A joint study by the think tank Institute for Development of Economics and Finance (Indef) and the Indonesia Fintech Association (Aftech) launched in August 2018 showed that the industry, directly and indirectly, contributed Rp 25.97 trillion (US$1.8 billion) to Indonesia’s gross domestic product (GDP) annually.

While the figure was still relatively small compared to Indonesia’s total GDP of Rp 14,837.4 trillion last year, fintech firms continue to expand to play an imminent role to reach the previously un-bankable sectors. Fintech services are becoming increasingly popular among customers because of the ease and efficiency that the companies are providing.

In 2018, the amount of loans distributed through peer-to-peer (P2P) lending platforms grew 681.25 percent on-year to Rp 20 trillion while the number of debtors reached 4 million, according to data from the Financial Services Authority (OJK).

In early March, at least 145 P2P lending platforms are in the registration process at the OJK, ready to join 99 fintech companies that have already been licensed by the agency.

Fintech true promise lies in its potential to provide basic banking services including settling payments, sharing risk and allocating capital. The industry is being driven by innovative trading, P2P lenders and payment service providers in addition to conventional financial institutions who are adopting new technologies to strengthen their businesses.

The industry challenges the status quo in the financial services sector and assists groups of unbanked and under-banked individuals as well as small business owners to formally build their credit profile, avoiding the risk of falling victims to deceptive trading practices by loan sharks.

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