In December last year, Steven Andrian, a 20-year-old resident of Jakarta decided to use the extra time he got to spend at home amid COVID-19 to dabble in stock investing. His preferred app was Ajaib, a two-year-old investment platform backed by the Indonesian venture capital firm Alpha JWC Ventures.
Ajaib, which today made headlines for raising an additional amount of $65 million in its Series A round led by Silicon Valley fintech investor Ribbit Capital, offered faster registration and had a minimum investment ticket size of $0.69, compared with $69.42 for other brokerages.
“It took only two days for me to start transacting and I only had to put Rp10,000 ($0.69), compared to other platforms where account activation took a long time. Although it’s a small fund, I hope to earn money in the stock market,” said Andrian, who also makes use of platforms like Stockbit, YouTube, and Instagram to gain information about stocks.
Andrian was one of the 1.68 million new retail investors who entered the Indonesian stock market last year, according to data from Indonesia Central Securities Depository (KSEI) — a 53% increase from 2019. Combined with bonds and mutual fund investors, the total stock market investors in Indonesia stood at about 3.87 million, up 56% from 2019.
The growth also marks a steep rise from the 894,000 new domestic investors recorded in 2016.
Making the most of this retail interest are platforms like Ajaib Group, which massively promoted its stock-trading app through social media platforms and influencers during the pandemic. The result was that it bolted into the list of top 10 brokerages in Indonesia in 2020, at number six, according to Refinitiv data.
Ajaib recorded an over fifty-fold increase in retail transactions since the pandemic outbreak, according to local media reports.
Founded by Anderson Sumarli, Yada Piyajomkwan, and Kevin Lee, the company began life in 2018 as a mutual fund provider. It acquired a local securities firm, Primasia Unggul Sekuritas, in May 2020, and rebranded as Ajaib Sekuritas, evolving into a stock trading and mutual fund platform in June 2020.
Inspired by US-based Robinhood and Brazil’s XP Investimentos, Ajaib claims that it charges the lowest brokerage fees in the market — around 0.13% and 0.23%, for buying and selling, respectively, provided the transaction is above Rp150 billion ($ 10.4 million).
For a transaction value less than Rp150 million ($10,391), the brokerage fee is similar to rivals — around 0.15% and 0.25%, for buying and selling, respectively. Transactions between Rp150 million and Rp150 billion are charged at 0.14% for buying and 0.24% for selling.
Ajaib also offers competitive features such as reference-based rewards.
The platform’s latest investment has taken its total Series A fundraising to a little over $90 million in what seems to be the largest round at that stage in SE Asia. It raised $25 million in the said round earlier this year, led by Horizons Ventures and Alpha JWC Ventures. The company aims to gain more customers, particularly among the millennial and Gen-Z segments, by increasing their financial literacy. Ajaib also plans to expand its tech infrastructure and products and hire more engineers.
Ajaib cooperates with the Indonesia Stock Exchange to conduct programmes to educate millennials and Gen Z. Millennials, or the 18-40-year-olds, accounted for 70% of the beginners in the stock market in 2020.
While Stockbit can’t lower its trading fee due to the trading partnership with Sinarmas Sekuritas, it is positioned as the most active social network for Indonesian investors. The platform enriches companies’ financial data and statistics to support trading for paid users for Rp250,000 ($17.30) a month. Users with a minimum trading capital of Rp5 million ($346) can acces Stockbit features for free.
“Investors or users can look up data from public companies within their reach, which is something that they could not do before. Moreover, they can also have a discussion and learn from other investors as well as trade or buy-sell their stocks all at once within the Stockbit app,” Wellson Lo, Stockbit’s founder and CEO, told DealStreetAsia.
Another recently launched digital trading platform is NH Korindo Sekuritas, a joint venture between South Korean Nonghyup Financial Group and Korindo.
NH Korindo offers ‘Naik’, a digital platform with a cheap brokerage fee — around 0.09% for buying and 0.19% for selling. The promotional offer is for one year after account opening and requires a minimum deposit of Rp1 million. “Yes, it is aimed at acquiring new users, but we also want to educate them about investment,” said Aras Whisnupradana, a company spokesperson.
Are low brokerage fees sustainable?
To be sure, the low-brokerage -fees strategy of Ajaib is not unique.
Global trading platforms such as Robinhood, Tencent-backed Futu Holdings in China, and Xiaomi-backed Tiger Brokers in Singapore have employed the same tactic.
Xiaomi-backed Tiger Brokers Singapore recorded a three-fold quarter-on-quarter growth in account openings in Q3 of 2020, according to a company statement. It also saw an increase in trading value of 540% in the period.
Meanwhile, Futu Holdings saw its users increase 52.2% year-on-year in Q3 last year, to 10.4 million users.
There are, however, those who disagree with the sustainability of low brokerage fees.
“Adjusting the brokerage fee is not a simple decision to make (for us). There are probably more than a hundred factors that we need to look into before making any changes to our fees closely. And I hope our competitors also think deep before making any adjustments. In the developed markets, brokerage fees are zero (or near zero) because brokerage service is already commoditised. Also, the market is big enough to secure Q (quantity) by lowering P (price). That is not the case in Indonesia,” said Taye Shim, CEO of Mirae Asset Sekuritas, Indonesia’s second most active brokerage firm, to DealStreetAsia.
Shim said new players disrupted the traditional market leaders, primarily by dropping brokerage fees. Mirae would provide the best user experience to customers and the fees are reflective of what the platform offers, he said.
Meanwhile, Mandiri Sekuritas, a subsidiary of state lender PT Bank Mandiri Tbk, and the tenth-largest in volume trading, recently launched a new feature, MOST Forum, on its website for making an interactive discussion for analysts and users. Through the Forum, the firm expects to engage more with users and improve its services.
Stockbit’s Lo revealed that the brokerage fee is not the primary driver to acquire users. Some factors like stability and speed, exclusive features, and essential functions will consider users to choose the right brokerage firms.
Moreover, Lo said, social media plays a significant role in helping the firms increase awareness of the investment and financial market. Stockbit and Bibit partner public personalities such as the television presenter Deddy Corbuzier and actor Raditya Dika, to educate Indonesian citizens to start investing.
Ajaib, too, appointed the Korean actor Kim Seo Ho, of the Netflix drama ‘Start-Up,’ as a brand ambassador to engage more users.
“Communication with users is key. We prefer our communication to be honest, transparent, and with a lot of personal touches. It’s like talking to a friend. Because of our large country, online communication will be most suitable to reach our users even for those in smaller towns,” Lo said.