Financial and Monetary Systems

How fintech is making investment accessible

An employee of PT Bank Negara Indonesia Tbk. moves a pack of 100,000 Rupiah notes at the bank's head office in Jakarta December 21, 2012.  PT Bank Negara Indonesia Tbk. is preparing cash notes amounting to 12 trillion Rupiah ($ 1.25 billion) for customers during Christmas and New Year holidays, an official said on Friday.  REUTERS/Supri (INDONESIA - Tags: BUSINESS) - GM1E8CL1LBQ01

Setting aside money for investment has traditionally been seen as a luxury in Indonesia Image: REUTERS/Supri

Herman Widjaja
Vice-President, Engineering, Tokopedia
Ramil Bansal
Investment Product Head, Tokopedia
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Financial and Monetary Systems

Mutual funds are considered one of the safest investment options available. They work by allowing an individual to pool their money with other investors, creating a fund that can be managed by investment professionals and distributed to generate profit. These pooled funds generally get invested in stocks, bonds, money markets or other securities, in different combinations and with varying risk-return profiles.

Like most investment options, there are limitations in terms of liquidity for disbursing a mutual fund. Most financial institutions need two to three working days to disburse the money. This procedure has been considered the norm.

But it presents challenges in a developing country such as Indonesia. With a GDP per capita under $4,000 and cash usage still heavy, most Indonesians do not invest. They need their income to sustain their day-to-day life. Easy access to money is an important criteria in making their financial decisions, and setting aside money for investment is considered a luxury. Most people simply don’t have the financial freedom to do so. With less than half the population owning a bank account and credit card penetration still below 8%, the limitation of access that comes with a mutual fund does not appeal to them.

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However, emerging trends in financial technology in Indonesia have finally provided solutions to this concern. Fintech development has made it possible for companies to offer the benefit of a mutual fund while ensuring access to cash whenever people need it, giving a ray of hope around the future of financial behaviour and investment habits in the country. With leading tech players developing financial services that offer mutual fund investments from as low as IDR 10,000 (roughly $0.70), barriers of entry have started to diminish.

In addition, some of these significantly more affordable investment products also offer immediate withdrawal of funds, where users can invest their money on these platforms in a mutual fund and still disburse it instantly. In other words, as soon as someone has invested in that mutual fund product, they can decide to withdraw it the next moment and get their money back.

It is fortunate that some leading fintech players are bold enough to break the norms and have a growth mindset. It is hoped that an affordable mutual fund product will change how Indonesians perceive investment and allow them to give it a try, by providing attractive value while letting them maintain control of their cash flow. Investment no longer has to be a luxury they can’t afford.

Technology enables us to solve creatively the instant disbursement issue and any further barriers of entry faced by many Indonesians, driving higher financial inclusion and creating a more inclusive economy and society.

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Financial and Monetary SystemsEconomic GrowthEmerging Technologies
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