Can Indonesia follow in the footsteps of China to become a force to reckon with in the digital economy? If it plays its cards right, it appears so.
According to a report by UOB analysts, these are some factors that Indonesia has going for it:
- Strong startup scene: Indonesia’s four domestic-based unicorns Go-Jek, Traveloka, Tokopedia, and Bukalapak, have an estimated combined valuation of roughly US$6.3 billion. Using the Chinese story as a model, UOB expects Indonesia’s FinTech economy alone to contribute approximately US$ 48 billion to the overall economy by 2022. Up to 51 FinTech firms are officially registered with the Financial Services Authority.
- Demographics: Large population with a median age of just 30.2 years old.
- Relatively good mobile and internet penetration: In 2022, Indonesia’s mobile phone internet user penetration rate is forecasted to increase from 29 per cent of its population in 2017 to reach 41 per cent, bringing a total of 114 million Indonesians online. This will provide digital players a large consumer base to market their services as well as drive marginal costs lower through economies of scale.
- Digital payments: With further growth in debit card ownership in Indonesia, UOB analysts believe that the adoption of digital payment will increase over time as one of the preferred forms of payment. This is especially so given that 69 per cent of Indonesians surveyed in 2015 has indicated preference of non-cash over cash payment, the second highest in Asean behind Singapore.
- Positive government support: Currently, positive development is expected in Indonesia as the Jokowi administration has launched the 2020 Go Digital Vision campaign in 2017. The digitalisation of SMEs and the informal sector is likely to boost productivity and economic gain as these retailers are able to sell their products through various E-Commerce platforms.