‘Indo-need-ya’ a FinTech frontier

Joe McGuire

We wade through the Jakarta traffic among the sour looks and disdain of fellow commuters. Disdain because we have a police escort. Out front, a police motorbike beeps and harangues cars to the left lane.

“Make way for the delegates” he shouts in bahasa as he beeps and swerves at others trying to negotiate the famous Jakarta sprawl.

I’m here for the Indonesian Australian Business Week (IABW), an Austrade event designed to forge connections between Aussie businesses and our closest neighbour. With nearly 260 million people and a forecast of nearly 6 per cent GDP growth this year, Indonesia is fast becoming one of the world’s most exciting economies.

Surprisingly, even though they are closer geographically than New Zealand, they don’t even rate in Australia’s top ten trading partners.

This looks set to change as government relations between both nations are currently running at an all-time high. Why? Interestingly, the catalyst for this change seems above all to be related to the strong personal relationship between Prime Minister Malcolm Turnbull and President Joko Widodo.

Not only was Mr Turnbull in attendance for our trip with Trade Minister Steven Ciobo, but they had also hosted President Widodo in Australia just three weeks prior.

Both countries have publicly confirmed an intention to sign a new Free Trade Agreemen tby the end of the year. This would be a remarkable feat when you take into account the historical challenges between the two nations.

Two military checkpoints, and a couple of cute sniffer puppies later (cuter if it weren’t for the gentleman with machine guns standing behind them) we arrive at the Ritz Carlton for our first event.

With an opening address from Minister Ciobo and Austrade CEO Stephanie Fahey, the heightened level of security makes sense. This is one of the locations of the infamous Jakarta bombings in 2009.

We are split into our streams for the week and I take my post with the FinTech crowd. Ripped jeans and t-shirts amongst a sea of suits, they aren’t hard to find. First on the agenda is an introduction to the regulators.

Indonesia has two financial regulators who split responsibilities; Bank Indonesia and OJK. While both regulators are based in different locations, they both share a passion for FinTech.

As of 2014, the World Bank reported that only 36 per cent of Indonesian adults had a bank account. Fintechs are perfectly placed to pick up the slack in this area, without the burden of banking legacy systems.

To this point, they have new guidelines for the industry to help local businesses develop. Regulation 18/40 was presented to our group by one of the heads of Bank Indonesia Pak Junanto Herdiawan whois considered a key driver of positive change in the economy.

His passion for FinTech is clearly evident and unlike regulators in other countries I have dealt with, he has a genuine interest in seeing business blossom.

However, while things are very exciting for local businesses, new regulation is always met with traditional legacy views in an economy with a history of occupation.

Foreign ownership is still a dirty word in Indonesia, and for payments companies like Airwallex, we face challenges around company structure.

Primary of these is that under our classification in regulation 18/40 we could only own 20 per cent of our businesses based in Indonesia. With market leading IP and global VC investment, this is something we are still working through.

This sort of restriction for an international business is sure to scare away a large number of international employers in the space, but it does hold great opportunities for local fast-followers.

Kejora is an incubator that understands the opportunity this protectionism offers. Set-up in Indonesia’s own Slipicon Valley (Yes, you read that right), the team at Kejora house nearly 400 people working to fulfil their entrepreneurial ambitions

Its business model is simple: find something overseas that is a proven model and copy it for the local market. This theory of being a fast-follower is nothing new. Global businesses like eBay have shut down operations in places like New Zealand after being beaten to the punch by Trade Me.

The enormous economic potential and population mean that Kejora are most definitely onto a winner. They also have a number of local role models to emulate.

Go-Jek, Traveloka and Tokopedia have by most measures achieved Unicorn status. Compared with Australia’s lone wolf Atlassian, they are in an enviable position. On last count, there were more than 160 FinTechs in Indonesia and on demographics alone, at least some of these companies are well placed to join their peers in those tables.

As we sit down to a final lunch at Luke Mangan’s Salt Grill, it’s hard not to be inspired by the opportunity Indonesia offers to the Australian economy.

Ten times our population, a low wage base and billions flowing into the economy. With those stats you could be easily talking about China at the turn of the century.

Yet, for many Australians, Indonesia doesn’t register a mention beyond boogie board bags and Bali holidays.

For any aspiring business or entrepreneur looking for a great market for diversification, I recommend taking a look over the back fence and seriously considering whether Indonesia could be a growth market for you.

You won’t be disappointed.

Joe McGuire attended the IABW 2017 as the Global Head of Sales for Airwallex. To find out more about Joe’s experiences in Indonesia or Airwallex, he can be contacted at; joe@airwallex.com

Do you know more? Contact James Riley via Email.

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