By Catherine Wang, Forbes Staff

As more startups explore Indonesia’s fintech potential, WeLab’s cofounder and CEO Simon Loong believes digital banking can be a win-win game.

There are good “a-ha” moments and there are bad ones, according to Simon Loong. Developing a virtual bank at the height of the pandemic was a good “a-ha,” even though it entailed an uphill learning process for his Hong Kong fintech company WeLab, an online lender nearly a decade old.

“We see digital banking as the future of financial services,” says Loong, cofounder and CEO of WeLab, in an interview on the sidelines of the Forbes Global CEO conference held in Singapore. WeLab launched its eponymous banking app in Hong Kong during the summer of 2020. With services spanning time deposits and digital wealth advisory, the bank has weathered Covid-19 uncertainty to accumulate a total of 500,000 users in Hong Kong, including users for the group’s lending platform WeLend.

Founded in 2013, WeLab has garnered a total of US$900 million in funding from the likes of German bank Allianz, China Construction Bank, International Finance Corporation, Sequoia Capital and Hong Kong billionaire Li Ka-shing’s TOM Group. WeLab became a unicorn – a startup with a valuation of more than US$1 billion – after a US$220 million funding round in 2017; the company declined to disclose its current valuation.

Now, the nine-year-old fintech company plans to bring its digital bank product overseas, starting with Indonesia. “As entrepreneurs, we always look at, ‘how do you build it once, and sell it 200 times?’ For me, it is about monetizing the upfront investment on WeLab Bank,” continues Loong, 45, proudly sporting an orange and blue lapel pin of his company’s logo. Whether in Hong Kong or Indonesia’s capital city of Jakarta, he adds the “fundamental thesis” behind his platform’s digital banking product remains the same—priming it for export.

WeLab is the latest foreign company entering Indonesia, where banking as a whole remains nascent. British bank Standard Chartered, collaborating with Indonesian e-commerce company Bukalapak, launched digital bank BukaTabungan last month. Line Bank, the banking service of Japan-based chat app Line – backed by Korean internet giant Naver and Japanese tech giant SoftBank – launched a digital banking app in Indonesia in June last year.

As a first step, WeLab acquired Indonesia Bank Jasa Jakarta (BJJ) alongside Hong Kong-based business group Jardine Matheson’s Astra International in early September. The move marks the Hong Kong fintech’s second joint venture with Astra, after WeLab acquired a controlling stake in BJJ for US$240 million last December and the two formed a joint venture company Astra WeLab Digital Arta (AWDA) in 2018. WeLab also launched Maucash, a digital lending product, in Indonesia that year.

“Investment in BJJ is in line with Astra [sic] aspirations in financial services pillars to become leading retail financial providers in Indonesia and support the growth of financial services industry as well as the economy of Indonesia,” said President Director of Astra, Djony Bunarto Tjondro in a statement about the acquisition.

Commercial Banks in Indonesia

Nurturing a financial services industry is a massive undertaking for the largest country in Southeast Asia, which lags behind in the adoption of financial services. Among Indonesia’s population of 270 million, at least 77 per cent were either unbanked or underbanked as of 2018, according to a widely cited article from the World Economic Forum this January. Indonesia’s government aims to achieve 90 per cent financial inclusion by 2024.

“In a [fully-banked] market like Hong Kong, pretty similar to Singapore, you need to focus on a few high-margin products for a digital bank to be profitable. For us, it’s lending and wealth…there’s no point selling someone that third bank account,” says Loong. “In Indonesia, our strategy would be financial inclusion. We’re actually able to offer accounts to people that have never had an account.”

The CEO cites the country’s youth as a factor in Indonesia’s openness to digital banking. Two-thirds of the country’s population are adults below the age of 41, according to government statistics this year. Younger demographics have driven a surge in demand for digital wallets, such as SeaMoney, the e-wallet under billionaire Forrest Li’s Sea group, and GoPay, the payments platform of Indonesia’s GoTo. To Loong, these wallets are only “simple, low-ticket-sized” tools that are a stopgap for bank accounts.

“A digital wallet, as a product, doesn’t pay interest, cannot lend money – it’s not a bank, right?” says Loong. “The younger generation will shift from cash, in the past, to a digital wallet, to digital banking, where they can fulfill their more holistic and comprehensive needs.” https://www.forbes.com