Bank of Indonesia
Visitors leave Bank Indonesia headquarters in Jakarta, Indonesia, January 17, 2019. (Photo: REUTERS/Willy Kurniawan/File Photo)

Indonesia has a huge number of unbanked individuals and businesses but the country's increasing internet penetration rates are being viewed by analysts as a way for financial technology (fintech) to become a norm.

According to The Asean Post, a survey by the Association for Internet Service Providers in Indonesia (APJII) revealed that internet penetration in urban areas reached 72 percent while rural areas recorded a percentage of 48.

Industry experts suggested that affordable rates for internet connections and cheaper smartphones are allowing for more consumers to consider virtual banking. This has resulted in more banks adopting fintech in their systems to cater better to the needs of consumers who prefer digital transactions.

The latest data also revealed that there are now more Indonesians who use GoPay and WePay services for their online transactions as more banks open up to fintech applications. Companies are also exploring partnerships with fintech firms in a bid to improve the digital experience of customers.

Smartag International is just one of the firms that signed a joint venture for fintech applications. The company struck a deal with Indonesian fintech firm PT Supratama Makmur Sejahtera (PTSMS) to merge into one provider that will provide financial services to the growing market in Indonesia.

Despite the rising number of internet users in Indonesia, there is still a lack of financial support for small and medium enterprises (SMEs) that play a major role in driving the Indonesian economy.

The latest data from the Indonesian Banking Statistics (SPI) indicated that loans provided for SMEs are still significantly small. Analysts recommended for government institutions to enhance fintech campaigns for SMEs in the country in a bid to improve financing for underdeveloped businesses that actually help spur economic growth.

Indonesian SMEs have a rougher journey towards fintech developments compared to established companies. Industry experts suggested programs and educational training for interested SME owners in the country spearheaded by the government and financial institutions.

Aside from spreading awareness about the benefits of fintech for SMEs, analysts said there should be more policies and programs that will allow small business owners to engage in healthier lending environments. Furthermore, improved lending services will also play well for consumers.

In response to the call for financial assistance to SMEs in the country, the Indonesian Fintech Lenders Association (AFPI) was established. Earlier this month, the group said it will continue to assist borrowers and consumers to help spur financial technology in the country.

Fintech grows rapidly in Indonesia. We now have 99 licensed lenders, but there are 177 lenders waiting to be licensed," AFPI chairman, Adrian Gunadi, said. The organization has been helping lenders get certification so they can service individual customers and SMEs that will help drive growth in the country's fintech industry.