Digital Banks - Indonesia

Indonesia

In Indonesia, the Digital Banks market market is anticipated to witness a significant growth in Net Interest Income, reaching a projected value of US$3.57bn in the year 2024.
Looking ahead, it is expected that the Net Interest Income will exhibit a compound annual growth rate (CAGR) of -4.34% from 2024 to 2028, resulting in a market volume of US$2.99bn by the end of 2028.
When compared globally, it is worth noting that in China is expected to generate the highest Net Interest Income, amounting to US$969,200.0m in the year 2024.
Digital banks in Indonesia are rapidly gaining popularity among millennials, offering convenient and user-friendly banking services.

Key regions: United Kingdom, Japan, China, United States, Brazil

Definition:

Digital Banks refer to the emerging market for purely digital banks that offer financial services via online and mobile platforms. Unlike traditional banks, digital banks also known as neobanks, do not have store-based branches and instead rely on technology to deliver their services. But in contrast to digital-only direct banks, which focus on providing traditional banking services in an online format, the digital banks/neobanks covered in this analysis prioritize cutting-edge features and a modern user experience.
Digital Banks offer a wide range of financial products and services, including savings and checking accounts, credit cards, personal loans, and investment products, among others. They aim to provide a more convenient, accessible, and user-friendly banking experience by leveraging technology such as mobile apps and artificial intelligence. They also provide a digital identification and onboarding process, often via smartphone.
The Digital Banks market is growing rapidly as consumers increasingly demand more convenient, digitally focused financial services. Neobanks/Digital Banks are able to offer these services at a lower cost compared to traditional banks, as they have lower overhead costs and a more efficient operating model.
However, digital banks face challenges in building trust and establishing their reputation in the financial services industry. They must also navigate the complex regulatory landscape and comply with the same rules and standards as traditional banks.
Overall, the Digital Banks market represents a growing and exciting opportunity for financial services providers to deliver innovative and convenient solutions to consumers.

Structure:

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income as well as the number of ATMs.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Bunq, Tomorrow, and Revolut.

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Analyst Opinion

The Digital Banks market in Indonesia is experiencing significant growth and development.

Customer preferences: Customers in Indonesia are increasingly drawn to the convenience and accessibility offered by digital banks, as they provide 24/7 access to banking services without the need to visit physical branches. The younger demographic, in particular, is more inclined towards digital banking due to their comfort with technology and mobile devices.

Trends in the market: One prominent trend in the Indonesian digital banking market is the rise of strategic partnerships between traditional banks and fintech companies. These collaborations allow traditional banks to leverage the innovative technology and agility of fintech firms to enhance their digital offerings and reach a wider customer base. Additionally, the introduction of advanced security features and personalized services is becoming more prevalent in the market to build trust and loyalty among customers.

Local special circumstances: Indonesia's unique geographical landscape, with its vast archipelago comprising thousands of islands, presents a challenge for traditional banking institutions to establish a physical presence across the country. This obstacle has paved the way for digital banks to thrive, as they can cater to the unbanked and underbanked population in remote areas through mobile banking solutions. Moreover, the government's initiatives to promote financial inclusion and digital literacy have further fueled the growth of digital banks in Indonesia.

Underlying macroeconomic factors: The growing middle class and increasing smartphone penetration in Indonesia have created a conducive environment for the expansion of digital banking services. As more Indonesians gain access to the internet and mobile technology, the demand for seamless and efficient banking solutions is on the rise. Additionally, the regulatory environment in the country is evolving to accommodate the digital banking sector, encouraging innovation and competition among market players.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.