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You’re a budding entrepreneur with an affinity for technology who’s spotted a problem in the Indonesian financial market. You’re convinced that you might just have the solution for it, and you think that you’ve got what it takes to break into the fintech scene.

And who could blame you for wanting to? With over US$56 million dollars raised in funding and 46 recorded deals across Indonesia’s fintech industry, the ecommerce market alone is projected to be worth US$130 billion by 2020.

But with obstacles such as regulatory issues and low public awareness, building a fintech product is harder than it might seem, especially when compared to verticals like ecommerce. To help you find the best approach, Tech In Asia spoke with four startup founders about their experiences in the market, sharing how they got their slice of Indonesia’s fintech pie.

1. Start with a solid infrastructure (Cashlez)

When Cashlez set up shop in Indonesia in 2015, it was a new player in an old game.

“We were really just nobody starting out, and we had to convince big banks of what we were doing,” says Cashlez CEO Teddy Tee, who came upon the idea for a point-of-sales system that’s more localized than the electronic draft capture (EDC) terminal. These devices can be a hassle to install and maintain. Vendors also have to teach merchants how to use them.

An example of an electronic draft capture (EDC) terminal, which Cashlez hopes to disrupt / Image credit: Pixabay

“We definitely were not the first in the industry, but there was no existing capacity that catered to the Indonesian market,” he adds.

Cashlez persuaded corporates and banks to partner with them by having the right business model from the get-go. The startup was able to develop this thanks to Tee, who was the director for merchant sales and solutions at Visa Worldwide Indonesia from 2012 to 2015.

As he explains, “I knew how to convince corporates that we had proof of concept based on existing strategies and frameworks, but we wanted to make it Indonesian-focused.”

But for those who don’t have Tee’s banking experience, finding suitable advisors is key. Choose people “who know the ecosystem, the existing regulations, and have all the right networks to help you,” he recommends.

2. Gain the public’s trust (Modalku)

When peer-to-peer lending site Modalku was launched as a loan marketplace for small and medium-sized businesses in 2016, its founders had to pay the staff out of their own pockets.

“We started with dreams and nothing else,” recalls CEO Reynold Wijaya, who was undertaking a Master of Business Administration at Harvard Business School with co-founder Kelvin Teo when they set up shop. “It was crazy in the beginning.”

Like most entrepreneurs, Wijaya and his partners faced a host of challenges as they got the startup going. But when asked what he thinks is crucial in breaking into the scene, he says it was vital to gain the trust of the public, which didn’t know much about fintech.

As he points out, “Thankfully, although fintech was relatively unknown, Indonesia was welcoming of the new venture and less defensive to it than Singapore.” Wijaya speaks from experience: He established Funding Societies, a similar peer-to-peer loan marketplace localized to Singapore that also serves as Modalku’s parent company, in 2015.

“It was easier for us to launch in Indonesia, as we encountered people who were more open to new ideas. And we had a larger network to reach out to for funding and collaborations since we’re Indonesian,” he shares.

However, being welcomed by the public doesn’t necessarily ensure smooth sailing. According to Wijaya, Modalku has taken steps to be transparent by disclosing its portfolio performance – including information such as late and defaulted payments. It also sends out press releases frequently and holds webinars on any updates on the company.

“Without the trust of the public, how can you gain investments? We had to make an extra effort in being very engaging, not just to convince regulators of the benefits of our cause, but to show the public that we could be trusted,” says Wijaya.

Winning the public’s trust and working with regulators are both important to success / Image credit: Pexels

3. Work with regulators (Investree)

The concept for Investree came about in 2015 when CEO Adrian Gunadi saw the potential of peer-to-peer lending as an alternative loan solution.

“There were opportunities in terms of a huge credit gap that was not being met by formal sectors, but also a huge pool of retail lenders that were untapped,” recounts Gunadi.

Prior to 2016, the term “fintech” barely saw any searches in Indonesia. But when Investree was rolled out, Gunadi immediately saw how the lack of existing regulations in the peer-to-peer lending sector could pose problems. “The market was there, demand was there, technology was there, but the lack of regulations made for a difficult launch,” he says.

He continues, “Dealing with money lending and investment space is a sensitive area. There was a risk that the central bank or regulators may deem our business illegal.”

As such, Investree immediately set out to find the most acceptable business model for the existing market, ensuring that it didn’t violate any regulations. It also started working with regulators in 2016 to define regulations for peer-to-peer lending.

“Once proof of concept was run, we conducted discussions with regulators and communicated our business model as a solution to a problem, and official regulations were issued by the end of the year,” shares Gunadi. “It made life much easier when talking to stakeholders or working with partners once we had legal standing.”

4. Stay ahead of your clientele (Faspay)

Faspay has been around since 2012. It helped the ecommerce market grow by providing an online payment gateway as an option at a time when peer-to-peer transfers and balance inquiries were the only ways people conducted transfers online.

According to Eddy Tju, Faspay’s vice president of business development, keeping up with their clients’ needs has enabled the startup to remain relevant in the market.

“We initially started working with Indonesia’s Bank Central Asia (BCA), but eventually merchants asked if they could conduct payments through other banks, so we formed partnerships with more banks,” says Tju.

Aside from providing discounts and educating the market on the uses and benefits of its online payment system, Faspay is trying to stay ahead of the curve by actively finding out how else they can assist merchants in Indonesia.

“We’re currently working on expanding to other payment options where we can see customers purchasing a product online and paying in cash at nearby convenience stores or retail outlets,” explains Tju. “This is especially useful to those who can’t afford a credit card or to students below the legal age who can’t pay in any way except cash.”

The ship hasn’t sailed yet to be part of Indonesia’s fintech scene / Image credit: Pexels

In 2016, Indonesia launched the National Strategy for Financial Inclusion (SNKI), which called for supportive regulations in a bid to help increase the proportion of the country’s citizens who have bank accounts.

In 2014, only 36 percent of Indonesians aged 15 and above had a bank account. The Indonesian government’s new target? 75 percent by 2019.

Indonesia still has a long way to go to reach its goal. Evidently, the desire for fintech that works for Indonesians is not a call to be ignored.

With growing government and investor support, Indonesia’s fintech scene is worth watching as it inevitably grows from promising innovation to invaluable service for digital businesses. So are you really going to sit back and watch, or will you be the next one on the startups-to-watch list?


This is part of Tech in Asia’s coverage of Finspire 2017 held on 18 and 19 October 2017.

FINSPIRE 2017 is the yearly event held by Mandiri Capital Indonesia (MCI), a subsidiary of Bank Mandiri, to accelerate fintech development in Indonesia. It brings together financial technology organizations, startup communities, and fintech enthusiasts to discuss the future of financial technology in Indonesia.

MCI aspires to help grow the Indonesian fintech startup ecosystem and accelerate the creation of products and services that will support the banking and financial industry.

This post Insider tips on how to build a successful fintech product in Indonesia appeared first on Tech in Asia.

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