Indonesia to drive digital bank growth as Gojek, Sea move into fintech (ASEAN Today)
Source: ASEAN Today/Arga Aditya/Unsplash
With the recent announcement that Indonesia’s Bank Jago will go fully digital, the trend of digital banking is on track to open up financial services to populations across the archipelago who have so far struggled to see benefits from traditional banks.
Indonesia’s Bank Jago is set to become the country’s first fully digitized bank. While the bank will provide traditional services for accounts, deposits, loans and investments, the bank will not have any physical branches or ATMs. Bank Jago will provide services exclusively online.
In December 2020, the bank announced that it would expand its existing strategic partnership with ride hailing service Gojek in order to collaborate on financial technology projects.
Gojek, which is backed by Facebook and PayPal, is a minority shareholder in Bank Jago and in late 2020, the company invested an additional US$160million (2.25 trillion rupiah), increasing its stake in the bank from 4.1% to 22.2%.
Bank Jago’s move comes amid news that Indonesia’s financial services authority will now allow customers to open bank accounts and apply for loans through Gojek’s app.
“Banks must be present in digital ecosystems; this is how people do their banking nowadays instead of visiting a bank,” Bank Jago commissioner Anika Faisal told the Straits Times.
Bank account ownership increases with digitization
According to the World Bank, an estimated 95 million Indonesians, one third of the country’s population, do not hold bank accounts. However, of that 95 million, 60 million own a mobile phone, representing a large untapped market and a key avenue to offer financial services to new populations.
Many poorer Indonesians who work in the private sector are paid in cash and the introduction of digital payments will significantly alter how they receive their wages.
Digitizing payments in the private sector alone could increase bank account ownership by 29%. Many Indonesians living in rural areas live far from the nearest physical bank or ATM and have to travel significant distances to withdraw cash for payments for utilities, hospital bills, school tuition and other expenses. Digital banking would enable easier payments and give rural Indonesians access to more financial services.
Bank Jago, like a number of other fintech firms, will help increase financial services equity in the country by eradicating barriers such as geography and providing people with greater access to and ownership over their finances.
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