Buying financial services in Indonesia the Cermati way

• Secures seven-figure US$ funding from Orange Growth Capital
• Aims to begin offering insurance products

JUST a little less than a week after receiving a funding round from financial technology (fintech) investment firm Orange Growth Capital (OGC), Indonesian fintech e-commerce platform Cermati is gearing up for expansion, looking to tap into new verticals, and hiring more staff to support both operations and technology, according to chief executive officer and cofounder Andhy Koesnandar.

In September last year, Cermati secured US$1.9 million in a Series-A funding round led by Jakarta-based East Ventures and Beenos Plaza, who were also the two investors in Cermati’s seed round in July 2015.

Since its inception in April 2015, Cermati has provided a comparison and e-commerce platform for customers interested in financial products. It was founded by two software engineers; Andhy Koesnandar and Oby Sumampouw and an industrial enginner Carlo Gandasubrata.

Cermati currently has three main categories of products on its platform, namely credit cards, loans, and savings. However, with the recent seven-digit US dollar injection, Cermati is looking to tap into insurance categories, starting with general insurance.

“At Cermati, every single financial product that is featured on the platform should be easy and straight-forward, meaning that it is easy to explain to customers, has standardised features, and it easy for customers to apply for the product.

“However, we are looking to expand our product categories and are looking at general insurance, as well as micro loans provided by the microfinance institutions,” Andhy told Digital News Asia, saying that general insurance is simpler than life insurance products, and will be a good way to test the market.

The startup will also increase its current 100 employees ‘significantly’ this year especially in the technology and operations divisions to support its core business.

“Technology has been our backbone so far. We need to ensure that our team is strong and that we can help more partners such as banks, fintech companies, and microfinance institutions to either start their digital strategy or integrate their current system with ours,” he added.

Andhy said that Cermati has an average of 100,000 visits per day to their site, and can process an average of 4,000 credit card, loans, and savings applications per month.

Financial inclusion not only about savings

Indonesia has 177.7 million people aged 15 and above, but only 36.1% or 64.2 million have bank accounts, according to the World Bank’s 2015 Little Data Book on Financial Inclusion.

On the other hand, according to Deloitte Consumer Insights “Capturing Indonesia’s latent markets” dated May 2015, more disposable income in Indonesia has become available to those earning above Rp5 million (US$375.2). People at this level of income also have a greater propensity to allocate funds for financial services, including credit card instalments, welfare and savings, setting aside 24% of their total monthly expenditure for these purposes.

While Cermati aims to encourage more unbanked people to have bank accounts and in the end enjoy many the financial products offered, it is now focused on working with people who already have bank accounts, but are not exposed to the various financial products.

“The financial inclusion issue does not stop when people finally open bank accounts. The problem then is how to push the banked people to try and explore more productive financial products. By giving them easy access to information and the ability to apply for those products, hopefully we will see our financial industry and society grow,” Andhy said.

Their Series A Extension round investor, OGC, believes that Indonesia holds big potential in the financial industry, and therefore needs a top-tier reliable financial e-commerce portal.

“(Cermati) business has huge potential for further growth as the Indonesian market is the largest in Southeast Asia. In Indonesia, disposable income amongst the population is growing and the regulators are supportive of innovation in the financial service industry. We are looking forward to working with Cermati,” OGC partner Hans de Back, who is joining Cermati’s board, said in a statement.

With the untapped potential in Indonesia’s financial sector, Cermati wants to focus only on conquering this market, and is not thinking of expanding the platform to other countries.

Cermati receives a commission from every application made through their platform. For end users, the platform is free, and will always be free, Andhy promised.

“It does not make sense for us to include premium features for customers, as many other e-commerce platforms do. We want to open the door for customers to explore more financial products,” he said.

Currently the platform has 16 partner financial institutions that are mostly banks. Andhy admitted that the number is still very low, and that Cermati’s journey is still in its initial phase.

While the startup wants to partner with more banks and other financial institutions, the effort to integrate its system with partners’ has not been as easy as they had hoped.

“There is a very noticeable difference between each financial institutions’ digital maturity level. A few are digitally savvy so it is easier to partner with them and integrate our system.

“However many financial institutions are still in the early stages of digital transformation, so it is slightly harder to go straight to integration. What we do with the less digital savvy partners is to engage in continuous discussions and provide assistance with their digital strategy,” he added.

Without setting an exact target of how many more financial institutions Cermati wants to partner with this year, Andhy said that it will be a long rather than a short journey to get all the top and second tier banks and financial institutions on the platform.

“What I have seen so far is that banks and other financial institutions in Indonesia are very open to innovation and want to collaborate with fintech startups, because they are fully aware that internal innovation might take some time.

“However because they are big and diverse with many departments and operations, they are still trying to get their internal digital strategy working, and as a partner, we have to wait for them,” he concluded.

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