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November 22, 2022

Taking to the skies: Why QED is excited about Indonesia

I was in Jakarta earlier in the summer and was awed by the brisk development of the country. It is one of the places where a high GDP growth rate can be seen in magnificent tangible improvements – from tall skyscrapers and modern business districts to gains in standards of living, how commerce is conducted, productivity and, of course, traffic.

Southeast Asia boasts a vast and growing economy; with some variance over the last two decades, the region has grown at an exciting 8.6% nominally.

In particular, Indonesia is a powerhouse and poised to become a major player in the global fintech landscape.

Over the last two decades, Indonesia’s share of GDP within SEA countries has increased from a third to over 40%. Its vigorous growth and fundamental resilience are anchored on abundant natural resources, mainly coal, palm oil and nickel, and its early success at graduating up the value chain. The particular export mix – energy and food – softens the impact of global crises and inflation as well.

Indonesia is home to the fourth largest population (around 270 million) in the world. With a median age of 31 years, it is no wonder that smartphones are everywhere and tech is being adopted across all walks of life, such as 130 million Facebook users and 100 million Tiktok users (3rd and 2nd largest in the world, respectively).  The country is already home to several unicorns in e-commerce, mobility and fintech.

Historically, financial services growth was led by a handful of large banks. Unsurprisingly, financial services is under-penetrated (credit and debit card penetration is less than 1% of the population), but it is due to many good reasons. Technology could meaningfully lower customer acquisition and servicing costs, consolidate the revenue potential of those customers, sharpen underwriting and collections capabilities, and enhance user experience. These are worthy use cases that QED has seen, invested in, and helped build across the world.

We see the Financial Services Authority, OJK, recognising the value of innovation and paving the path for new-age companies to play a larger and more constructive role.

Indonesia offers phenomenal opportunities to build “full stack” companies which bring innovation across the value chain of banking, insurance and wealth management, to create tech companies to enable better partnerships between regulated entities and new-age platforms, and to build embedded finance companies that monetise real economy activities through financial services.

I am now back in London excited about the opportunities ahead. I met some marvellous founders and was thrilled at the country’s potential to build the next generation of fintech leaders in the region. We will be back for more soon.