Indonesia’s largest private bank Bank Central Asia (BCA) has launched a venture capital business unit called Central Capital Ventura (CCV), joining the race to use financial technology (fintech) startups to reach the otherwise “unbanked” markets.
BCA has invested Rp 200 billion ($15 million) for the initial stage of its latest venture.
“Technology advancement in the internet and telecommunication has allowed more startups to create further digital-based innovation, especially in the fintech sector. Considering fintech has a huge potential to grow, we expect CCV to thrive as a venture capital firm,” said Armand Wahyudi Hartono, BCA vice president, in a stock exchange filing last week.
CCV, 100 per cent owned by BCA, will invest in and collaborate with fintech and supporting companies that will “support BCA’s financial service ecosystem as well as that of BCA’s subsidiaries, and who will give added value to BCA’s customers.”
BCA is not the first bank to set up its own VC unit to invest in fintech. Last year, state-owned Bank Mandiri introduced its venture capital unit Mandiri Capital Indonesia (MCI), with Rp 500 billion ($37 million) of initial capital.
The purpose is to invest in startups that provide payment services relevant to e-commerce, and to act as a “bridge connecting investors and entrepreneurs to the fintech sector, as technology and finance are becoming more advanced and inseparable.” In 2017, MCI plans to inject up to Rp 200 billion ($15 million) into four to five fintech startups. Its ticket size will vary between Rp 10 billion and Rp 30 billion.
Indonesian fintech is burgeoning and is expected to continue doing so, especially this year, for a number of reasons. At the end of 2016, Indonesia had introduced a new set of rules for peer-to-peer (P2P) lending platforms, boosting investors’ confidence in the sector. The rules cover issues such as foreign ownership, minimum capital requirements, interest rate provision, and consumer protection.
The policies had long been anticipated by players, who had been working closely with the Indonesian financial services authority (OJK) to come up with rules governing lenders and borrowers.
Rosan Roeslani, chairman of the Indonesian Chambers of Commerce and Industry (KADIN), went as far as saying that investments into the fintech industry is expected to reach $8 billion by 2018.
“In 2008, fintech investment stood at roughly $ 900 million. It had increased to three billion in 2013, and is projected to reach $ 8 billion by 2018,” Roeslani had said.
Transactions through fintech in Indonesia are estimated to be Rp 40 trillion in the past two years, a rapid escalation alongside growth in internet usage in the country, with a third of its 250-million population going online. A fifth of that number, however, still have no bank accounts.