Big Data’s effect on FinTech Industry’s influence in Indonesia

BIG Data is BIG, for everyone, and it's here to stay

Big Data’s effect on FinTech Industry’s influence in Indonesia

Computer technology performs an imperative role in the revolution of contemporary finance. The uprise of financial technology has permanently amended the facets through which the financial industry conducts itself. In recent years, technological revolutions like big data analytics have altered the way individuals and firms think, interact, and work.

What is big data?

“Big Data is a field that treats ways to analyze, systematically extract information from, or otherwise deal with data sets that are too large or complex to be dealt with by traditional data-processing application software”.

Big data utilizes complex data structures to provide resolutions for challenges faced by financial and banking businesses. With the proliferation of financial transactions such as mergers and acquisitions, the relevance of big data is becoming increasingly putative.

Why is big data restructuring financial systems?

The financial sector is inherently data-centric. Billions of dollars are flowing from across global markets daily, where data analysts are tasked with the responsibility to articulately generate predictive strategies. According to BARC, organizations implementing big data analytics have seen a 69% chance of better strategic decisions. Previously, the sector was forced to utilize rudimentary methods formulated by human risk inferences and calculations to analyze and process data. However, due to the revolutionary improvements in technology, the process has been expedited by big data analytics.

Big data analytics presents the financial sector with accelerated and more accurate predictive modeling to effectively estimate and alleviate the implicit financial risks associated with trading


Big data analytics presents the financial sector with accelerated and more accurate predictive modeling to effectively estimate and alleviate the implicit financial risks associated with trading. Furthermore, financial firms are able to apply these technological advancements to ameliorate multiple facets of their services, such as customer targeting, risk management, fraud detection, etc. Not only has big data revolutionized the way several businesses process information, but it has unfastened the very foundation of the financial services industry.

Implications of Big Data in Financial Markets

Big Data undoubtedly has immense potential in the finance markets. The abundance of information and analytical technology has played a crucial role in the efficiency of the system. The copious amount of information is mostly attributed to social media which has undeniably the largest impact on the workings of the financial market. Social media provides individuals with a platform to freely express their opinion on financial markets. Furthermore, online transactions and internet banking produce millions of data sets per day. Consequently, countless informational data sets are utilized by financial institutions to predict volatility forecasts, market valuations, risk analyses, option pricing, and even algorithmic trading.

Technological advancements increase prospects of development for financial firms. Large and established businesses greatly benefit from the rise of big data analytics as they can put forth more data than smaller enterprises. Increased amounts of data allow for more thorough, accurate financial analysis, and less equity uncertainty all while cutting a firm’s cost of capital. With superior predictions and lesser costs, businesses prosper, and investing becomes progressively more attractive.

Implications for Financial Technology Services

Financial technology (FinTech) services strive to attain innovative preeminent services to augment customer satisfaction and surpass competitors. According to BARC, customer satisfaction rates have skyrocketed 52% since its inception. Big data is an essential facilitator of financial service innovation. They allow FinTech companies to quickly and more affordably provide credit risk assessments and scoring.

A penny saved is a penny earned. According to the world bank, 1.7 billion people do not have access to basic financial services. However, with the additional funds available, Fintech companies are able to increase their outreach to emerging markets. Looking at the issue from a macroeconomic perspective, the potential for minimizing poverty (both absolute and relative poverty), income inequality, and other socio-economic issues is more evident than ever.

FinTech’s impact on Indonesia’s Economic growth

Indonesia is one of the largest economies in the world, with the potential to undergo significant development. Currently, Indonesia’s economy is heavily dependent on small and medium-sized enterprises(SME’s), employing 97% of Indonesians and their role in the economy is becoming increasingly imperative. Financial Technology services could be a key enabler for the Indonesian economy to reach its full potential.

SMEs account for around 60% of Indonesia’s GDP. However, traditional financial systems are tentative to invest in Indonesia’s SMEs despite their conspicuous benefits to the economy. This is due to the lack of accountability and outdatedness of the financial statements of SMEs. In developing economies like Indonesia, the informal sector such as street food vendors, traditionally facilitate transactions with cash. 66% of people in Indonesia, primarily the informal sector are “unbanked”, meaning that they don’t have access to financial services, have switched to phone payments apps. Phone payment apps keep track of transactions seamlessly, allowing users to build up credit scores to access payments, insurance, and financial plans, to grow their businesses.


Financial technology enables secure and contemporary processes, which allows for accelerated economic growth. The enhanced involvement of financial technology in grassroot communities increases the attractiveness of investment which has wildly beneficial impacts in and around Indonesia. Investment spending is a crucial component to the growth of the economy. Escalated investment spending due to an increase in business confidence promotes long-term economic growth. As a result of decentralization of financial services, income inequality, poverty both reduce. Increased economic productivity also inextricably ties with an increase in the quantity and quality of factors of production that would lead to an influx in educated labor, improved physical capital, and more.

Dhruv Laungani is an intern at the School of Government and Public Policy - Indonesia, which produces Strategic Review.

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