GIC-backed Bank Jago races to upend mobile banking in Indonesia

JAKARTA (BLOOMBERG) – Bank Jago will begin offering some banking services via mobile app this month before extending full-fledged products including loans, securing early-mover advantage in Indonesia’s booming digital banking industry.

The lender, which received fresh capital from ride-hailing and payments giant Gojek and Singapore sovereign wealth fund GIC, will then embed its services on Gojek’s platform this year, president director Kharim Siregar and commissioner Anika Faisal said in a joint interview from Jakarta. That would let Gojek’s tens of millions of users instantly open a bank account with Jago and manage their finances via the Gojek app.

“We really foresee the change in the lifestyle through the phones,” Mr Siregar said. Digital banking “needs to be easy, fast and secure. Whoever can do this well will come out as leaders. We want to be in that leadership position.”

Bank Jago went from obscurity to Indonesia’s fourth most-valuable listed bank in recent months. Gojek and GIC’s investment has swelled optimism that a small bank with total assets of just US$116.2 million (S$155.4 million) in September could become the first technology-based lender catering to the masses. Its shares have soared 265 per cent in the past year to a record high 11,100 rupiah on Thursday, boosting its market value to US$8.4 billion.

Underbanked population

Indonesia is one of the most underbanked markets in Asia, with 52 per cent of the population without a bank account. Yet more than 70 per cent of the population have a smartphone and are rapidly becoming accustomed to using digital payments like GoPay and OVO as a way to make purchases and transact business.

“Bank Jago is already in the process of transforming itself into a digital bank but bringing in GIC will bring comfort in terms of governance of the bank as well as obviously bringing in new funds,” said Angus Mackintosh, founder of CrossASEAN Research.

Expectations that Gojek will merge with Indonesian e-commerce giant Tokopedia bode well for the lender, he added. “The potential customer base for Bank Jago will be even larger assuming the Gojek-Tokopedia merger goes through, opening up Tokopedia’s customers and sellers as potential customers.”

Bank Jago’s partnership with Gojek also underscores the allure of the financial-technology potential in the world’s largest archipelago, where total profit pool is estimated to reach as much as US$3.2 billion in five years by Sanford C. Bernstein. By working with Gojek, Bank Jago could boost its share of the revenue pie while Gojek expands its financial services through the bank.

The relationship between Bank Jago and Gojek isn’t exclusive, Mr Siregar added. The lender is keen to team up with more tech companies and financial services to reach a wider audience, Ms Faisal said.

Lofty expectations

Firms offering financial services through digital channels can fill the gap between the many Indonesians who have smartphones but lack access to bank loans, according to Bernstein’s analyst Kevin Kwek.

While Bank Jago is focused on building its products and partnerships, it won’t rule out acquisitions in the future. “At least this year, we do not foresee the need to acquire another bank just because we have a number of things on our plate,” Ms Faisal said. “But in the future if an opportunity arises and if it definitely adds value, it’s worth considering. We keep our options open.”

With the market capitalization exceeding US$8 billion even before it launched its app, Bank Jago’s management is ramping up efforts to deliver on the lofty expectations.

“It shows very high expectations from our shareholders for us to perform,” Mr Siregar said. “It’s a responsibility.”

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