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As COVID-19 accelerated the growth of fintech and the adoption of digital banking services in 2020, the financial services industry has undergone rapid transformation. According to industry watchers, advances in digital adoption, which typically take five years, have occurred in ten months during this period.

FinTech is now a crucial component of the country’s financial services sector. In the new post-pandemic normal, even more digital financial services, primarily provided by fintech, can be expected as the business community moves to meet the growing demand from digital natives and smartphone users in Indonesia. and its regional neighbors.

The Minister of Communication and Information Technology believes that the financial technology sector, or fintech, can be a motor force in the growth of Indonesia’s digital economy. He noted that fintech opportunities are determined by the scope and amount of funding available.

Fintech lending services reached 27.2 million people, or 10% of the population, in August of this year, according to at the Ministry of Communication and Information Technology. In addition, the industry lent 14.950 trillion rupees last year, making Indonesia the second best performing ASEAN country in terms of attracting FinTech investment, after Malaysia, Singapore. , Thailand and Vietnam.

Investments in Indonesia totaled around US $ 178.48 million, or around 20% of ASEAN’s total fintech investments. The ministry also found that the number of FinTech companies in Indonesia is getting stronger in terms of funding, starting with the pre-series and going through the early and late stages.

In addition, the minister declared that players in the fintech industry still had much more potential because a certain segment of the population still lacked optimal access to modern banking services. He estimated that 50% of the population of six ASEAN countries did not yet have a bank account or were underbanked, citing a FinTech Industry Outlook in a study in Southeast Asia.

“This is where companies that are seen as healthier and of better quality will be able to receive a higher valuation in the next round of funding, while companies that are on the other side of the spectrum will have struggling to attract investment to spur recovery efforts, ”the Minister added.

Additionally, the fintech industry was always affected by a host of digital issues, including fraud, information hacking via the sniffing method, and mule money schemes in which perpetrators ask victims to transfer money. money in someone else’s account. The ministry has proposed precautionary measures to ensure that the FinTech industry grows in parallel with strengthening Indonesia’s digital economy ecosystem.

OpenGov Asia previously reported on the development of the financial sector. About three decades ago, banks began to adopt digital channels such as telephone, SMS and / or mobile banking, which are more of a “classic” digital payment. Now that the digital economy is driving the growth of the entire Indonesian tech sector, Indonesian citizens must use digital payments to support the country’s economic growth.

Despite massive growth in smartphone adoption and growing demand for digital banking services, the majority of countries continue to rely heavily on cash. Some Indonesians do not have a bank account, demonstrating that cash is still needed for financial inclusion. Liquidity is also deeply embedded in the economies of many developed markets.

As a result, technology companies are now offering new digital financial services, such as e-wallets or e-money, which were previously integrated with e-commerce platforms. The trend accelerated when the COVID-19 pandemic struck in early 2020, limiting the mobility of people.

Ultimately, Indonesia stands to benefit greatly from the digital revolution. To ensure development, the country’s public and private sectors must to prioritize investments in digital technologies to improve infrastructure, expand penetration and increase productivity. The resulting economic impact, $ 150 billion per year by 2025, is too great to ignore. Implementing a comprehensive digital strategy will enable Indonesian businesses to thrive in the digital age and propel Indonesia’s economic growth to new heights.