Indonesia accounted for around 40% or US$77 billion of the total value of digital economy transactions in Southeast Asia. This was stated in the e-Conomy Southeast Asia report as cited by the Financial Services Authority (OJK) in 2022.

“The realization of digital economy transactions value grew by 22% compared to the previous year,” said the Chief Executive functioning as insurance, Financing Institutions, and Pension Fund Supervision Ogi Prastomiyono said in Nusa Dua, Bali, some time ago.

This achievement made Indonesia a significant digital economy player in the ASEAN region. Prastomiyono said that one of the factors supporting the growth of the digital economy in Indonesia is the proliferation of financial technology (fintech) companies capable of creating efficiencies and easily accessible financial services.

As of January 2023, OJK recorded 102 fintech companies facilitating borrowers and lenders or offering peer-to-peer lending (P2P). These P2P lending companies simplify the loan process, particularly for borrowers with limited access to traditional banking services.

“With information and technology innovation, loan disbursement can be done quicker and easier," he said.

Aside from P2P lending, 97 digital financial innovations (IKD) were registered with the OJK as of January 2023, classified into 15 business models. One of them is innovative credit assessment (ICS).

ICS provides an added value in the credit disbursement process, particularly in making loan disbursement to be quick with simple terms, including the “buy now pay later” (BNPL) scheme.

OJK encourages the combination of credit ratings by conventional agencies and ICS that aims to enhance better credit quality while expanding the coverage of financing realization. Currently, credit ratings by conventional institutions primarily consider indicators such as loan payment history and outstanding debts.

ICS utilizes big data covering up to 15 variables, including social media activity and online e-commerce transactions. The ICS has been one of the breakthroughs for micro, small, and medium enterprise (MSME) owners aiming to access credit but may lack strong access to banks while already engaged in e-commerce.

“We believe that in 2023, with normal growth conditions, Indonesia's economy will grow well. In 2022, it grew 5.31%. For this year, during the global crisis, inflation, increased interest rate, and geopolitics issues, Indonesia's economy remains stable," Ogi added.

Meanwhile, Deputy IV for Digital Economy, Employment, Micro, Small, and Medium Enterprises Coordination at the Coordinating Ministry for Economic Affairs Rudy Salahuddin revealed the potential of the digital economy in Indonesia. According to him, the digitization of the economy transformed people’s behavior and preferences, leading to increasing demands for public services to be faster, easier, cheaper, safer, and more reliable.

“Indonesia has great potential in embracing the flow of digitalization,” Salahuddin said at the Open Finance Summit 2023 in Jakarta, on Wednesday (Jun. 21, 2023).

In 2022, approximately 40% of the total digital economy transaction value came from Indonesia, reaching US$77 billion. “By 2025, it is predicted that the value will double to US$130 billion,” Salahuddin said.

Furthermore, the deputy mentioned that investment in the digital sector grew. The deal value of investments in Indonesia in the Q1 of 2022 amounted to US$3 billion, the second highest value after Singapore. Moreover, the Indonesian market is also prospective as Indonesia has the fourth largest population in the world, most of which are in productive age.

In addition, digital maturity in Indonesia has primarily occurred in major cities. "Therefore, expanding digital adoption to second-tier and third-tier cities will open up higher market opportunities," said the deputy.

Salahuddin said that businesses in Indonesia will continue to grow with such prospects. Indonesia ranked sixth as the country with the highest number of startups with over 2,400 companies. “Furthermore, the majority of our eight unicorns are operating in the fields of e-commerce and fintech,” he said.

Translator: Wisnu Wardoyo