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Bank Central Asia investing $15m in fintech

Indonesia's largest private bank joins race for unbanked market

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BCA is harnessing fintech to chase millions of 'unbanked' Indonesians from its headquarters in Jakarta.   © Reuters

Indonesia's Bank Central Asia is to invest 200 billion rupiah ($15 million) in financial technology companies in its race with domestic rivals to use startups to reach customers previously considered "unbankable."

BCA is to own 100% of a new company, Central Capital Ventura, according to a stock exchange filing on Friday. CCV wants to invest in and collaborate with fintech companies "that will support BCA's financial service ecosystem as well as that of our subsidiaries."

With some 1,200 branches and 17,000 automated teller machines, BCA has one of the largest retail banking operations in Indonesia, and runs the country's most advanced payments system. It is the largest private bank in Indonesia with 660 trillion rupiah in assets as of September.

Less than half of adult Indonesians have bank accounts, but opening branches in rural areas lacking infrastructure is prohibitively costly. A growing number of fintech startups, many using cutting-edge technology to analyze credit quality and process payments, are filling the gap with their capacity to reach "unbankable" customers through smartphones.

In 2016, state-owned Bank Mandiri set up a 500 billion rupiah venture capital unit Mandiri Capital Indonesia. The aim was to foster fintech startups, particularly those catering to smaller businesses. "Based on studies, this is quite tough -- 80-90% of startups fail," said Hira Laksamana, MCI's chief financial officer.

Indonesian banks are competing with telecommunication companies and startups that see promise in fintech because mobile phones far exceed bank accounts. The largest company, state-owned Telekomunikasi Indonesia, has its own mobile payment service as well as a venture capital arm called Metra Digital Innovation that incubates "payment solutions" startups. MDI has offices in Jakarta, Singapore, and Silicon Valley supporting incubation and accelerator programs.

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