Opening fintech company presents more challenges for foreigners, but it’s not impossible. Here’s why.
Opening a company as a foreigner in Indonesia is difficult. There are handfuls of restrictions for foreign investors, and Indonesia itself is a large country with diverse demography and unique social-cultural aspect. However, foreign investors may get a better chance in building fintech companies, since the country has recently loosened the bans on ecommerce fields for foreigners.
New Regulation about Ecommerce and Foreign Investors
Before 2016, Indonesia limited ecommerce field for foreigners, and prioritized local entrepreneurs. However, after seeing the need for investments in ecommerce and financial technology, the government loosened the ban and invited foreign investors in. Foreign investors were given freedom in a new category called electronic trade transactions system.
This new category consists of four models that are available for full foreign ownerships: price-grabbing, marketplace platform, online classified ads, and daily deal websites. Foreign investors are allowed to build companies on these fields, as long as their investment values are higher than USD7.3 million.
Challenges in Building Fintech Companies in Indonesia
You may have the capitals and resources necessary for building a new fintech business, but Indonesia is not an “easy” country to navigate. Here are several challenges you will face when trying to start a fintech company:
· Diverse demography
Indonesia’s populations consist of more than 300 ethnic groups, and they don’t count expatriates or migrants from other countries. Most of Indonesia’s current populations consist of young and productive people, and the country will soon enter the era of bonus demography. This makes Indonesia a rich, colorful country to explore based on populations, but it can be difficult to predict the next market trend.
· Needs for larger investments in talent building
Indonesian education system is currently still viewed as very orthodox, which does not bode well for the talent pools. If you want to recruit many local employees, make sure to set aside investment for talent building programs, such as training and scholarship program for specific employees.
· Finding trusted local partners
Despite more leniency for foreign investors in the business market, opening a company in Indonesia as a foreigner is still difficult. Many foreign companies opt for finding local partners to run their businesses in Indonesia. The most notable examples are iFlix and Telkom, Moxy and Bilna, or Lippo Group and Grab. Make sure to choose trusted local partners with good potentials for development.
· Business “localization” is important
Indonesian customers often do not respond well toward products that sound “too foreign”. Foreign companies often need to change the name of their businesses or products to suit local taste or add specific payment methods that accommodate everyone (many Indonesians don’t depend on credit cards for payment).
· Unique working culture
Indonesia's corporate culture is different from industrial countries such as Singapore, Germany, or the US. Instead of bluntness, a strong focus on the result, and directness, the working culture in Indonesia prefer cooperation, appreciation toward workers, and a slightly more personal level of leader's involvement.
Source: BI with Its Roles and Supports for Fintech
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