It were the following developments that led to the media attention. First, Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan, OJK), the government agency that regulates and supervises the country’s financial services sector, announced that it is currently revising OJK Regulation No. 19/POJK.03/2014 on Branchless Financial Services in the Context of Inclusive Finance. Heru Kristiyana, OJK Chief Executive of Banking Supervision, confirmed that the revision will allow the establishment of full (branchless and cashless) digital banks across Indonesia. However, it will still take a few months before this new regulation is designed and released (possibly in late Q2-2021 or Q3-2021 we can expect the regulation to be released).

Secondly, we have seen a couple of interesting corporate moves over the past couple of months in which strong digital players, such as super-app Gojek or e-commerce platform Shopee, invested in relatively small local banks. This is a clear sign that the big tech companies are strengthening their ecosystems by (further) expanding into the financial services sector. Having a digital bank would certainly strengthen their ecosystem significantly (for example, fees involved in the topping up of electronic wallets, or e-wallets, would not go to a third-party anymore, and it would also open up opportunities to lend credit to the numerous micro, small or medium businesses that are active on platforms such as GoFood or Shopee).

Moreover, Indonesia seems to have the perfect environment for the development of the digital banking industry. The nation comes in the shape of a massive Archipelago with vast remote regions where transportation by land is rough (partly due to weak infrastructure development). For banks, this makes it complex (and loss-making) to open physical branches in the remote regions. Considering these regions are rather sparsely populated and characterized by high (relative) poverty rates, a physical branch may have a limited number of clients only.

And, in this context, it is also important to note that – based on World Bank research – only some 49 percent of the Indonesian population holds a bank account. So, there is a huge number of Indonesians (roughly 135 million individuals) who may need to open a bank account in the years, or decades, ahead.


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