Over the past few years, the Indonesian Central Securities Depository (KSEI) has consistently recorded a significant increase in the number of investors in the country, as shown in the issuance of Single Investor Identification (SID) numbers.
Last year, the depository recorded a 44 percent increase in SIDs to 1.62 million, of which 988,946 were mutual fund SIDs.
However, those numbers are still low compared to Indonesia’s population of more than 260 million people. This presented a big opportunity for foreign players, including Australia’s micro investment financial technology (fintech) firm Raiz Invest, to expand to the archipelago.
“We want to help increase Indonesia’s financial literacy and also teach the millennials to save and invest their money without changing their lifestyles,” Raiz Invest Australia CEO George Lucas said during Raiz Invest Indonesia’s recent soft launch in Jakarta.
Like Australians, many Indonesian millennials are having a hard time saving their money because of high lifestyle costs, he said. This leaves them with very little to no money left to save and invest for their future.
To help them solve this issue, he said, his firm provided a mobile app called Raiz that would automatically take spare change from its users’ spending and invest it in mutual funds.
Raiz Invest Indonesia chief marketing officer Fahmi Arya said the app would set aside small amounts, less than Rp 5,000 (35 US cents), from each transaction.
“So, if a user bought a cup of coffee for Rp 41,000, [the expense would be Rp 45,000 and] we would take the Rp 4,000 and save it in the app,” he said, adding that the app would automatically buy the user a mutual fund product when the money in their Raiz account reached Rp 10,000.
He further explained that the app would automatically take money from its users’ bank accounts and e-wallets that were linked to the app.
Currently, he said, his company was in discussions with large banks – that have Rp 30 trillion in capital or BUKU IV category banks – with their own mobile banking app and two e-wallet providers to be its partners.
He added that the mutual funds available on the app would be adjusted to users’ risk profiles when they first register. During its initial release in the country, the app will only provide three products for each profile: conservative, moderate and aggressive.
Fahmi said the app would point conservative users to the money market mutual fund, while moderate and aggressive users would be offered to invest in fixed income and equity mutual funds, respectively.
Raiz Invest Indonesia has already secured a deal with an asset management firm to provide mutual fund products, but Fahmi declined to reveal the name of the company. He also said his firm was open to partnering up with more asset managers in the future.
Raiz Invest secured its mutual fund securities agent permit from the Financial Services Authority (OJK) in December and plans to officially launch the app in the third quarter of this year. The firm is targeting to attract 400,000 users, all first-time investors below the age of 35, by 2020.
The OJK has given permits to nine other online securities agents, helping tech-savvy millennials to easily buy mutual funds through their mobile phones.
Avrist Asset Management head of investment Farash Farich said he viewed the growth as an opportunity for asset management firms to sell more products.
“These platforms enable us to tap into a market we weren’t able to reach before,” he said, adding that those platforms could also help boost financial inclusion and increase the number of mutual fund investors in the country.
Meanwhile, Lucas of Raiz Australia said his company held an 80 percent stake in Raiz Indonesia but did not reveal how much it had invested in the Indonesian branch. He also revealed that his company was planning to expand its services to Malaysia.
According to Raiz Australia’s IPO prospectus, the company plans to use A$5 million ($3.52 million) of the A$15.12 million it raised last year for international expansions to Indonesia, Malaysia and Thailand.