Bank Jago, an Indonesia-based digital bank, agreed to sell an equity stake to Singapore’s wealth fund GIC. This development should help the bank launch its app and start lending to eligible merchants.
Merchants that carry a good sales track can apply for a loan by showing digital records of constant profits or even their business operations. They don’t need to provide any assets as collateral. Bank Jago completed a rights issue in late March 2021 in which GIC planned to spend more than IDR 3 trillion $206.57 million to acquire 9% of the bank’s enlarged share capital.
Singapore’s private equity fund Northstar Group which holds a major stake in Bank Jago has previously co-invested with GIC in the financial service sector. Northstar is focused on investing in Indonesia within three sectors, namely consumer, digital, and financial services.
Being the world’s fourth most populous country according to the visual capitalist, digital banking will be a game-changer for the people of Indonesia because nearly one-third of its 270 million people are unbanked.
Regarding Bank Jago's go-to-market strategy, Northstar co-founder Patrick Walujo said, "Experience shows that the most successful banks are usually those that work very closely with a large digital ecosystem”.
"Banks' customer acquisition costs are often quite high. To reduce those costs, you need to tap people who already have a habit of transacting with you and then you add a financial solution to that."
Bank Jago will be launching its banking app this month after it receives final regulatory approval. It plans to provide a wide range of services such as loans to Gojek’s drivers and food merchants. It plans to serve merchants on the Indonesian e-commerce platform Tokopedia.
Gojek, which is offering ride-hailing and digital payments services, has acquired 22.16% of Bank Jago in December and is now in talks with Tokopedia for a possible merger. Gojek extends its services to millions of drivers and food merchants while Tokopedia said that its merchant partners stood at 9.9 million as of the end of 2020.
When asked if digital banking would disrupt the banking industry, Walujo replied, "We are not here to disrupt anybody. Our mission is simply to provide the best possible experience and product to our customers”.
"Our core focus is our customers and to make sure that the market needs are addressed, and that the customers of Gojek or merchants of Tokopedia have access to the right financial services."
He added that digital banking will be inevitable in the near future. "Even the legacy conventional banks need to have a digital strategy or at least a strategy to address competition from the new digital players that are coming from all sides," he said.
Traditional banks such as Jakarta-based Bank Central Asia (BCA) and Bank Mega have acquired smaller banks which are all set to operate as their digital banking arms. The bank focused on pensioners. Bank BTPN became the first Indonesian lender to start offering a digital banking product, named Jenius in 2016.
"GIC co-invested in BTPN with us more than 10 years ago. Many of the executives at Bank Jago are from BTPN, and so, we and GIC have known them for a long time," Walujo added.