Exploiting and manipulating the digitalisation in Indonesia, based on the more individualised and personalised preferences

Exploiting and manipulating the digitalisation in Indonesia, based on the more individualised and personalised preferences

Indonesia’s tech spending rises 8.4% in 2016, startups to grow 6-fold by 2020

Indonesia’s tech spending rises 8.4% in 2016, startups to grow 6-fold by 2020
Antonia Timmerman, October 7, 2016

Indonesia, southeast Asia’s largest economy, is seeing a rise of spending in its technology and communication sector, with 2,000 startups – the highest number in the region – trying to capture the country’s growing digital market. A report by Castle Asia shows that Indonesia’s spending on the tech sector climbed to Rp 214.4 trillion ($16.4 billion) in 2016, compared with Rp 199 trillion ($15.2 billion) in 2015.

The rising trend is seen not only in large scale companies, but also in smaller businesses with a contribution of about 13 per cent, the report says. This makes Indonesia a very dynamic market, especially with tech-based startups predicted to balloon more than six-fold by 2020.

TelkomTelstra president director Erik Meijer believes it opens tremendous opportunities for international players to invest in Indonesia, accelerated by economic growth and president Joko Widodo’s commitment to implement reforms in the sector.

“Indonesia’s economic growth is giving very positive impact to digital and technology expansion. Its government has come to realize the big potential that can be derived from technology,” said Meijer.

Up until June, 28 Indonesian startups pocketed Rp 2.09 trillion ($160.7 million) in investment. This number shows a stable quarterly growth of more than 100 per cent within the last 12 months, with e-commerce and marketplace being the most sought-after sectors by global investors.

Indonesia Startup Report 2015 shows that Indonesia’s e-commerce is seen as the most attractive after China and India. The confidence is in line with the sector’s sales performance, which is predicted to increase a whopping 22 per cent, compared with 0.24 per cent in India and 0.15 per cent globally.

The transformation in digital and technology sphere has affected Indonesia’s overall economic performance. According to reports, the sector has become Indonesia’s second largest contributor to GDP after financial and insurance (11.4 per cent) during 2016’s first six months. Even though there is a slight decline of 1.7 per cent compared to last year, the sector still holds a tremendous opportunity for both local and foreign players.

$14.6b predicted to pour into Indonesian startups

Indonesian association of venture capitals and startups (AMVESINDO) had earlier predicted that about Rp 200 trillion ($14.6 billion) of investments were expected to pour into the startup sector starting this year, as the government is carrying out a tax amnesty program which it says could bring Rp1,000 trillion ($73.2 billion) worth of evaded tax and assets back to the country.

The association said the money is likely to be invested in tech-based firms. One of the reasons is because conventional sectors are still recovering from the slowdown that hit global economy last year. Commodities, oil and gas, and property, for example, are suddenly less attractive now. “OJK, the government, the Indonesian chamber of commerce (KADIN), everyone is preparing to welcome these hot funds,” Teddy Lee, Head of fintech department at AMVESINDO told DEALSTREETASIA recently.

More than 350,000 people have declared assets totaling 3,620 trillion rupiah (US$278 billion), which brought the government 97.2 trillion rupiah (US$7.46 billion) in revenue, according to finance ministry data.

Also Read: $14.6b to pour into Indonesian startups, says AMVESINDO

$14.6b to pour into Indonesian startups, says AMVESINDO

In August, Indonesia’s popular ride-hailing app Go-jek attracted $550 million in funding, further enforcing the notion that Indonesian startups are fertile ground – thanks to is growing population of young internet users.

Fenox Venture Capital, one of the most active VC firms in Indonesia, is of the view that the on-demand sector is still quite enticing for investors, with much room for expansion. The venture firm has been investing and mentoring some of the on-demand platforms such as Belazee and AhliJasa. “Go-Jek is the king of on-demand startups now. But I see there are some others that are very promising as well,” Fenox Venture Capital’s investment team Nazier Ariffin said.

J.P. Morgan > Solutions > Treasury Services > Digitization a Game Changer for Cash Management
Digitization a Game Changer for Cash Management

Rapid changes in technology have raised expectations and standards in the world of cash management both in terms of what corporate treasurers require and the solutions that banks are able to provide.

Digitization has undoubtedly been at the forefront of this evolution, enabling the development of more innovative products to meet treasurers’ specific needs as they look to optimize performance, gain competitive advantage and ensure regulatory compliance.

As a leader in cash management technology and the digitization of treasury solutions, J.P. Morgan believes there are three specific areas that are having and will continue to have a profound impact on the future strategies of treasurers and how they run their treasury operations: robotics, virtual branches and data analytics.

Robots Bring Smarts to Automation

Robotic Process Automation (RPA) has made significant advances in Asia over the past 18 months and it’s a trend that is set to continue as more regional and local institutions invest in this very relevant technology. Using software algorithms and sensors, RPA is a strong fit for any treasury department looking to strengthen their manual processes and increase operational efficiencies, enabling employees to focus on other areas within their organization where they can add real value.

To give an indication of the rapid growth in the RPA sector, it’s estimated that the size of the global market in terms of revenues will reach around US$5 billion by 2020, which will have been achieved in just under a decade.

Global IT Robotic Automation Market Size, Forecast and Year-on-Year (YoY) Growth

One key component of RPA is the use of Task Bots and IQ Bots, which address both structured and unstructured manual processes and leverage machine learning. These bots are designed to drive process automation and augment the human workforce in operations by sourcing information from multiple repositories, and making decisions based on the information.

This bot-driven digital workforce addresses specific client requirements rather than building rules in the core application, automates manual processes such as data entry and reconciliation, and uses rules learned from the operations workforce to automate processes.

Implementing RPA has enabled J.P. Morgan to deliver new solutions to clients, onboard clients quicker, and eliminate human error. Beyond facilitating improvements, RPA has started to transform treasury operations by replacing manual processes and enhancing the integration of clearing infrastructure whilst avoiding the need for clients to develop new operations-driven manual processes.

The next phase of RPA is expected to include the deployment of intelligent robots that allow the utilization of machine learning and artificial intelligence to replace human handling of transactions and eliminate exceptions.

Virtual Branches Become Reality

Bank branches are also experiencing significant change as physical branches are starting to be replaced by virtual branches.

Traditionally, clients were required to visit branch offices in order to submit the required documents for processing and conduct tax payments, particularly in markets like India and Indonesia.

Virtual branches not only eliminate the need to be physically present, they also enable corporates to initiate and approve payments online, gain complete visibility in all eTax payment transactions with detailed audit trails and improve efficiencies. Straight-through processing improves turnaround time and token identification provides an additional level of security.

By using J.P. Morgan’s virtual branch solution, corporates now have access to an integrated and comprehensive suite of general and localized banking services through a single, innovative portal housed within the J.P. Morgan ACCESS® OnlineSM, from the comfort of their office.

digitization cash managent virtual branch graphic
The Virtual Branch is accessible via J.P. Morgan ACCESS® OnlineSM

Along with improvements in technology, regulatory changes have also allowed banks and corporates to make virtual branches a reality.

Providing Insights with Data Analytics

Data analytics – which can provide valuable insights into areas such as customer behavior, the competitive landscape and internal processes – is quickly establishing itself as an invaluable tool for the corporate treasurer and within cash management. If used correctly data analytics can help drive growth strategies and provide guidance as to where investment is most needed.

Data analytics has also allowed banks to increase security, protect their clients’ own data and defend against cyber-crime, which is an unwelcome consequence of increased digitization.

J.P. Morgan is taking steps to enhance its capabilities to ensure that it can accept data in all formats, leverage the data and apply its analytics skills to provide critical intelligence to clients. Corporates can then use this to improve their operational process flows and to implement the necessary new solutions required. J.P. Morgan has been able to deliver even greater value by identifying changes in process patterns, benchmarking, and pulling information from its vast global network about money flows in order to offer further intelligence that will allow its clients to adjust their focus and realign their businesses accordingly to take advantage of any potential new opportunities to improve.

Choosing the Right Partner

Digitization has led to significant improvements in the client experience, including increased cash visibility, the delivery of real-time data flows, transition of physical cash to electronic cash and utilization of straight-through processing. Real-time processing, which is becoming the norm in many parts of Asia, has accelerated process change as well.

J.P. Morgan has taken a highly innovative approach in this rapidly-changing environment, enhancing its technology and developing new tools to deliver new digital processes and products that simplify and improve cash management for its clients.

Through innovation and digitization as well as close collaboration with fintechs and clients, J.P. Morgan has been able to evolve its platforms, significantly simplify processes and deliver a unique value proposition to clients in order to help protect, manage and grow their organizations. Integration of client software with J.P. Morgan’s digitized platforms and client usage of solutions such as host-to-host connectivity or APIs, allows clients to automate manual processes, increase productivity and eliminate bottlenecks.

While solutions that work for today are important, it’s critical for companies to implement solutions that prepare for expected expansion as well as new practices or technology that a corporate may not anticipate.

By leveraging J.P. Morgan’s position in supporting corporates’ cash management needs around the world, with its partnership approach and leadership in technology and digitization, companies can implement a solution today and constantly have access to new practices that give them a competitive advantage for the future.
Learn More

For more information, please contact:

Manoj Dugar
Head of Core Cash Management Product, Asia Pacific
Treasury Services
Email: manoj.dugar@jpmorgan.com

Abhijit Gupta
Head of Banking Technology, Asia Pacific
Corporate & Investment Bank
Email: abhijit.gupta@jpmorgan.com

Indonesia: After crisis-era bailouts, Lippo’s billionaire Riady returns to banking

Indonesia: After crisis-era bailouts, Lippo’s billionaire Riady returns to banking
Chanyaporn Chanjaroen, October 7, 2016

Indonesian billionaire Mochtar Riady is seeking to rebuild his banking empire almost 20 years after the Asian financial crisis prompted him to back away and focus on real estate. This time, it’s not going to be a brick-and-mortar operation, but a digital one driven by his grandson John, the 87-year-old chairman of Lippo Group said in an Oct. 4 interview in Singapore. Riady said his conglomerate’s Indonesian banking asset, PT Bank Nationalnobu, could be used as a vehicle for digital services such as electronic payments, initially in that country before potentially expanding into Singapore.

“Tomorrow’s banking is e-banking,” said Riady, who has seen at least five runs on his banks during a career spanning more than five decades. “The target has to be very high, very big, but we will start small. This is according to Laozi,” he said, referring to the Chinese philosopher who is regarded as Taoism’s pre-eminent scholar.

In going digital, Riady is hoping to capitalize on the burgeoning numbers of Southeast Asian consumers who are increasingly using electronic platforms to pay for bills and purchases, as well as for daily banking. The trend is arriving in Indonesia, which Riady expects to follow the Chinese push into digital payments and technology that has benefited companies from Alibaba Group Holding Ltd. to Tencent Holdings Ltd.

“The banking business is a services industry,” Riady, who was in Singapore to launch the English version of his autobiography, told Bloomberg Television in a separate interview. “I strongly believe that business transactions will increase a lot and go through e-payment and this is the big opportunity to the banking industry.”

Bank Indonesia, the central bank, estimates e-commerce transactions will rise to $4.6 billion this year from $2.6 billion in 2015. It’s planning to issue rules to improve supervision of e-commerce payment systems, Deputy Governor Ronald Waas said last month.

Before the Asian financial crisis in 1997-1998, Riady, a career banker since 1960, had helped build several Indonesian lenders including PT Bank Central Asia, which is now the country’s largest non-state bank by assets. He shifted the focus of Lippo Group into property after the Indonesian government seized his PT Bank Lippo following a crisis bailout. For background on the bank seizure and its subsequent sale, see here.

After that happened, Riady decided he’d had enough of the industry, according to his autobiography. The slump in the rupiah caused by the crisis led to many bankruptcies and left banks saddled with bad debt, while central bank oversight on his banking assets had become “exceptionally strict.”

“We even had to ask for consent from the central bank before issuing any loans,” Riady wrote. “It was exhausting and demoralizing. I started to wonder whether I should place such an onerous burden on the next generation of my family.”

Meanwhile, the Lippo Group had managed to amass real estate assets amid economic slowdowns in the 1990s as it claimed land that had been used as collateral for loans that couldn’t be repaid.

“As a raw material, these resources could be processed in a number of ways and, following long-term development, their appreciation would be substantial,” Riady said in the book. “For Lippo Group, it was a revelation, and we were determined to make the most of it. I decided to leave banking behind.”

Digital Experience

He returned, in a small way, in 2010 with a capital injection reportedly worth $6.7 million into Bank Nationalnobu, which gave the Lippo Group a 60 percent stake in the Jakarta-based lender. Bank Nobu, as it’s known, has less than $600 million of assets, ranking it 30th among Indonesia’s commercial lenders, according to data compiled by Bloomberg.

John Riady already has experience of digital businesses. The 31-year-old oversees Lippo Group’s e-commerce arm MatahariMall.com, an online shopping portal that aspires to be Indonesia’s Alibaba. The group has also backed Venturra Capital, a $150 million fund that invests in Southeast Asian technology firms.

Mochtar Riady is now urging his grandson to take his experience into the industry that helped make the family fortune. The elder Riady sees a world where all payments one day will be made electronically, a world where automated teller machines and credit cards won’t function anymore.

“After the financial crisis, I decided to terminate my banking profession,” the billionaire said. “Today I see a different situation. I try to go back into banking – there is a new challenge, a new opportunity here.” Bloomberg

Indonesia’s First Media unit to list in Q3, plans to raise $52.63m

Indonesia’s First Media unit to list in Q3, plans to raise $52.63m
Vincencia NLS, July 1, 2015

Indonesian pay TV operator PT First Media Tbk (KBLV), a unit of Lippo group plans to sell up to 25 per cent of its internet service provider PT Internux shares via initial public offering (IPO) in the third quarter of 2015. Internux is known for its internet product brand called “Bolt”. Internux is seeking to raise Rp700 billion ($52.63 million) from the IPO, which will be helped by Ciptadana Securities as the underwriter.

Lippo Group owns approximately 69.04 per cent shares in Internux through First Media-directly own 39.35 per cent- and indirectly through PT Mitra Mandiri Mantap, which owns 56.99 per cent shares. Internux has secured broadband wireless access permit in 2009, introduced its fourth generation technology product that will allow mobile Internet users to enjoy super-fast interest access.

The company has invested up to $550 million for the service, which uses Long Term Evolution (LTE), a technology that some experts believe will herald an Internet revolution in the country, as it allows shorter delays (latency) and higher data transfer capacity, a vital service which is in high demand in cities like Jakarta.

Internux has a strategic cooperation with Mitsui Corporation and is being supported by Huawei, an international company that has been providing 4G LTE around the world.

Under the cooperation, Mitsui is providing technical, management and financial support. Huawei, meanwhile, designs and provides the supporting equipment, including the 4G wifi enabled-modem.

Other IPO

The other company, which will list its shares on the Indonesian Stock Exchange (IDX) is an auto components manufacturer PT Garuda Metalindo. The company will list its shares on the stock exchange on July 7. RHB OSK Securities Indonesia, Lautandhana Securindo, Valbury Asia Securities and Yulie Sekurindo are acting as underwriters for the company’s IPO.

Garuda Metalindo is seeking to raise Rp 257.81 billion ($19.30 million) in order to pay back loans and purchase additional nut-and-bolt machines. Garuda Metalindo is selling 468.75 million shares at Rp 550 each, at a lower end of the proposed price range of Rp550-Rp800 per share, set earlier.

This year, the Indonesian bourse expects 32 companies to float shares on the stock exchange.

In first half of 2015, eight companies has listed their shares, namely PT Mega Manunggal Property Tbk (MMLP), PT Bank Yudha Bhakti Tbk (BBYB), PT Mitra Keluarga Karyasehat Tbk, (MICA), PT PP Property Tbk (PPRO), PT Puradelta Lestari Tbk (DMAS), PT Mitra Energi Persada Tbk (KOPI), PT Merdeka Copper & Gold Tbk (MDKA) and PT Bukaka Teknik UtamaTbk (BUKK).

PT Bukaka Teknik Tbk, an engineering and construction company which is part of Kalla group, relisted its shares on June 29, 2015 after completing its debt restructuring and returned to normal business operation. The company was forced to delist its shares from the bourse in August 2006 due to debt problems.

First Media to sell 15% of Indonesia’s Internux (Bolt!) in Q3
14 Jul 2015

Indonesia’s First Media (formerly Broadband Multimedia), the media arm of local conglomerate the Lippo Group, is planning to sell a 15% stake in its local wireless broadband business PT Internux via an initial public offering (IPO) in Q3 2015. First Media is the majority 70.2% shareholder of PT Mitra Mandiri which owns Internux, the brand manager of Bolt!, which offers 4G Time Division-Long Term Evolution (TD-LTE) broadband wireless services to around 1.4 million Indonesians in the areas of Jakarta, South Tanggerang, Bekasi and Bantan. The stock market filing did not disclose how much the group aims to raise from the IPO.

According to TeleGeography’s GlobalComms Database, in May this year First Media confirmed plans to boost the profile of its 4G wireless broadband brand Bolt! this year, via investment of between IDR500 billion and IDR700 billion (USD38.1 million and USD53.3 million). First Media’s vice president Irwan Djaja said at the time that the amount forms part of a total IDR1.5 trillion CAPEX for 2015, and will be used to ‘expand the service penetration of Bolt! in Medan, North Sumatra and the northern region of Sumatra, as well as other regions’.

Separately, First Media is also in the process of selling off its stake in internet services provider (ISP) LinkNet and hopes to decide on a buyer in August, Reuters reports. TeleGeography notes that last month, Indonesian mobile operators XL Axiata and Indosat were believed to be lining up alongside the country’s largest integrated media, broadcasting, entertainment and telecoms group, Global Mediacom (MNC Group), for control of local ISP LinkNet. The three firms have expressed an interest in acquiring a majority stake in Jakarta-based broadband operator LinkNet, the sale of which is being led by its two main shareholders, Lippo Group and CVC Capital Partners Asia Pacific (through Asia Link Dewa). The two collectively own a combined 67.3% stake in LinkNet valued at about USD824 million based on the firm’s June share price. Under local rules, any Indonesia-based enterprise gaining control of a listed company must submit an offer to buy out other minority shareholders.