In a push for digitalisation, the Indonesian government is currently encouraging state-owned enterprises (SOEs) to partner with local tech startups to transform operations. With the growing digitalisation trends in Indonesia, the government is looking for ways to harness the opportunity and provide a thriving environment for businesses. Digitalisation in Indonesia will also give a facelift to the startup ecosystem through venture capital investments offered by banks and state-owned establishments.
Indonesia is home to over 100 state-owned companies that are influential in various industries, including construction, natural resources, transportation, manufacturing, finance, and agriculture. The influence they wield has given room for numerous inappropriate and ineffective practices.
However, the newly appointed state-owned enterprises minister, Erick Thohir, is working tirelessly to change the tide. To this effect, he has given directives to venture capital providers to support tech startups that can drive digitalisation in Indonesian SOEs.
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Thohir believes that this move will be beneficial for all parties. Firstly, startups get the opportunity to work with lucrative customers—the SOEs—thereby increasing revenue generation. On the other hand, the government can take advantage of the partnerships and tools provided by startups to increase the efficiency of their interests and speed up digitalisation.
A steady income stream will also increase the startups’ valuation, allowing investors to earn better returns when they decide to exit. Both sides are currently collaborating to execute new projects and develop new products. For now, three corporate venture capital firms, including Telkom Indonesia’s MDI Ventures, Mandiri Capital, and BRI Ventures, are investing funds into the tech startups.
Making strides to digitalise Indonesian SOEs
In August 2020, MDI Ventures, the state-owned telecom company’s corporate venture capital subsidiary, closed a $500 million USD fund, taking its overall asset valuation to $790 million USD. The company aims to invest the funds to support Indonesia-based startups and accelerate the digitalisation of the country.
These startups will provide valuable digital services to state-owned companies to help them adapt to Indonesia’s evolving business ecosystem. Since its inception in 2016, MDI Ventures has backed up 44 startups financially, creating new revenue sources for Telkom Indonesia Group.
Recent partnerships with startups open up even more opportunities for the company to have profitable exits in the future. MDI Ventures has an extensive network of business partners in the government and private sectors, meaning that they can expose startups to better future opportunities.
The company plans to build long-term bridges that will connect tech startups, Telkom Indonesia, and other state-owned companies, thereby boosting digitalisation. SOEs are key drivers of the country’s economy; therefore, equipping them with the right digital tools will positively impact the nation’s growth.
Bank Mandiri develops co-branded credit cards with startups
In a bid to build a massive customer base, Bank Mandiri partnered with Sea Group’s eCommerce subsidiary Shopee to develop a co-issued Visa card in February 2019. Shopee customers can fill in their card application form on the app, after which the bank will contact them for further verification.
Bank Mandiri subsequently collaborated with the travel platform unicorn, Traveloka in February 2020 to develop a co-branded credit card. The partnership, which Henry Hendrawan, Traveloka Group’s President, set up with Hery Gunardi, Bank Mandiri’s Consumer and Retail Transaction Director, aims to support businesses in the tourism sector.
Tourists can take advantage of the credit card services to explore both local and international travel destinations. Traveloka looks set to increase its travel financing to 20% to boost Bank Mandiri’s credit card business growth.
Overall, the partnership has enabled them to offer value-added services to Traveloka-Mandiri card users, providing a hassle-free avenue for customers to meet their lifestyle and travel needs.
Bank BRI partners with Traveloka to credit cards for unbanked Indonesians
Bank Rakyat Indonesia, a leading consumer bank in the country, also partnered with Traveloka to launch a Buy Now Pay Later card. Underbanked Indonesians can take advantage of this card to access credit facilities through an end-to-end card payment management system. The PayLater card, supported by the Visa network, can be used to perform both local and international online and offline transactions.
This valuable partnership aims to eliminate consumers’ pain points where a considerable amount of Indonesians lack credit access usually offered by credit card companies. Card applicants go through a fast and straightforward registration and verification process—usually 24 hours at the most—to start using the service.
The growing partnership between SOEs and tech startups will surely boost digitalisation in Indonesia over time. Experts also believe that the digitalisation trends in Indonesia will positively impact the economy because the digital innovations will enable state-owned companies to perform better for generations to come. By building partnerships and working together towards a cohesive online economy, the country’s startups and SOEs set a precedent in the region that many will hope to emulate.