How to Navigate The Perfect Storm in Fintech

The year 2023 is shaping into a year of perfect storms for the fintech and digital banking sectors. The ongoing COVID-19 pandemic has accelerated the shift towards digital financial services, while economic uncertainty and changing consumer behaviors are creating new opportunities for fintech companies.

Regarding these exciting issues, Founder & Chief Operating Officer (COO) Ayoconnect Chiragh Kirpalani got a special invitation from the Indian Embassy for The Indonesia India Business Forum (IIBF) event with the topic "Fintech & Digital Banking – Opportunities in the Year of Perfect Storms 2023".

Moderated by Bayu Prawira Hie (Executive Director of Intellectual Business Community), Chiragh engaged in a productive discussion with Tjandra Gunawan (President Director of Bank Neo Commerce), Muhamad Fajrin Rasyid (Digital Business Director of Telkom Indonesia), and Akash Shambu Danimwala (President Director of Bank SBI Indonesia). The discussion covered the current state of fintech in India and Indonesia and identified potential opportunities for collaboration between the two countries.

India and Indonesia's fintech and digital banking sectors rapidly expand, bringing more convenient and accessible financial services to a broader population and creating new opportunities for entrepreneurs and investors. With the adoption of new technologies such as blockchain, artificial intelligence, and biometrics, the fintech industry in these countries is likely to experience even more innovation and disruption.

Two Biggest Opportunities: Payments & Lending

In 2023, digital payments are expected to see continued growth as one of the biggest opportunities. The COVID-19 pandemic has led to a surge in online shopping and contactless payments, and this trend is likely to persist as consumers continue to adopt digital transactions. Fintech companies that can provide secure and user-friendly digital payment options will be well-positioned to capitalize on this opportunity.

One of the significant challenges in the digital payments space is the need for enhanced security measures to protect against fraud and hacking. Additionally, as digital payments become more prevalent, there is a growing need for interoperability between various payment systems and platforms to ensure seamless consumer transactions. Ensuring the accessibility and inclusion of the underbanked and unbanked population is also a challenge for digital payment providers. Furthermore, compliance with regulatory requirements and data privacy laws is a significant challenge for fintech companies operating in digital payments.

On the payment side, if you go to the other side, it's all about transactions. And where there are transactions, there are potential security loopholes. That's where the challenges lie, which can bring down the potential of this technology, especially during a recession. People will start looking at costs as a factor, which becomes an essential piece that people are starting to consider," Chiragh says.

Another opportunity in 2023 is the continued expansion of digital lending. The economic uncertainty caused by the pandemic has led to a decline in traditional lending, which has created an opportunity for fintech companies to provide alternative sources of financing. Digital lending platforms offering quick and easy loan approvals and flexible repayment options will be well-positioned to attract borrowers.

"If you look at lending, the backbone of lending is SMEs and MSMEs. In Indonesia, we are facing challenges in obtaining good working capital. If we look back at the root cause of accessing capital, it's not that capital is not available in the market. It is available; banks are ready to provide that capital," Chiragh says.

"I think the government is doing a tremendous job. The awareness and the roadmap are there to put together those capabilities. But I think right now, that's missing within the lending sector. And that's why the lending capabilities can leapfrog so much if there are more data points and accessibility on that," added Chiragh.

Financial Inclusion Matters

Another major trend in 2023 is the growing demand for financial inclusion. The pandemic has highlighted the importance of financial inclusion, as many people have found themselves excluded from the traditional financial system. Fintech companies that can provide financial services to underbanked and unbanked populations will be well-positioned to take advantage of this opportunity.

With new players entering the market and existing players expanding their offerings. The success of fintech companies will depend on their ability to offer innovative and relevant services that meet the changing needs of consumers and businesses.

Indonesia is poised to become the region's largest fintech hub. The internet economy is estimated to reach $130B in 2025. Rural areas' unbanked and underbanked populations make them ripe for digital penetration. Indonesia and India's fintech and digital banking sectors are also expected to see significant growth in 2023. The governments in both countries have been supportive of fintech and digital banking, which is expected to continue in 2023. The focus in both countries will be on digital payments and financial inclusion, with the government promoting digital financial services in rural areas.

Taking The Leap: Discover Possibility through Fintech and Digital Banking

There is a significant potential for collaboration between India and Indonesia in fintech and digital banking. AyoConnect, for example, has 140 employees in India who support the Indonesian market by addressing various use cases and business solutions.

"Cross-border payments will become much more seamless between India and Indonesia. This is an essential key aspect that everyone is looking into. For example, QRIS Indonesia, which is already accepted in 5 Southeast Asian countries, will hopefully be accepted in India as soon as possible. These are very exciting times for cross-border payments," Chiragh says.

Despite the challenges, Fajrin Rasyid remains optimistic about the future of digital banking and fintech in India and Indonesia. "This is because both can fill the financing needs in the country are still very large. On the other hand, the rapid growth of the overall digital economy also drives the development of digital banking and fintech business in the future," he noted.

Overall, Indonesia and India are seen as prime markets for growth in the region's fintech and digital banking sectors. "To be successful, companies in these markets should shift their focus from solely increasing business valuation or Gross Merchandise Value (GMV) to generating real profits. Investors are increasingly looking for digital banks and fintech startups that can create real profits," as highlighted by Bayu in his summary of the panelists' statements at the end of the discussion.

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