Digitalisation paving the way to financial inclusion

Despite the global economic disruption in the past few years, the Indonesian economy has seen a growth of 3.69% in its gross domestic product (GDP) in 2021 according to Bank Indonesia. Moreover, the World Bank has forecasted a growth of 5.1% in the country’s GDP for 2022. As the adult population of Indonesia reached 181 million, the percentage of the unbanked is 51% and the underbanked is 26%. Accordingly, in 2020, the government announced a regulation on National Strategy for Financial Inclusion (NSFI) aiming to achieve 90% financial inclusion by 2024, and to encourage economic growth. Due to the geographical landscape of the country which consists of 6,000 inhabited islands, traditional banks are facing a major challenge to cover them all. While the number of small and medium enterprises (SMEs) has surpassed 60 million, the majority are experiencing problems in accessing financing. Hence, financial institutions (FIs) and fintechs have a high potential in the market to collaborate and further develop the financial sector, while supporting the government’s vision toward financial inclusion and the country’s economi growth. Considering that around 69% of the total population are active on social media and about 74% are internet users, the majority of the population are youth and highly tech-savvy. This poses an opportunity for fintechs and technology disruptors to further expand and offer more digital financial solutions. Therefore, the financial services authority, Otoritas Jasa Keuangan (OJK) has launched the “Master Plan for the Indonesian Financial Services Sector (MPSJKI) 2021-2025” to realise the vision of a next-gen national financial services sector. Accelerating the digital journey by investing in advanced technologies such as artificial intelligence (AI), machine learning (ML), internet of things (IoT), advanced analytics, cloud computing, and robotic process automation (RPAs) are vital for FIs to thrive and remain competitive. Moreover, the use of open banking application programming interfaces (APIs) and partnerships with fintechs and third parties will empower the banking sector to digitally onboard more customers, provide a highly-personalised experience, and meet their needs. In line with the initiatives of the financial authority OJK towards accelerating digital transformation and achieving financial inclusion, The Asian Banker is hosting Finance Indonesia 2022 that will bring together regulators and key decision makers from financial institutions, industry players, and disruptors under one roof in interactive sessions to address the latest trends, developments, and challenges facing the Indonesian financial services industry.