There’s more to be done to democratise Indonesia’s financial markets, says Bibit CEO

Photo: Sigit Kouwagam

The Indonesian financial market is undergoing a sea change as droves of millennials and Gen Z cohorts are becoming first-time investors.

The total number of investors in the country’s capital market has doubled since Jan 2020 as the social and economic restrictions triggered by COVID-19 have shifted the allocation of savings and discretionary spending to securitised assets.

Homegrown wealthtech company Stockbit is among the first movers to have benefitted from the shift. After starting off in 2016 as a platform for stock traders to exchange information and trade, Stockbit diversified into mutual fund retailing in 2019 after acquiring the mutual fund app Bibit.

As of today, Bibit, which is separate from Stockbit’s stock trading app, has emerged as one of the highest-rated investment apps on Android with over 500,000 downloads.

Bibit received capital boost in May when a group of investors, led by Sequoia Capital India and EV Growth, invested $65 million. The capital injection brings Stockbit’s total funding to $114.2 million, the largest among Indonesia’s wealthtech firms, to date.

Despite the remarkable growth during the pandemic, capital market penetration in Indonesia still has a long way to go, said Stockbit co-founder and Bibit CEO Sigit Kouwagam.

“In the aggregate, only 2% of Indonesians have participated in the capital market so far. As Indonesia is still at the beginning of the democratisation of access to wealth management products, there’s still a lot of room for growth,” said Kouwagam, who was among the wealthtech industry leaders interviewed for our latest report The State of Wealthtech in Indonesia.

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Edited excerpts of the interview with Kouwagam:

Where does Indonesia stand in terms of the development of the country’s mutual fund industry, and what can we expect in 10 years?

In the last five years, the number of mutual fund investors in Indonesia has grown more than ten times. In early 2016, the number of mutual funds and stock investors was only around 248,000 and 434,000 respectively. In the first five months of 2021 alone, more than 1.5 million new investors have started investing in mutual funds and 715,000 in stocks, bringing the total number of mutual funds and stock investors to 4.7 million and 2.4 million respectively.

However, in the aggregate, only 2% of Indonesians have participated in the capital market so far. As Indonesia is still at the beginning of the democratisation of access to wealth management products, there’s still a lot of room to grow. We project that by 2025, the number of investors in Indonesia could reach 25 million.

What lessons can Indonesia learn from mutual fund market development in other emerging markets such as China and India?

We can definitely learn from emerging markets such as China and India, especially in terms of the collaboration between the regulators and the private sector. While it is imperative to screen out bad actors in the capital market before they cause any damage, promoting the right knowledge to the people on how to manage their finances through various education programmes plays a pivotal role in growing the mutual-fund market.

In India, the “Mutual Funds Sahi Hai” [English translation: mutual funds are the right choice] campaign epitomises the success of an awareness-building programme across the country, which has also penetrated into the smaller cities. By enrolling popular sports persons to speak to retail investors and helping all mutual fund brands to communicate better with consumers, this campaign was also supported by the regulator.

Meanwhile, the regulator in China offers tax incentives to retail investors who invest in pension funds or the nation’s strategic infrastructure projects.

Can you explain the underlying factors that contributed to Bibit’s growth, particularly during the pandemic?

We believe people are looking for better ways to manage their money during these trying times. The change of lifestyle to more digital is one of the most critical factors that contributed to our growth during the pandemic. In September 2020, the Central Bank of Indonesia recorded a 37.8% increase year-on-year in digital transactions, which included digital banking and bank transfer.

Similarly, through digital technology, we make it less time-consuming and less of a hassle for people to open their accounts and start managing their funds compared to physically going to the bank. In addition to a high degree of transparency, people also choose Bibit because we don’t charge users high commission fees.

At present, Bibit does not charge a commission from its users, can you please explain your revenue model and when do you expect to break even and start recording profits?

We do not charge a commission from our users. We generate our revenue from the asset management companies that we work with — also known as trailer fee, which is considered an industry-standard in the financial sector. This has provided us with very healthy unit economics for our business.

Why is there a separation of apps between Bibit and Stockbit? How do you cross-pollinate resources and business opportunities between the two?

We believe that having a separate app gives us the ability to have better focus in communicating our products to a wider audience. Understanding that most Indonesians are not familiar with investing, we believe that more and more people are leaning towards a simple and focused app that delivers a clear value proposition.

A separate app also gives us flexibility in terms of creating a user experience that would suit both sets of users which are quite unique in their own way. Stockbit users would require a more sophisticated level of features as compared to Bibit users which are made up of first-time investors that are looking for a simple app to start their investing journey. This allows us to analyse the data and get unique insights, and deliver those learnings across our products to serve users better.

Tech giants such as GoTo and Grab, are entering the wealthtech segment. What is your view on the emergence of these closed-ecosystems and how do you think this will affect Bibit’s strategy?

We believe that as more players enter this segment, the financial literacy of Indonesians will improve faster, which is aligned with our goal. We foster collaborations with industry leaders and bigger ecosystems to make it even more frictionless for the users to invest in the right way.

For example, we collaborate with GoPay AutoPay to make Dollar Cost Averaging investments or for creating a Systematic Investment Plan really seamless. This allows retail investors to become more disciplined to achieve their financial goals while investing the right way, which really aligns with our mission.

What is next for Stockbit Bibit, do you see yourself expanding to other asset classes?

We always listen to our users and we’re helping them invest optimally in diversified asset classes to achieve a secure financial future. There are a lot of exciting developments from increasing adoption and education with regards to the newer asset classes. We constantly look at additional investment products that can complement users’ portfolios in the long run, which has a clear regulatory environment that can provide retail investors protection.

Financial education is very important to Bibit’s growth. Can you share with us your initiatives, and where you are exactly on that journey right now?

At Bibit, we view financial education as a critical part of a user’s investment journey. However, context is very important. Indonesians are largely new to capital markets and are considered beginners. Education has to be tailored to these new investors delivered in new formats that are more digestible, fun, and simple to understand.

As part of our initiatives, Bibit collaborates with fund managers and key opinion leaders to educate and inspire our users to start thinking about their future selves. We hold regular virtual meetups, ranging from YouTube webinars and Telegram audio chats to share with our users how to integrate investing into their daily lives. We have received an exhilarating outtake, which is shown by the level of engagement we got during each of our online sessions.

The importance of financial education cannot be underestimated. We believe that free financial education resources on the web that are openly accessible to everyone can help more Indonesians enter the capital market.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.