While Indonesia has long been known as a fertile ground for fintech growth due to its huge market size and large unbanked population, a recent report shows that the sector has grown in leaps and bounds over the past decade.

The number of fintech players in the archipelago grew six-fold to 334 in 2022 from only 51 in 2011. The growth was initially driven by the payments segment, but it has now become a diverse landscape driven by lending, payments, and wealth.

This updated state of Indonesia’s fintech sector was featured in a report titled “Indonesia’s Fintech Industry is Ready to Rise” — a newly released report by early-stage venture capital firm AC Ventures and Boston Consulting Group (BCG) that features interviews with 20 industry leaders.

“Indonesia’s sleeping giant fintech ecosystem is on the rise, and when it wakes, the value unlocked will inevitably be substantial,” the report read.

The report noted that the first wave of fintech growth was dominated by the payment segment, which had over 63 million e-wallet users in 2020 and is expected to see a compound annual growth rate (CAGR) of 26% up to 2025.

Source: “Indonesia’s Fintech Industry is Ready to Rise” report by BCG and ACV

The Indonesian fintech lending space had more than 30 million active peer-to-peer (P2P) borrower accounts in 2021, while the wealth segment had over 9 million retail investors as of 2022, the report read.

Transaction values, according to the report, also continue to grow with more than $20 billion of e-wallet transactions in the period between 2017 and 2021, representing a 123% CAGR. Over $17 billion in loans were disbursed between 2017 and 2022. Meanwhile, over $20 billion in net asset value of wealth tech and digital trading took place in 2021.

Investors remain bullish

The report found that investor sentiment remains bullish for players in Indonesia’s fintech sector, with total investments between 2020 and 2022 reaching $3.2 billion or 4.6X the funding seen during 2017-2019, “demonstrating strong investor commitment”, the report read.

Still, the report noticed a shift in investors’ taste. While a significant portion of funding went to payment and lending players, wealth tech had a breakout year in 2021 by receiving over $500 million in funding. The report also noted that a majority of the deal volume went into early-stage companies, indicating a strong desire to invest in emerging innovation.

Source: “Indonesia’s Fintech Industry is Ready to Rise” report by BCG and ACV

“Despite the current crisis in banking, I think in this part of the world we are somewhat immunised and our banks are certainly in pretty good shape. Fintech remains very exciting because we still see tremendous growth in various sub-sectors of fintech and also there is still the underbanked and unbanked part of the population that we look to serve,” Helen Wong, a managing partner at AC Ventures, said at the report launch on Wednesday.

Wong said AC Ventures has seen that some horizontals — including payment companies and digital banks — are more mature than others. “I think for us going forward, we will look to invest in more verticals. For example, we did one in auto financing, we did one in property financing, and also maybe some of the enablers … credit scoring, investment in KYC,” Wong said, noting that AC Ventures was recently also looking into the B2B invoice financing space.

AC Ventures, whose assets under management reached more than $500 million, invests in early-stage startups with a focus on Indonesia and ASEAN. It has invested in over 120 tech companies since 2012.

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