Changing Landscape of Financial Products Distribution in Indonesia: Ken Research

While the Indonesian government has been taking initiatives on grounds of industrial digitization, education & commerce, the country still lags behind other emerging countries in terms of digital adoption. Indonesia is placed as one of the largest economies in South East Asia where >60% population is unbanked. This proportion of the population is often looking for alternative digital financing options. However, there is still a section of the population that continues to rely on traditional sources of financing (banks and informal channels like friends, family, informal lenders, etc) for varied reasons such as limited financial awareness, inadequate collateral, lack of trust on alternative sources, etc.

Therefore, a middle ground to traditional & alternative financing solutions was established with the introduction of Online Aggregators (commonly known as marketplaces). These are price comparison websites facilitating comparison across multiple credit/insurance options from different providers. Backed by a team of financially educated advisors & telesales individuals, they provide assistance by suggesting suitable loan/insurance options to customers depending on their requirements & adherence to eligibility criteria. All of these services are provided free of cost to customers.

So, one might wonder, where are the aggregators earning money from? With established partnerships with multiple banks & insurance companies, Online Aggregators work on a commission/fee-based system wherein commission rate is decided depending on product complexity, regulations & agreement conditions. CekAja, one of the pioneers in the industry brought in the concept of Online Aggregation in 2013. The company started off with comparison across loan & insurance products and later on expanded to investment products to Time Deposits, Unit Linked Deposits, Mutual funds, etc. Following CekAja’s model, companies including Aturduit, KreditGogo, Cermati, Futuready & CekPremi entered the Indonesian market.

According to Ken Research publication, Indonesia Online Loan & Insurance Aggregator market has been growing at a Y-o-Y growth rate of >15%. The industry is concentrated among the top 5 players contributing >90% to industry revenue. In order to stand out among peers, aggregators have been investing heavily in Technology, Establishing partnerships & Product developments. Leveraging on an in-house technology development team, aggregators collaborate with credit scoring companies to undertake credit scoring & verification checks for unbanked customers. A credit score for such individuals is established after analyzing multiple factors including shopping patterns, bill payment history, consumption patterns, etc. Such models help in providing credit opportunities to unbanked populations which otherwise would’ve been not possible.

Changing lifestyle & spending patterns has led to increased traction of Micro Insurance products with small premium & limited coverage scope. Sold at affordable prices of as low as IDR 10,000 these have been a hit in Indonesia, thereby OJK recording 22 Mn policyholders as of June 2019 with expected expansion. This has encouraged leading insurance providers to venture into developing another niche low premium insurance products such as digital appliance insurance, travel insurance, etc.

COVID 19 pandemic has created a paradigm shift in consumer behavior with almost 8 out 10 people now prefer online services. As people suffer from salary cuts, layoffs, shutting down of the small businesses, there has been an increase in the demand for short-term loans & credit cards. The surge in applications would’ve created a high growth opportunity in the industry. However, given uncertain circumstances & the fear of NP loans, banks and aggregators have been very cautious in disbursing credit to new customers. But looking at long term picture, a pandemic will act as an inflection point in demand for online aggregators & can be foreseen to be a permanent one.

Online aggregator services are observed to be a highly scalable business thereby expanding operations to other socio demographically similar South East Asian countries (Philippines, Singapore, Malaysia) can be the first route to diversification. Secondly, customers prefer existing vendors over trying new ones (especially for financial products) therefore it creates the high cross-selling potential for other services. Taking advantage of established customer database & advisory services, aggregators must strive to expand platform services to Peer to Peer Lending & Wealth Management. The following framework can be considered while expanding financial product offerings.

For More Information on the Research Report, refer to below links: -
https://www.kenresearch.com/banking-financial-services-and-insurance/loans-and-advances/indonesia-online-loan-aggregator-industry-outlook/347119-93.html

Companies Covered: -
Cermati
CekAja
CekPremi
Futuready
Aturduit
KreditGogo
GoBear
Finder

Time Period Captured in the Report: -
Historical Period: 2015–2019
Forecast Period: 2020-2024

Key Topics Covered in the Report: -
Socio-Demographic, Economic, Banking & Fintech Scenario in Indonesia
Insurance Scenario in Indonesia with segmentation by Insurance type including Motor Insurance, Health Insurance & Life Insurance
The lending scenario in Indonesia with segmentation by Loan to Government, private (Individuals, NBFIs, NFIs) and Others
Household/Retail Lending Scenario with Segmentation by Multipurpose Loans, Mortgage Loans, Credit Cards, Auto Loans, Loans to MSMEs, Home Appliance Loans & Others
Gaps in Traditional Loan Industry fulfilled by Online Loan Aggregators
Online Loan Aggregator Industry in Indonesia with Revenue Models followed
End-to-End Customer Journey followed
Technological & Organizational Structure followed
Regulatory Landscape
Competitive Landscape including Overview, Ecosystem & Cross Comparison among major players on the basis of Operational, Loan/Insurance Providers, Product Portfolio and Website Features
Company Profiles- Cermati, CekAja, CekPremi, Aturduit, Futuready & KreditGogo
International Case Studies-PaisaBazaar& PolicyBazaar (India)
Future Outlook of Loans and Insurance & Online Aggregators
Impact of COVID 19

Related Reports by Ken Research: –
https://www.kenresearch.com/banking-financial-services-and-insurance/loans-and-advances/india-online-loan-market-research-report/622-93.html

https://www.kenresearch.com/banking-financial-services-and-insurance/loans-and-advances/uae-online-loan-aggregator-industry-outlook/337074-93.html

Contact Us: –
Ken Research
Ankur Gupta, Head Marketing & Communications
Ankur@kenresearch.com
+91-9015378249

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