Market Trends of Indonesia Big Data Analytics Software Industry
Small and Medium Enterprises to Hold Major Market Share
- According to The World Economic Forum, Indonesia boasts over 60 million ultra-micro and micro-enterprises, playing a crucial role in the country's economy as the backbone of the micro, small, and medium enterprise (MSME) sector. Recognizing the significance of MSMEs, the Indonesian government has prioritized financial inclusion efforts, introducing initiatives and regulations to encourage the adoption of digital financial services.
- With a target of achieving 90% financial inclusion by 2024, up from 77% in 2022, the focus is on MSMEs to drive this vision. Therefore, Indonesia's banking industry is undergoing significant transformation driven by digitalization and the push for financial inclusion. With government support and a focus on leveraging technology, Indonesia is poised to achieve its financial inclusion goals and foster economic growth.
- As digitalization reshapes Indonesia's banking sector, there has been a notable surge in the adoption of digital banking services. According to The Financial Services Authority of Indonesia (OJK), despite approximately 80% of the Indonesian population being unbanked, smartphone penetration stands at 80%, indicating a ripe opportunity for expanding financial services.
- To make banking accessible to low-income individuals and small businesses, reducing transaction costs is imperative, necessitating a focus on data, technology, and scalability. Meeting the needs of this large market segment is reshaping Indonesia's banking landscape and emphasizing the importance of analytical tools for the industry.
- Several initiatives are underway to foster the development of Indonesia's financial services sector. The Financial Services Authority of Indonesia (OJK) has implemented a national action plan titled the "Digital Financial Innovation Road Map and Action Plan 2020-2024." This plan aims to cultivate a supportive and comprehensive digital financial ecosystem, ensuring the competitiveness and resilience of the financial services industry amid evolving trends and challenges. OJK has also introduced the "Master Plan for the Indonesian Financial Services Sector (MPSJKI) 2021-2025." This plan focuses on the pivotal role of the financial services sector in facilitating Indonesia's post-pandemic economic recovery.
- In alignment with the MPSJKI 2021-2025, OJK has launched the 2020-2025 Indonesian Banking Development Roadmap (RP2I). This roadmap is designed to bolster the competitive edge of the financial services sector by promoting the adoption of emerging technologies such as artificial intelligence (AI), fostering technology collaboration among businesses, enhancing financial literacy, and modernizing regulations, licensing, and supervision through digital solutions.
- In January 2024, the United States, in collaboration with the US Agency for International Development (USAID) and Nikel Academy, an online training provider established by PT Impact Credit Solutions, unveiled a new initiative aimed at supporting women-owned small and medium enterprises (SMEs) in accessing financing and expanding their businesses.
- Named Financial Inclusion of Women-Led Small and Medium Enterprises (FINCLUSION for W-SMEs), this program is valued at USD 1.2 million. It seeks to mobilize USD 50 million in lending to women-owned SMEs in Indonesia, given that women own nearly half of the country's small and medium enterprises (SMEs).
- Implementing social mobility restrictions (PPKM) during the pandemic prompted a shift to online activities, including accessing financial services. The surge in e-commerce transactions also resulted in a higher adoption of e-payments, with fintech lenders catering to the increased demand for loans from micro and small-medium enterprises (MSMEs).
- Also, a 2023 survey conducted by Snapcart, a real-time offline shopper engagement and data services provider for brands, revealed that approximately 52% of respondents from Generation Y expressed satisfaction with their digital banking experience, while only about 3% reported dissatisfaction. Meanwhile, 35% of Generation Z respondents were satisfied with their digital banking experience.
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Retail to be the Major End-user Vertical
- The retail segment in Indonesia continues to grow in Asia, driven by its sizable population and an expanding middle class characterized by increased household purchasing power and modern consumer habits.
- Indonesia is positioned as one of the world's most promising economies, marked by economic stability and significant growth, which, in turn, is positively impacting the retail industry. Many international retailers are viewing Indonesia as the next frontier for expansion. Moreover, in the post-COVID landscape, coupled with political stability, retailers are growing more confident in expanding their brands within Indonesia.
- The Indonesian retail market is experiencing significant investment and expansion, with new shops, malls, and hypermarkets emerging. In October 2023, the global lifestyle brand MINISO inaugurated its inaugural IP-themed flagship store at the Margo City Store in Indonesia. This flagship store marks a pioneering initiative for the brand worldwide.
- Indonesia is witnessing a surge in luxury brand expansions and renovations. In April 2024, Louis Vuitton revealed its revamped plaza, blending its international allure with local Indonesian cultural elements. Joining the trend, prominent names like Bvlgari, Burberry, Zegna, Chopard, and BOSS are also transforming. Moreover, mid-range luxury labels such as Lacoste, Calvin Klein, and Tommy Hilfiger are experiencing a notable increase, especially in Indonesia's secondary cities, including Kalimantan and Sulawesi.
- The launch of malls and shopping complexes in Indonesia will also bring the demand for the processing of data and analytics that the sales from offline and online channels will produce. Retailers will need analytics for marketing, discounts, strategy, sales, post-sales processing, and data analytics to enhance their business and make data-oriented business decisions, strengthening the demand for the market in the region.
- In December 2023, Indonesia's retail sales index value for food, drinks, and tobacco reached 299. Throughout the year, the retail sales index in this sector experienced fluctuations. This index is a short-term metric to gauge the value of goods retail businesses sell in Indonesia.
