Southeast Asia leaps ahead in high-tech financial servicesDecember 7, 2019
JAKARTA/HANOI — Bank customers in Asia are swapping their wallets for smartphones, using apps for everything from buying groceries to sending money home from abroad to investing.
Need a loan? Forget filling out paperwork and waiting in line for a bank teller. Now you can apply for credit on your phone and receive an answer almost immediately, thanks to screening that uses artificial intelligence. Financial services are increasingly available anytime, anywhere.
Emerging economies, where many people still do not have access to banking services, are “leapfrogging” the traditional style of retail banking and jumping straight to digitized financial services. For a growing number of people, a visit to a brick-and-mortar bank seems old fashioned.
“I put 70% of my salary into my electronic money account,” said Bayu Wicaksono, a 23-year-old engineer living in Jakarta. Most of the things he buys he pays for with e-money from Ovo using his smartphone.
Ovo is an Indonesian payments service — and much more. Wicaksono uses his Ovo app to hail rides, purchase food and other items, send money to his mother and invest in financial products. His salary still goes into his regular bank account. But “if the upper limit [of about $735] on the amount of money that can be put into an e-money account were removed,” he said. “I would also want to receive my salary in e-money.”
Growth in e-money transactions in Indonesia is among the fastest in the world. E-money, including e-money cards, was issued 257 million times as of the end of September, according to figures from the country’s central bank. That is roughly a fivefold increase from the end of 2016. For comparison, banks have issued around 170 million ATM cards in total.
Bank customers in Indonesia often have to pay fees to apply for credit or to maintain an account. Not so with e-money accounts, which can be opened simply by downloading an app onto a smartphone and registering the phone number with the payment service.
Jason Thompson, Ovo’s CEO, said that Indonesia is about where China was in 2008 when it comes to e-money. But he thinks it will catch up in two to three years because fintech in Indonesia is growing at a breakneck pace. Thompson’s company has attracted 100 million users in the two years since it opened for business in 2017.
Ovo was the brainchild of the Lippo Group conglomerate and got its start as a payment method for the group’s department stores, shopping malls and other businesses. Now it has a partnership with Singapore-based ride-hailer Grab and Indonesian online retailer Tokopedia.
The company has won over consumers by expanding the number of places where its e-money can be used — both on and offline. Its aggressive rebates, which can be as high as 30% of the purchase price, are also a hit with customers.
According to U.S. market researcher CB Insights, Ovo has a valuation of $2.9 billion, making it the fifth-biggest unicorn in Indonesia. A unicorn is an unlisted startup valued at more than $1…