Ovo CEO: «Financial Inclusion Is More Than a Bank Account»

Indonesian payment service Ovo – already believed to be Indonesia’s fifth unicorn company, with a valuation of more than $1 billion – has brought digital payments to a broad swathe of the archipelago’s merchants and consumers.

But Jason Thompson, Ovo’s CEO, noted that in emerging markets, there’s more to financial inclusion than just bank accounts and digital payments. Financial inclusion, in the form of having a bank account, is considered a crucial step in escaping poverty.

Around 69 percent of adults globally, or around 3.8 billion people, now have a bank account or a mobile-money provider, up from just 51 percent in 2011, according to the World Bank’s Global Findex report for 2018. Around 1.7 billion adults globally remain unbanked, the report said but noted around two-thirds of them have mobile phones, which could help them access financial services.

No Financial Literacy

The same report said around half of Indonesia’s adults now has a bank account, up from 36 percent in 2014 and 20 percent in 2011. But Thompson indicated just having a bank account isn’t enough to increase financial inclusion.

«In terms of banking in Southeast Asia, I see banking penetration growing quite rapidly, but it’s been driven by salary dispersal, not by financial literacy,» Thompson said at the Singapore Fintech Festival 2019 on Tuesday. «Just telling someone they have to collect their money from a different place doesn’t drive literacy,» he added.

Biggest Challenges

Thompson said financial literacy was one of his company’s biggest challenges, with product availability a real-world problem for Indonesians. «Can you imagine your child goes to hospital and you need to pay, where do you get money from,» he said, noting this was a situation his company tries to address with its Ovo Paylater product. That offering lets customers delay payment interest-free for 30 days, or use a 12-month installment credit product for some loans.

«What happens if you don’t get Ovo Paylater? How does that feel like? In financial institutions, we call that financial exclusion. I’m sure that’s not a phrase they understand or feel,» Thompson said. «So how do you bring tools that show these people how they can help us understand them, how we can get data, how we can develop the algorithms to feed them the necessity,» he added.

More Products

Offering more financial products to Indonesians on the ground should get easier as the country’s internet penetration grows. Around 64.8 percent of the Indonesian population had become internet users as of the start of 2019, according to the Association of Internet Service Providers in Indonesia (APJII), although penetration is lower in rural areas. Data from Statistica showed Indonesia’s smartphone penetration at around 47.6 percent this year.

Digital banking penetration is around 58 percent of financial services users in Indonesia, a McKinsey report from February showed. The penetration of digital banking – rather than traditional banking – is important because digitally active consumers bought twice as many banking products in 2017 compared with non-digital users, and they have 1.5 times more products than non-digital peers, McKinsey said.