Buoyed by a growth spurt provided by a new generation of retail investors, Indonesia’s wealthtech startups have raised $356 million so far this year. That is more than half the capital secured by the market since January 2016, according to the latest report by DealStreetAsia – DATA VANTAGE.
With the exception of P2P lending, Indonesia’s wealthtech market has seen its startups find their footing during a period dominated by the pandemic and its ramifications, finds The State of Wealthtech in Indonesia.
Indonesia has doubled the total number of investors in its capital market since the COVID-19 pandemic began in January 2020. The healthcare crisis triggered massive reallocations of discretionary spending and savings into securitised assets as socio-economic restrictions changed consumption patterns.
However, this is just the beginning. With 5.4 million registered investors, the archipelago’s capital market penetration stands at a mere 2%. The upcoming mega listings of e-commerce firm Bukalapak and GoTo, the holding company of Gojek and Tokopedia, are expected to reinvigorate the stock market and boost its market capitalisation. These share sales are also seen as potentially a big draw for more retail investors to participate in the capital market.
Our latest report explores the market in detail, including the factors behind the dramatic rise of wealthtech startups, the competitive landscape and obstacles, including structural bottlenecks.
The growing middle class
Thanks to rapid economic growth, which has hovered above 5% in the past decade except for 2020, Indonesia has seen its average income double in the last 10 years. In 2019, the Southeast Asian country moved into the group of upper middle-income countries after its gross national income (GNI) per capita breached the $4,046 global threshold for the category.
Growth in capital market investors over the years
Helped by rising financial literacy and digitalisation, more Indonesians are starting to allocate capital to the public market. In just five years, the total number of investors registered with the Central Securities Depository (KSEI) grew nine times to 3.9 million in 2020. By the end of May, the number had grown to 5.4 million. Of these, 4.7 million are mutual fund investors, while 2.4 million invest in stocks directly.
“Indonesia is still at the beginning of the democratization of access to wealth management products, there’s still a lot of room for growth. We project that until 2025, the number of investors in Indonesia could reach 25 million,” said Sigit Kouwagam, CEO and co-founder of mutual fund app Bibit, which has raised $114.2 million in venture capital funding to date.
Taking lessons from wealthtech developments in emerging markets such as China and India, Rini Hapsari, the co-founder and managing director of Tanamduit, believes digital investment platforms will become a major driving force in the mutual fund industry.
“Investment products will be more diverse. Apart from plain vanilla or traditional mutual funds, ETFs will also grow,” said Hapsari, whose company services mutual fund transactions on Bukalapak’s platform.
Large captive audience
According to a biannual survey last conducted in June 2020 by the association of internet providers (APJII), Indonesia had 196.7 million internet users, translating into internet penetration of 73.7%, up from 64.8% in 2018.
The survey indicates a large captive market for wealthtech players, especially mutual fund retailers.
Competition to heat up
Pure-play wealthtech firms seeking to capitalise on Indonesia’s rising affluence must compete with traditional players such as banks, investment management firms and securities companies. These incumbents are investing in building infrastructure to deliver services via apps equipped with features such as online onboarding and robo-advisory.
Map of online mutual fund retailers
Reshaping the fintech playbook in Indonesia
The rise of wealthtech platforms will also reshape the fintech playbook of tech giants that control four major ecosystems in Indonesia. These are GoTo, Grab, Sea Ltd, and, to a lesser extent, Bukalapak, which is controlled by EMTEK Group.
In future, these tech giants will either forge alliances to launch their own services or acquire a stake in wealthtech firms. We are already seeing this play out in the market. On top of its partnership with upstarts Bareksa and Tanamduit, Bukalapak seeks to launch a dedicated unit to retail mutual funds under PT Buka Investasi Bersama, its joint venture with Ashmore Asset Management Indonesia.
The State of Wealthtech in Indonesia report is available exclusively to DealStreetAsia – DATA VANTAGE subscribers.
Subscribe/upgrade your subscription now to access our database of thousands of Singapore-registered companies as well as our entire set of reports and DealStreetAsia’s exclusive stories and interviews. Still not sure? Opt for a one-month trial for only $299.