In late June, Nikkei Asia reported that Japanese consumer finance group Orico will soon launch a credit card business in Indonesia via an investment in the Indonesian fintech startup Honest Financial Technologies, which established a full-scale virtual credit card business this year for use on smartphones. Orico will bring deep knowledge of the credit card sector to the venture, which will issue both digital and plastic cards.
The credit card tie-up between Orico and Honest Financial aims to solve a bottleneck for Indonesian consumers: the shortcomings of QR payment apps for big-ticket purchases – like automobiles. Indonesia’s credit card penetration rate is very low at just 5%, compared to 35% in Thailand and 30% in Malaysia, so there is plenty of low-hanging fruit.
Also in late June, Mitsubishi UFJ Financial Group (MUFG) said that it would buy Indonesian auto loan provider Mandala Multifinance for 7 trillion rupiah ($467 million) to deepen its Asian presence and tap consumption growth in emerging markets. The Mandala acquisition will help MUFG expand its auto loan business in Indonesia, built through Adira Dinamika Multi Finance, a car loan unit of MUFG's Indonesian banking unit.
Among Japan’s three megabanks, MUFG has been among the most active investing in Southeast Asia. Undeterred by the global fintech slump, it has taken stakes in multiple companies across the continent in the past year. These include the Philippine and Indonesian units of Dutch consumer finance company Home Credit BV (HC) for about 596 million euros, a US$200 million stake in the Jakarta-based fintech Akulaku, and the launch of a US$100 million fund focused on Indonesian startups called MUFG Innovation Partners Garuda No. 1 Limited Investment Partnership.
For its part, Mizuho Financial in March invested US$125 million into Kredivo, a Singapore-based digital financial services provider that focuses on the Indonesian market. Mizuho seems especially interested in Kredivo’s buy now, pay later (BNPL) capabilities. Given Indonesia’s low credit card penetration, BNPL has helped to plug a significant lending gap.
In Indonesia, the number of BNPL users is growing quickly in tandem with the booming e-commerce market. Research by Kredivo shows that Indonesia’s BNPL users on e-commerce platforms rose 38% in 2022. Respondents to a Kredivo survey said that the top reasons they used BNPL are that it allows them buy products for urgent needs, enables them to shop with short-term installments and gives them access to more promos.
More M&A deals by the Japanese finance sector in Indonesia fintech are expected in the coming months and into 2024 as Southeast Asia’s largest economy offers strong long-term fundamentals.