The Future of Indonesia's Financial Technology Sector

The Future of Financial Technology in Indonesia: Trends and Opportunities

  • InCorp Editorial Team
  • 16 January 2025
  • 6 minutes reading time

The financial technology sector, or fintech, combines technology with financial services to improve efficiency and accessibility. It includes services like digital payments, online lending, and investment platforms.

However, only some things involving finance and technology are fintech. For instance, while a basic banking app isn’t considered fintech, a peer-to-peer lending platform powered by AI is.

Fintech is revolutionizing Indonesia’s economy and society, driving innovation and financial inclusion. It’s expected to add $2.8 trillion U.S. dollars to the economy by 2040, underscoring the sector’s immense potential.

This article will explore fintech’s growth, opportunities, and challenges in Indonesia and offer a closer look at its transformative impact.

Current Landscape of the Indonesia’s Fintech Sector

Indonesia is undergoing a sweeping digital transformation that will redefine the economy and society. The financial sector is at the forefront of this revolution, presenting substantial opportunities for domestic and international businesses.

Recent milestones include:

  • E-commerce transactions valued at $51.9 billion in 2022.
  • QR payment transactions soar to IDR 98.5 trillion in 2022, reflecting the success of standardized QR codes for interoperability among banks and digital wallets.
  • With 22.4 million registered merchants, Indonesia leads the ASEAN region, with the potential to double that number in the future.

The enhanced digital economy will contribute an additional $2.8 trillion U.S. dollars to Indonesia’s GDP by 2040. This growth highlights the fintech sector’s role in driving economic expansion and enhancing financial accessibility.

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Opportunities in Indonesia’s Financial Technology Sector

The financial technology sector in Indonesia is experiencing unparalleled growth, driven by advancements in digital infrastructure, regulatory support, and increasing consumer adoption.

The following sections will examine two important opportunities shaping Indonesia’s fintech landscape.

Fintech Lending and Digital Payments

Indonesia’s fintech sector has grown significantly, with the number of companies rising from 51 in 2011 to 336 in 2023. This surge is driven by peer-to-peer (P2P) lending platforms like Akulaku and Kredivo, which connect borrowers and lenders and offer quick financing solutions for small and medium-sized enterprises (SMEs).

By March 2024, 94 conventional and 7 Sharia fintech lending companies were operating, catering to the unbanked and underbanked population.

Digital payments are another cornerstone of fintech growth in Indonesia. Platforms like Gopay, DANA, and OVO have simplified transactions, allowing users to make payments without a bank account or credit card.

With over 48 licensed e-wallet systems, Indonesia has embraced cashless payment methods, making financial services more accessible to millions. Gopay, integrated into Gojek, leads the market, while OVO thrives through partnerships with Grab and Tokopedia.

Indonesia is emerging as a significant player in the cryptocurrency market. Through Bappebti, the government has introduced proactive regulations, recognizing crypto assets as commodities and establishing a legal framework for trading.

In November 2023, cryptocurrency transactions reached IDR 17 trillion, boosted by the launch of the world’s first state-backed cryptocurrency exchange in July 2023. Bitcoin and Ethereum are the most popular cryptocurrencies in Indonesia, viewed primarily as long-term investment assets. 

The government proposed a 50% tax reduction for crypto investors in 2024 to encourage market growth. This supportive environment and rising Bitcoin prices since early 2023 continue to drive interest in the sector.

Challenges and Risks in Indonesia’s Financial Technology Sector

The Future of Indonesia's Financial Technology Sector

Despite its rapid growth, Indonesia’s financial technology sector faces challenges that could impact its sustainability.

According to Djoko Kurnijanto, Head of the Department of Regulation and Licensing for Financial Technology, Digital Financial Assets, and Crypto Assets (IAKD) at the Financial Services Authority (OJK), these challenges include business continuity, talent development, collaboration, and the need for adaptive regulations.

Business Continuity

Many fintech companies need help with governance issues and insufficient capital, which has caused some to cease operations. Although investor interest in fintech has decreased, some firms are intensifying efforts to attract external funding. Strong governance and innovative strategies are critical for ensuring long-term sustainability and building investor confidence.

Talent Development

Indonesia has an advantage with its young, tech-savvy population. However, transforming this demographic from technology users to skilled professionals is essential for the fintech sector’s progress.

Fintech companies must focus on nurturing adaptive talent to meet evolving technologies’ demands rapidly.

Collaboration and Partnerships

Collaboration across different sectors is critical for fintech growth, but Indonesia still needs strong partnerships between fintech companies, financial institutions, academia, media, and regulators.

A more integrated approach, such as the pentahelix model involving all stakeholders, can create a supportive ecosystem for innovation.

Adaptive Regulations

Regulatory frameworks often must catch up to technological innovations, creating uncertainty for investors and businesses. Adaptive regulations are needed to foster innovation, ensure market integrity, and protect consumers. Responsive and supportive policies will encourage sustainable growth in the fintech sector.

The Future of Financial Technology in Indonesia

Indonesia’s financial technology sector is poised for exponential growth as it continues to leverage technological advancements, supportive policies, and increasing consumer adoption.

The sector is expected to shape the country’s digital economy by 2040, with emerging technologies like cloud technology, big data analytics, and adaptive financial solutions driving the next wave of innovation.

Cloud Technology Investments

Global tech giants continue to invest heavily in Indonesia’s cloud infrastructure to support the country’s digital transformation:

  • Alibaba: Established a significant presence with multiple data centers, providing first-mover advantages.
  • Google Cloud: Expanded operations in Jakarta to enhance scalability for fintech services.
  • AWS: Invested $2.85 billion in data centers in West Java, offering infrastructure for secure financial operations.
  • Microsoft: Further developing its cloud capabilities to support Indonesia’s tech-driven economy.

Big Data in Consumer Insights

Big data is becoming central to understanding and serving Indonesia’s consumer market.

  • Social Media Analytics: Platforms like Facebook and Instagram are critical tools for micro, small, and medium enterprises (MSMEs) to engage with their audience.
  • Growing Social Network Users: Indonesia’s social media user base is expected to reach 256 million by 2025, creating enormous opportunities for fintech engagement.

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Start Your Journey in Indonesia’s Fintech Market with InCorp

As the fintech sector grows, now is the perfect time to establish your presence in this market. However, to maintain this momentum, it is crucial to address the challenges within this industry.

InCorp provides expert guidance to streamline your market entry and ensure full compliance with Indonesia’s local regulations, helping you build a strong and sustainable foundation for your business.

We can assist you with:

  • Company Registration: Get your business up and running with guidance from experienced professionals.
  • Legal Consultation: Navigate Indonesia’s fintech laws and build a compliant foundation for your operations.

Complete the form below to position your business for success in one of the most dynamic digital ecosystems globally.

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Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Frequently Asked Questions

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.

      • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

    The minimum number of shareholders to incorporate a PT is two

    You can transfer the license if your local distributor agrees to change the product license holder.

    A foreigner is not allowed to form a CV in Indonesia

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