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May 10, 2019

How are Indonesian Fintechs becoming more relevant for the unbanked segment?

By Rizqi Amalia and Dawn Herdman

 

The Indonesian government, and more specifically organisations such as Bank of Indonesia and OJK (Indonesian Financial Services Authority) have stated national goals to increase financial inclusion across the country (which currently has more than half of the population, or around 180 million people currently unbanked). With increasing smartphone usage, the time is ripe for greater financial technology solutions; but we see the uptake has still be somewhat low to date and even fewer use regularly. While fintech companies are obviously set up with the aim to make money, some of them do so by specifically targeting this unbanked or financially excluded segment. This, in turn, is helping to increase financial inclusion, which in turn brings broader benefits to the society as a whole.

Indeed, the fintech landscape is heating up from only 6% industry growth in 2006-2010 to 78% in 2015-2016. This leap signifies an increase of consumer interest, and the success of these companies is marked by an increase of potential rivals. According to OJK's data from April 2019, there are 106 companies registered and licensed as fintech in Indonesia and many of them focus on payment, lending, personal finance, wealth management and remittance. They are able to give more differentiated offerings and some offer P2P (peer-to-peer) lending previously unobtainable.
For most middle to low class citizens, the practicality that fintech companies offer is compelling and highly relevant for many of the unbanked segment, in both urban and sub-urban populations. It offers simple and easy procedures. However, the real genuine market innovation is the ability to offer loans to this market without a traditional credit score and not requiring any guarantee or collateral to secure the loan (of which is required by banks to lend).

Illuminate has found through our research with mid to lower social class groups, that the systems of fintech companies, especially for lending, are more approachable than banks, which are perceived to be intimidating, complicated, and too formal. Of particular note, the naming of fintechs also makes a difference to both the willingness of the unbanked consumer to begin using Fintech and also in their choice decision factors. Many of the newer fintech companies use names that are more approachable and less intimidating or formal than traditional banks. Some examples include Pinjam Duit (‘Lending Money'), Uang Teman (‘Money Friend'), PinjamGampang (‘Easy Lending'), TunaiKita (‘Cash Us'), Cicil (‘Installment'), PinjamanGo (‘Lending Go'), Do-It, Cash Cepat (‘Fast Cash'). Each of these companies use very direct names that also describe the unique selling point of the company in the language of their consumers. This reflects the product dimension and eliminates the gap to consumers as they feel that this product is for them; and strongly relating to their needs. For example, the PinjamGampang (Easy Lending) name connotes that the company provides hassle-free lending procedures.

The fintech company's choice of logo is also very important for attracting the unbanked consumers. Illuminate conducted semiotic analysis of fintech logos to understand the common symbolism and cues communicated within this growing category. We see that the informal nature of many fintech companies similarly appears within the design schemes of company logos. These logos often look playful and cheerful, and often include symbols and colours to communicate safety and security - the use of symbols such as a tree or lock or mountain; using colours such as blue or aqua marine which creates a sense of security, professionalism and trustworthiness for Indonesian consumers.

For example, if we take a closer look at the Findaya logo, we see that it uses a flower symbol that connotes growth but also is warm and relatable. The use of blue colour gives a calm and safe meaning. The curved edges on the font chosen creates a closeness with consumers. The tagline (registered and supervised by OJK) also gives reassurance.
It is with these elements, and the innovative technology they employ, that fintech companies are able to understand consumers' desires and needs; and appeal to them in the same breath.

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