The development of information technology has led to an evolution that leads to digital banking services. Digital bank aims to improve the efficiency of operational activities and the quality of bank services to their customers wherever they are. The pandemic condition that has accelerated the adoption of digital technology in Indonesia's aspects of social life, including banking services, is one of the main factors that encourage foreign investors to invest in domestic banks. In the future, they will invest more significantly when the pandemic has subsided and people's buying power has returned.
Digital banking services are banking services or activities using electronic or digital facilities. It enables customers to obtain information, communicate, register, open accounts, banking transactions, and close accounts, including obtaining other information and transactions outside of banking products, including financial advice, investment, electronic-based trading system transactions (e-commerce), and financial analysis without having to establish physical bank branches.
Currently, most investors interested in investing in digital banks have quite a variety of factors. One thing is that the prospects for the development of digital banking in Indonesia are promising. In the next 10 years, digital banks are expected to make banking industry competition more efficient, increase the number of business sectors financed by loans, less underbanked people, and create a complete digital ecosystem. In the future, only 20% of conventional banks will survive in the era of digital competition. In addition, 46.9% share of stock market capitalization to GDP is still relatively small. The presence of digital banks can trigger an increase in investment interest in the capital market. The presence of digital banks is also expected to accelerate bank consolidation. Those who are inefficient will lose to compete.
Economists say that the Indonesian people are infrastructure-ready for digital banking. The government will add more hardware investment in digital infrastructure in the future. In addition, regulatory support through the POJK for Commercial Banks is a driving force for foreign investors to invest in Indonesian banking, especially digital banks. The promising prospect of digital banking development attracts foreign investors. After Ribbit Capital announced its investment in PT Bank Jago Tbk. (ARTO), now it's Alibaba's turn, through Akulaku Silvrr, to win the support of the majority of shareholders to become the controller of PT Bank Neo Commerce Tbk. (BBYB). Apart from Ribbit and Alibaba, other prominent investors like Grab are also reportedly eyeing small banks to convert to digital. Technology companies such as e-commerce and fintech are also increasingly aggressively acquiring small banks. These acts will strengthen the digital ecosystem that has been owned in terms of the financial business.
At least three things trigger the interest of foreign investors in Indonesian banking—first, the large population of Indonesians who do not have a bank account (unbanked population). The number reached 52 percent or about 95 million people. These people have long been neglected due to various reasons. Moreover, more than 47 million adults lack adequate access to credit, investment, and insurance. Third, smartphone penetration in Indonesia reaches up to 70-80 percent. Digital banks that can improve service integration with other digital platforms and become leaders in technological innovation have the potential to become market movers. For example, customers can open digital bank savings accounts on an e-commerce platform with the service integration in question. On the other hand, customers can also invest in equity mutual funds in digital banks without opening a new account on a particular investment platform.
How JAC Outsourcing Can Assist
For foreign investors looking to establish a legal entity in Indonesia, careful and extensive market testing is essential in determining environmental conditions and profitability of products and services. Our Employer Without Establishment service can support your company in taking the first steps towards overseas expansion. Foreign investor companies can legally register their employees under JAC Outsourcing employment status in the early stages of establishing a legal entity. We take care of all associated processes such as payroll and tax calculation, eliminating such time consuming task for companies aiming to focus on overseas growth. Many foreign investors engaging in first stage market testing in Indonesia opt to use this service as they familiarize themselves with the local market. For those companies who prefer to hire staff locally to carry out such activities, JAC outsourcing also provides recruitment services to aid such operations.
How JAC Consulting Can Assist
JAC Consulting has provided expert assistance in the establishment of business entities in Indonesia for many multinational companies operating within various industries. Many who are new to this process may feel overwhelmed by local language barriers and the complex bureaucratic steps involved. JAC provides comprehensive consultation from the beginning, starting with research on business feasibility and prioritization of the compliance to government regulations. We ensure that the application process of establishment is as smooth and efficient as possible.