i) Mobile applications
There are countless mobile apps within the Southeast Asian fintech ecosystem that are either established directly as financial instruments or transforming themselves into such capabilities. The current Indonesian government is playing an active and encouraging role in promoting such businesses to proliferate usage of fintech products across the country. The Indonesian president Joko Widodo has been a staunch supporter of digital developments which he demonstrated, among many other occasions, with his plan to create 1,000 local tech start-ups oriented ideally in financial solutions with a total worth of $10 billion by 2020. As an example of support to such startups, Bank Mandiri, a large state bank, have been recently investing heavily in local financial technology startups, promoting portable and user-friendly alternative to electronic data capture machines.
ii) Non-traditional credit scoring
In contexts like Indonesia, potential customers have difficulties having access to credit markets as they usually lack a verifiable credit history. Banks’ requests frequently include clear and verified identification documents, employment letters, utility bills and multiple guarantors — all of which resources that are lacked by a vast number of the population. In this case, increasingly in Southeast Asia, by creating substitutes to conventional data and paperwork, many successful fintech companies have developed new ways of assessing an individual’s creditworthiness, extending credit opportunities to the financially excluded. Fintech startups have developed novel credit scoring methods, some of which evaluating data points from a potential client’s phone and produces a credit score for them in under two minutes — where the whole process is linked with lenders already, in order to facilitate the loan immediately.
iii) Peer to Peer Lending
Beyond non-traditional credit scoring and mobile applications, an essentially more offline form of a financial instrument, peer-to-peer lending is also gaining traction in Indonesia. The Indonesian government issued regulations for the peer-to-peer (P2P) lending industry, clearing up and assisting the management issues of peer-to-peer actors, which assisted the robust growth rate of related platforms which has been so far promising. The business model of peer-to-peer lending is parallel to the regular moneylending schemes within the informal economy of Indonesia, where individuals or institutions specializing in loan practices give out capital using their own funds, intermediated financing sources and asset management tools.
iv) Online Payment Gateways
An online payment gateway is essentially a third-party between merchants and customers that securely take the money from customers and send it to merchant’s’ bank account. Payment gateways seamlessly connect to e-commerce or in-house payment processors enabling, credit cards to be processed across borders. A well known payment gateway in Indonesia is Xendit. Xendit allows small merchants, e-commerce businesses and any online-related enterprise to accept and send payments simply, and at speed. Uniquely built for Indonesia and Southeast Asia, Xendit serves customers from fast growing startups to multi-national enterprises.