<article>Indonesia’s banking sector has seen a string of acquisitions and investments in recent years on the back of regulatory updates in the areas of digital banking and multiple ownership of banks. </article>

Indonesia’s banking sector has seen a string of acquisitions and investments in recent years on the back of regulatory updates in the areas of digital banking and multiple ownership of banks. 
Tech companies have led these acquisitions as they race to create a dominant digital bank that could contribute to their overall ecosystems. At least 16 local and foreign tech companies have either acquired or invested in 14 Indonesian banks with the intention to repurpose them into digital-first banks, according to <a href="https://www.dealstreetasia.com/reports/indonesia-digital-banking-review-2022/">the latest report</a> by DealStreetAsia &#8211; DATA VANTAGE.
But this is more than just a tech story. Conventional banks have joined the race in a big way, and unlike other markets, they have been at the forefront of digital banking disruption in the country, finds <a href="https://www.dealstreetasia.com/reports/indonesia-digital-banking-review-2022/">Indonesia Digital Banking Review 2022</a>.
Conventional banks, including regional and rural banks, have been busy fortifying their defences. 31 are now able to do online onboarding, 40 can facilitate QR Code transactions and 25 are able to do both. Banks with ample resources such as Bank BCA, Bank BRI and Bank BNI have acquired and invested in smaller banks and converted them into digital-first banks: Bank Digital BCA (Blu), Bank Raya and Bank Mayora, respectively.
List of tech companies with a stake in Indonesian banks
<figure id="attachment_298906" aria-describedby="caption-attachment-298906" style="width: 788px" class="wp-caption alignnone"><img loading="lazy" decoding="async" class="wp-image-298906 size-full" src="https://media.dealstreetasia.com/uploads/2022/07/Table.png?resize=640,401" alt="" srcset="https://media.dealstreetasia.com/uploads/2022/07/Table.png?w=788 788w, https://media.dealstreetasia.com/uploads/2022/07/Table.png?resize=300,188 300w, https://media.dealstreetasia.com/uploads/2022/07/Table.png?resize=768,481 768w" sizes="(max-width: 788px) 100vw, 788px" data-recalc-dims="1" /><figcaption id="caption-attachment-298906" class="wp-caption-text">Source: Indonesia Stock Exchange, Directorate General of General Law Administration, public disclosures</figcaption></figure>
<h3>Ecosystem matters</h3>
A number of new digital banks are benefitting from the vast networks of their shareholders and affiliated companies.
Backed by Indonesia’s largest tech conglomerate GoTo, Bank Jago turned profitable in just 16 months since it was rebranded as a digital bank. It achieved the feat faster than South Korea’s KakaoBank, which has been a poster child for digital banks worldwide. Jago, which took its name from celengan ayam jago or rooster-shaped piggy bank, also leads in several other categories, including total assets, loan value and net interest income. The bank’s high loan-to-deposit ratio, however, poses a high risk in the event of an unforeseen economic downturn.
With shareholders such as CT Corp, Salim Group and e-commerce platform Bukalapak, Allo Bank is another contender with the potential to become a dominant digital-first bank in the future. The bank has managed to remain profitable after its transformation from a conventional lender.
As one of the early movers in the digital bank space, Bank Neo Commerce, which is backed by Akulaku, excels among publicly traded digital banks for its ability to collect third-party funds. This is largely due to its offers of high interest rates during promotion periods. Bank Neo, however, suffered close to 1 trillion rupiah (roughly $67 million at today&#8217;s exchange rate) in losses last year, partly due to its high marketing spending.
<h3>More M&amp;As</h3>
Bank regulations on multiple ownership and minimum capital requirements will further drive market consolidation. Indonesia is an attractive market as investors can find dozens of undercapitalised banks to acquire for a bargain. The country is also fundamentally attractive due to its large underbanked population, but the window of opportunity is closing in as digital transformation is turbocharging penetration.
Indonesia’s banking authority demands commercial banks to achieve a minimum core capital of 3 trillion rupiah by the end of this year, up from 2 trillion rupiah at present. Economic pressure due to the COVID-19 pandemic, rising inflation and a generally unfavourable global environment make achieving the capital requirement harder for smaller banks. In turn, this should further encourage M&amp;A activities in Indonesia.
Banks that have a full payment service provider licence are ideal targets for acquisitions. Currently, there are 16 publicly listed banks, 22 private banks and 34 regional and rural banks that hold the licence
<hr />
The <a href="https://www.dealstreetasia.com/reports/indonesia-digital-banking-review-2022/">Indonesia Digital Banking Review 2022</a> report covers regulatory updates affecting Indonesia’s banking sector, the performance of key players in the digital banking space and important developments that will shape their future. The report also includes:
<ul>
<li style="font-weight: 400;" aria-level="1">a mapping of banks based on licences necessary to operate full digital banking services</li>
<li style="font-weight: 400;" aria-level="1">the financial performance of publicly-traded digital-first banks</li>
<li style="font-weight: 400;" aria-level="1">the most popular e-wallet players based on a survey of 1,000 offline retail MSMEs</li>
<li style="font-weight: 400;" aria-level="1">the role played by the country&#8217;s fintech lending sector</li>
</ul>
The report is available exclusively to DealStreetAsia – DATA VANTAGE subscribers. <a href="https://data.dealstreetasia.com/">Subscribe/upgrade</a> your subscription now to access our entire set of reports.

At least 16 tech companies have either acquired or invested in 14 Indonesian banks with the intention to repurpose them into digital banks.

The battle, the players, the rules: Understanding Indonesia's digital banking landscape

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The battle, the players, the rules: Understanding Indonesia's digital banking landscape

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