The amount of investment pledged by fintech companies was equally impressive, hitting Rp 486.3 billion (US$36.41 million) in 2016.

Another positive signal is that people, particularly urban dwellers who are more attached to digital banking, have responded well to more comprehensive fintech services.

This situation highlights the potential of the Indonesian market for fintech business players, offering them opportunities to further grow their business.

The government, through its monetary and financial services authorities Bank Indonesia and the Financial Services Authority (OJK), has fully supported digital financial services by, among other measures, the national cashless movement, as part of the effort to create a cashless society. Last year, it also launched a campaign to expand the use of electronic money.

Fintech services are oriented toward a similar direction and spirit with the final goal of raising people’s awareness of cashless transactions.

However, people’s enthusiasm for fintech services deemed as fast, practical and safe should not serve as the only parameter of success of fintech innovation. Fintech businesses must figure out where the industry is heading, how fast the innovation evolves and how robust the market should grow.

In his article titled “The Fourth Industrial Revolution: What It Means, How to Respond”, Klaus Schwab elaborates phases of technology-driven industrial changes. These changes began with the invention of steam engines and continued with the invention of electricity. Mechanized production followed these processes with the invention of electronic and information-technology devices, and finally came the digital revolution.

Currently, the global industry is experiencing the fourth revolution, namely the digital revolution, as the product of technological advancement.

Fintech services are among many forms of digital revolution taking place in the world. The phenomena is also occuring in Indonesia as the market is ready to adopt the services. While the number of players surges, the services are now much more varied, such as payment gateways, investment platforms, financial planning assistance, comparative analyses of financial products and financial research.

Start-ups are not the only party providing fintech services. Other financial institutions — banks, multi-finance companies and insurance companies — are restructuring the way they do
business through innovation by offering similar services to maintain their role and keep up with people’s rapidly changing needs. Consequently, there are so many fintech products available in the market.

The next question to ponder is whether existing fintech services serve as solutions to customer needs or merely respond to demand from customers.

To ensure sustainable growth of the industry, business players must innovate competitively instead of simply riding on the wave in the global arena and adopting prematurely in the Indonesian market.

Fintech actors should first identify ongoing problems in the society, then conduct research and studies to determine what services are in demand and apply appropriate strategies to offer accurate solutions.

Another thing to observe is the competition between start-ups and more established financial institutions in promoting fintech products and services. Are those products really needed and well-received among consumers? Or do they only instigate confusion among customers over the most suitable products to fulfill their needs?

A survey carried out in several Indonesian regions revealed that only 20 percent of 1,000 respondents had used fintech services. This proves that such services have yet to be fully adopted as a main solution to financial problems.

This survey also found that the low penetration of fintech services was attributable to a lack of information dissemination and education about their uses in the country. Even if such activities exist, they still cannot satisfy users. As a result, fintech companies still cannot meet their goal of creating dependence among their users on their services.

Reflecting from the findings of the survey, fintech businesses should learn faster to understand people’s needs. With accurate data at hand, fintech companies are expected to generate new innovations and create services in line with customer demand.

I am optimistic that in the future, more fintech players will realize such a necessity and can present more real all-in-one solutions through appropriate products and services.

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The writer is a member of the Indonesian FinTech Association and the director for regulatory and industrial relations at OVO

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