This section analyses the relationship between the usage of a particular fintech app and individual user socioeconomic and psychological factors. We use logistic regression to empirically verify the factors affecting personal decisions to use fintech. Table A1 shows a list of dichotomous dependent variables used in the model. Y1–Y5 are dependent variables concerning usage of different fintech platforms, i.e., M-banking, E-wallet, lending, investment, and donation. Y6–Y7 are dependent variables concerning fintech usage for social activities and expanding one’s network. Finally, Y8–Y9 are dependent variables concerning one’s perception of data security and fraud related to fintech usage.Table A2 shows a list of independent variables used in the estimation. It covers individual-specific characteristics such as age, gender, income, job type, and residential area. It also covers some psychological factors, such as feeling in control, being afraid of data leaks or fraud, and being worried about being extravagant or trapped in unsustainable debt, among others.Overall, the estimation results show that having many choices for the needed financial services (KAT_CHOICE) and feeling in control (KAT_ TAKE_CONTROL) make people like to use various types of fintech applications. These variables are statistically significant and positive in all model estimations (Table A3).Table A3 shows that men tend to like investment apps, while women tend to like E-wallet and lending apps (KAT_GENDER). Younger people (Generations Y and Z) tend to like E-wallet and investment apps (KAT_ AGE). Those with higher education (post senior high school) tend to use fintech more, especially M-banking, investment apps and donation apps (KAT_EDUC), compared to those with lower education. And people who have full-time jobs tend to like fintech, i.e., M-banking and investment apps (KAT_JOB). Finally, lower-income groups tend to like E-wallet apps (KAT_SES), while the higher income groups tend to like M-banking apps.Location variable (KAT_AREA) stands out as significant in all estimations (Table A3). It shows that those living in the Jabodetabek area have a higher probability of using fintech platforms than those outside Jabodetabek. Later we re-estimate the model using the Jabodetabek sample to check the robustness of the estimation results.Table A4 indicates that fintech use is not associated with expanding social networks (KAT_BROADEN NETWORK). However, people who use fintech for social activities (KAT_SOCIAL_ACT) tend to install E-wallet, donation and investment apps.

The economic, political, strategic and cultural dynamism in Southeast Asia has gained added relevance in recent years with the spectacular rise of giant economies in East and South Asia. This has drawn greater attention to the region and to the enhanced role it now plays in international relations and global economics.

The sustained effort made by Southeast Asian nations since 1967 towards a peaceful and gradual integration of their economies has had indubitable success, and perhaps as a consequence of this, most of these countries are undergoing deep political and social changes domestically and are constructing innovative solutions to meet new international challenges. Big Power tensions continue to be played out in the neighbourhood despite the tradition of neutrality exercised by the Association of Southeast Asian Nations (ASEAN).

The Trends in Southeast Asia series acts as a platform for serious analyses by selected authors who are experts in their fields. It is aimed at encouraging policymakers and scholars to contemplate the diversity and dynamism of this exciting region.

THE EDITORS

Series Chairman:

Choi Shing Kwok

Series Editor:

Ooi Kee Beng

Editorial Committee:

Daljit Singh

Francis E. Hutchinson

Norshahril Saat

INTRODUCTION

The COVID-19 pandemic has arguably accelerated changes in consumer behaviour, leading to more people performing economic activities online. One important change is the adoption of fintech as a preferred transaction and payment method. This trend is driven by a significant proportion of the unbanked population and the lower-income segment in urban areas. New fintech start-ups such as ShopeePay (E-wallet), Shopee Paylater (Buy Now Pay Later or BNPL) and Kredivo (Online Lending Service) and Bibit (Mutual Fund Invesment) have all introduced innovative ways to offer online financial services in Indonesia’s rapidly growing digital economy.

Fintech enterprises offering E-wallet, BNPL, Online Lending, Insurance and Multifinance require approval from the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan or OJK), whereas fintech enterprises dealing with investments, stock/mutual funds and cryptocurrencies require approval from the Commodity Futures Trading Supervisory Agency (Badan Pengawas Perdagangan Berjangka Komoditi). In 2012 OJK replaced the previous Capital Market Supervisory Board (Bapepam LK or Badan Pengawas Pasar Modal & Lembaga Keuangan) and holds wider authority in supervising and regulating the capital market and financial institutions. Fintech enterprises undergo a two-step process to obtain permits from OJK: the first involves reporting and analysing the suitability of pursuits and business processes with current government regulations; and secondly, upon further recommendations, fintech start-ups are mandated to register the business with OJK by compiling a self-assessed risk mitigation portfolio and devising a collaboration scheme with government inspectors to avoid money laundering and to establish a consumer service centre for consumer protection. The innovations brought about by fintech startups show similarities to the technology and business processes within the various fintech categories in Indonesia; standardization is, however, still a work in progress. This is occurring in the area of their services, their transaction and payment methods, the timeframe involved, the quality of the fintech platforms, and the rights and responsibilities of both the industry and consumers.

Along with improved services and increased transparency, fintech is gaining momentum and changing the economic landscape in urban and peri-urban areas. This is due to its decentralized, personalized and efficient nature. We observed lower psychological barriers to enable digital literacy and spread fintech adoption among Indonesia’s middle-and lower-income urban households.

EXECUTIVE SUMMARY

• • This article reports the findings of an online survey conducted in November–December 2021 on Indonesians’ experience and perception of fintech tools, focusing on fintech adoption in the Greater Jakarta region, which besides Jakarta, includes Bogor, Depok, Tangerang and Bekasi.

• • One key finding is that, in the Greater Jakarta region, socioeconomic status as measured by income is not a key determinant of fintech adoption. This is likely due to the more developed and mature ICT infrastructure in the Greater Jakarta region, which makes fintech tools readily accessible.

• • However, the kinds of fintech tools that are more likely to be used— M-banking, E-wallet, Online Lending, Investment, Donations, and so on—are influenced by factors such as income, education, gender, age and occupation, suggesting that different fintech tools appeal to different groups in society according to their needs and resources.

• • Psychological factors that are important in the adoption of fintech include having many choices in the needed financial services and feeling in control. While fintech users are concerned about data leaks and fraud, this does not deter them from using fintech.

• • It may be anticipated that with the deepening of ICT infrastructure and public education on the safe use of fintech, fintech usage in Indonesia will continue to spread throughout the country.

After many years of discourse, in 2019 the Indonesian government decided to build a new capital city (Ibu Kota Negara, IKN) in the Penajam Paser Utara and Kutai Kartanegara municipalities, East Kalimantan province. The new capital city is named Nusantara, which means “archipelago”, and it is planned that Nusantara will replace Jakarta as the main site of Indonesia's central government starting in 2024.

The capital relocation will mark significant transformations for Indonesians, not only in administrative, cultural and socio-economic aspects but significantly, in national politics. Jakarta has been the centre of gravity for Indonesia's government, business, culture and society since pre-independence days. Therefore, relocating the capital city to Nusantara, East Kalimantan, is perceived as a political commitment by the current administration to shift the national centre of gravity to a region outside Java.

Narrowing the developmental imbalance between Java and the outer islands has been at the heart of the capital city relocation narrative. Java, known for its overpopulation, is home to 152 million people (around 56 per cent of Indonesia's population), according to the most recent census in 2020.1 This contrasts sharply with the 6 per cent of Indonesians who live in Kalimantan, which is six times larger than Java island. With its massive demographic advantage, Java produces about 59 per cent of the country's GDP. East Kalimantan is nevertheless among the provinces with the highest gross regional domestic product (GRDP) per capita, second only to Jakarta. Yet, East Kalimantan is underpopulated, with just 3.7 million inhabitants or about a third of Jakarta’s.2 The opportunity for growth is thus significant.

The other main reason cited for the capital city relocation is that Jakarta is deemed increasingly unsuitable to be the nation's capital, given its numerous cross-cutting socio-economic and environmental challenges. Despite public policy efforts to control the effects of growth, worsening traffic congestion, pollution, and the increased risk and cost of frequent flooding have all adversely affected the quality of life in the city. IKN Nusantara, in contrast, is considered by some to be less exposed to natural disasters and is strategically located in the country's geographic centre.