Pulse Stories: Banking on Fintech


Micro merchants — the small shop owners, street food vendors, and many others like them — make up the backbone of Indonesia’s economy, yet many of them are often excluded from financial services. Can financial technology accelerate their financial inclusion? With the support of the Department of Foreign Affairs and Trade (DFAT) Australia and in collaboration with the Indonesia Fintech Association (AFTECH), Pulse Lab Jakarta launched a research project called ‘Banking on Fintech : Financial Inclusion for Micro Enterprises in Indonesia’ to promote resilience and growth within Indonesia’s unbanked micro business sector. While previous studies have focused on understanding why most low-income communities remain unbanked, we decided to build on the work of some pioneering fintech companies in Indonesia that are reaching micro merchants and learn from the experiences of early fintech adopters.

According to the Ministry of SMEs and Cooperatives, roughly 99 per cent of all businesses in Indonesia are micro enterprises — the small shop owners, street food vendors, and merchants who earn a maximum of IDR300million per year. Despite their crucial role in the economy, micro enterprises remain vulnerable to shocks and are unable to grow due to a lack of access to formal financial services. In line with the Government of Indonesia’s financial inclusion agenda, the growing fintech industry has acknowledged the importance of catering to the financial needs of micro enterprises to accelerate financial inclusion. However, the Indonesia Fintech Association (AFTECH) also acknowledged that unbanked micro enterprises are a challenging segment, given that they are harder to reach than small or medium enterprises.

Despite this challenge, we have taken note of a number of digital financial service providers in Indonesia that have started to reach previously unbanked micro enterprises. Our main research question therefore was: Why, and how, despite the same obstacles and behavioural barriers, have some micro enterprises made the leap and began to use these services?

Our emphasis on behavioural insights stems from the realisation that: while financial inclusion efforts should be pioneered by higher-level policymaking, it must also be supported with a clear understanding of the realities of the target users. We employed a human-centred design process in our field research with 116 respondents across Jakarta, Bekasi, Sukabumi, Ciseeng, and Banyumas, most of whom are micro merchants who are either users or agents of mobile savings accounts, mobile payments, and peer to peer group lending. Through the research, we uncovered the mental barriers hampering micro merchants from accessing financial services, their fintech adoption journey, and the enabling factors that help them to actively use and benefit from fintech.

Beyond understanding the users’ realities, we learned that, for micro merchants, the way in which fintech services are introduced and implemented is more influential than details of the technology itself in micro merchants’ decision to adopt a digital financial service. Therefore, rather than recommending product or service ideas, for which there are many latent needs, we opt to translate our insights into design principles. The design principles embody our understanding of the finance and technology-related attitudes and behaviours of micro merchants, particularly the enabling factors that equip them to adopt digital financial services. These principles can be applied by fintech companies as design directives in developing and testing a variety of solutions for micro enterprises in Indonesia.

Following this research, we have teamed up with the United Nations Capital Development Fund (UNCDF) to launch a Challenge Fund to promote and accelerate usage of fintech for the financial inclusion of microenterprises. Details of the Challenge Fund are available here and applications are open until October 1st, 2018.

We hope that our research is useful not only for those interested in applying to the challenge fund, but also for anyone committed to making financial inclusion a reality in Indonesia.

Happy reading!

Feel free to download a copy of the report here.

Pulse Lab Jakarta is grateful for the generous support from the Government of Australia.



UN Global Pulse Asia Pacific
United Nations Global Pulse Asia Pacific

UN Global Pulse Asia Pacific is a regional hub that aims to drive data innovation and sustainable development to ensure that no one is left behind.