data on the number of internet users reaching 215 million in the 2022-2023 period, with 28.98% of users accessing economic, financial, and business content,” said Aries.

He continued, “The increase in fintech adoption can also be seen from the high number of digital payment transactions as seen from the value of Electronic Money (EU) transactions increasing by 43.45% (YoY) to reach IDR 835.84 trillion and is projected to increase by 25.77% (YoY) to reach IDR. 1,051.24 trillion in 2024.”

CEO & Co-Founder of OY! Indonesia, Jesayas Ferdinandus, who was also present at the event, also emphasized that his company will work with AFTECH to educate the use of fintech in Indonesia, especially for business people and business owners.

“OY!’s cash and non-cash payment solution innovations continue to be developed to provide a safe and integrated transaction experience so that it can optimize business efficiency and customer transaction flows in Indonesia. As an innovation initiator, OY! is working with AFTECH to educate the use of fintech to the implementation of appropriate payment solutions for business people and business owners,” said Jesayas.

Referring to the 2023 Annual Members Survey report from AFTECH, the number of fintech companies registered with the association has consistently increased since 2016, where the online lending sector is the cluster with the largest number of startups with 102 companies. Followed by digital financial innovation at 84 companies and digital payment service providers at 39 companies.

The driving factors for fintech innovation in Indonesia include the existence of supporting regulations from the government, such as regulations to support the growth of the fintech industry. For example, OJK Regulation Number 13/POJK.03/2018 concerning the Implementation of Peer-to-Peer Lending Business Activities.

The existence of fintech innovation in Indonesia has succeeded in reaching previously unbanked communities, especially in remote areas, the financial transaction process has become efficient, fast, easy, and transparent, and financial services have become easier to access anytime and anywhere.

Finally, fintech expansion in Indonesia continues to show significant growth. After successfully revolutionizing the way people access financial services, fintech is now increasingly aggressive in expanding its reach. The increasing digital literacy of Indonesian people makes them more open to financial technology.

With bright prospects, the development of fintech in Indonesia shows positive signs in increasing access to financial services, encouraging financial inclusion, and supporting economic growth in Indonesia.