As more startups explore Indonesia’s fintech potential, WeLab co-founder and CEO Simon Loong believes digital banking can be a win-win game.
Jthere are good “a-ha” moments and there are bad ones, according to Simon Loong. Developing a virtual bank at the height of the pandemic was a good “a-ha,” even if it involved a tough learning process for his Hong Kong startup WeLab, a nearly decade-old online lender.
“We see digital banking as the future of financial services,” said Loong, co-founder and CEO of WeLab, in an interview on the sidelines of the Forbes Global CEO Conference held in Singapore. WeLab launched its eponymous banking app in Hong Kong during the summer of 2020. With services spanning term deposits and digital wealth advisory, the bank weathered the uncertainty of Covid-19 to rack up a total of 500,000 users in Hong Kong, including group lending users. WeLend platform.
Founded in 2013, WeLab has raised $900 million in total funding from German bank Allianz, China Construction Bank, International Finance Corporation, Sequoia Capital and the Hong Kong billionaire. Li Ka-shingof the TOM group. WeLab became a unicorn – a startup valued at over $1 billion – after raising $220 million in 2017; the company declined to disclose its current valuation.
Now, the nine-year-old fintech plans to export its digital banking product overseas, starting with Indonesia. “As entrepreneurs, we always think ‘how do you build it once and sell it 200 times?’ For me, it’s about monetizing the initial investment in WeLab Bank,” continues Loong, 45, proudly sporting an orange and blue lapel pin of his company’s logo, whether in Hong Kong or the Indonesian capital of Jakarta. , he adds that the “fundamental thesis” behind his startup’s digital banking product remains the same: priming it for export.
WeLab is the latest foreign startup to enter Indonesia, where banking as a whole remains nascent. British bank Standard Chartered, together with Indonesian e-commerce company Bukalapak, launched digital bank BukaTabungan last month. Line Bank, the banking service of Japan-based chat app Line – backed by Korean internet giant Naver and Japanese tech giant SoftBank – launched a digital banking app in Indonesia in June this year. last.
Initially, WeLab acquired Indonesia Bank Jasa Jakarta (BJJ) alongside Hong Kong-based group of companies Jardine Matheson’s Astra International in early September. The move marks the Hong Kong fintech’s second joint venture with Astra, after the two acquired a majority stake in BJJ for $240 million last December and formed joint venture Astra WeLab Digital Arta (AWDA) in 2018. It has launched Maucash, a product digital loan, in Indonesia that year.
“Investment in BJJ is in line with Astra [sic] aspirations in the financial services pillars to become leading retail financial service providers in Indonesia and support the growth of the financial services industry as well as the economy of Indonesia,” said Djony Bunarto Tjondro, Chief Executive Officer of ‘Astra, in a statement on the acquisition.
Nurturing a financial services industry is a colossal undertaking for Southeast Asia’s largest country, which is lagging behind in financial services adoption. Among Indonesia’s population of 270 million, at least 77% were unbanked or underbanked in 2018, according to a widely cited January World Economic Forum article. The Indonesian government aims to achieve 90% financial inclusion by 2024.
“In a [fully-banked] market like Hong Kong, quite similar to Singapore, you need to focus on a few high-margin products for a digital bank to be profitable. For us, it’s loans and wealth…there’s no point in selling that third bank account to someone,” Loong says. “In Indonesia, our strategy would be financial inclusion. We are able to offer accounts to people who have never had an account. »
The CEO cites the country’s youth as a factor in Indonesia’s openness to digital banking. Two-thirds of the country’s population are adults under the age of 41, according to government statistics this year. Younger demographics have led to a rise in demand for digital wallets, such as SeaMoney, billionaire Forrest Li’s Sea Group e-wallet, and GoPay, Indonesia’s GoTo payment platform. For Loong, these wallets are just “simple and inexpensive” tools that are a workaround for bank accounts.
“A digital wallet, as a product, doesn’t pay interest, can’t lend money – it’s not a bank, is it?” says Loong. “The younger generation will move from cash, in the past, to a digital wallet, to digital banking, where they can meet their more holistic and comprehensive needs.”
Yet WeLab faces fierce competition from established local players. Spurred by relaxed regulatory measures, local startups have launched digital banks in Indonesia over the past two years. GoTo-backed Bank Jago launched its all-digital banking app last April, after becoming Indonesia’s first all-digital bank last February. Aladdin, backed by SoftBank, launched an app for digital Sharia banking, or Islamic law-compliant banking, last March.
Loong remains confident WeLab can keep up, with plans to launch a digital banking app next year – the same timeline as Southeast Asia super app Grab, which will launch its digital bank in Malaysia and Indonesia. “Banking, as a whole, is not a win-win industry…it can allow several big players to exist,” he says. “We are quite happy with the market and believe we are competitive as WeLab Bank in Hong Kong has already built many products.”
WeLab’s proven track record of running a digital bank in Hong Kong, along with its suite of online lending offerings, would give it an edge over competitors, Loong said. The market “underestimates the complexity of building a digital bank”, given the high expectations of regulators and customers. “You don’t just lend money, do stock brokerage or do wealth management advice. You are a bank, people give you their savings,” he explains.
“The younger generation will move from cash, in the past, to a digital wallet, to digital banking, where they can meet their more holistic and comprehensive needs.”
Southeast Asia is new territory for Loong, whose career has been split between Hong Kong and mainland China. Prior to co-founding WeLab, Loong spent 15 years in the retail banking divisions of Citibank and Standard Chartered. While pursuing a master’s degree in management at the Stanford Graduate School of Business, he met his wife, Frances Kang. Together, the pair would go on to co-found WeLab alongside Kelly Wong, Loong’s classmate since pursuing a Bachelor of Commerce degree at the University of Sydney in Australia.
The fintech giant’s core business is in Hong Kong and mainland China, where it operates online consumer lending platforms WeLend and WeLab Digital. Last April, WeLab was in talks to go public later that year at a valuation of up to $2 billion, but the IPO fell through. The startup declined to comment on its listing plans, but said Forbes it remains fully committed to building and expanding its digital banks in Hong Kong and Indonesia while “examining strategic opportunities”.
Indonesia serves as a springboard for Loong’s grand strategy, expanding the startup’s reach to other territories in the region. WeLab plans to enter Thailand, the Philippines and Vietnam, but did not disclose a timeline for the move. In the meantime, Loong said the company will continue operations in Hong Kong and mainland China, while learning lessons that can be applied to Indonesia and future markets.
“The technology, the know-how… I know we’ll learn a lot and make a lot of mistakes,” says Loong. “Doing Indonesia is creating an opportunity for us to use ‘how to be smarter next time’. So let’s not make the same fucking mistakes again.