Open Finance in Indonesia: Interview with Jakob Rost, Founder and CEO, Ayoconnect

By Joy Dumasia

Ayoconnect is Indonesia’s largest API platform, it enables developers to choose from a wide range of white-label financial products on Ayoconnect’s API platform and quickly launch them to their users. Founded in 2016, Ayoconnect’s API stack has seen rapid adoption; more than 100+ Indonesian companies trust it as clients, including leading banks, retailers, e-commerce, FinTechs, and e-wallets such as Bank BRI, Bank Mandiri, DANA, Indomaret, Bukalapak, Home Credit, Pegadaian and connects more than 1,000 institutions through its network of APIs. Ayoconnect’s APIs process more than 300 million API hits annually.

IBS Intelligence sat down with Jakob Rost, Founder and CEO, Ayoconnect, to discuss Open Finance in Indonesia.

Could you give us an overview of Ayoconnect’s product offerings and client base?

Ayoconnect is transforming Indonesia’s financial industry by making it easier and faster for businesses of all sizes to launch new financial products and services. We currently serve more than 200 API customers, including some of the region’s largest banks, financial institutions, tech unicorns and FinTechs, and offer more than 4,000 embedded finance products.

The range of API products that Ayoconnect offers is enormous and growing rapidly. To give you a flavour; our Open Banking APIs include account opening, account balance and transaction check, and on the embedded finance services, we have payment tools for telco and utility bills, recurring subscriptions, and lifestyle services, such as media streaming. Direct debit, which currently does not exist in Indonesia and is set to launch in just a few months.

Ayoconnect’s identity and income verification insight data services make it simpler and faster to open accounts and obtain financial services, including for the underbanked or unbanked. We also make payments much easier to execute and give neobank customers a way to withdraw cash from offline channels other than ATMs, such as supermarkets and post offices.

What’s driving the development of Open Banking and its scope in the future?

It’s an interplay of technology, regulation and consumer behaviour. Technology came first. Soon after the banks started to offer their customers online accounts, people began to question why the entire financial system wasn’t digital. Not unreasonably, they wanted to make or receive payments and share their money and data instantly with other financial services providers, suppliers of goods and services, and government agencies.

In some markets, the UK initially, then the EU with the PSD2 Directive, regulators stepped in to encourage this trend. They saw that Open Banking and Open Finance, which widens the concept to potentially all financial services, had major benefits for consumers in terms of better and faster services, greater choice of suppliers, lower transaction costs, and service innovation. Regulators wanted to ensure consumer protection was built in from the get-go and were also motivated to encourage the development of new companies with the potential for ultra-rapid growth.

Interestingly, the US has taken a different approach led by the providers of core banking IT systems and based on API gateways that offer access to the data and functionality inside of core systems, allowing banks to work more easily with third parties. This is similar to Ayoconnect’s approach in Indonesia and recognises that the fastest route to Open Finance leapfrogging the lengthy regulatory processes in Europe is a market-driven philosophy that enables all interested parties to interoperate via the speed and relative simplicity of APIs. As this pattern suggests, the future is a mixture of further geographical widening of Open Finance and an ever greater diversity of services made possible by Open Finance.

Are Open Banking APIs being properly protected against fraud?

This is an issue that’s taken very seriously everywhere. In Indonesia, where Ayoconnect primarily operates, the relevant regulators have extensive measures to minimise risk and protect customers. Such measures are supported by standardisation and legal frameworks from regulatory bodies, including the Central Bank of Indonesia (BI), Financial Services Authority (OJK) and the Ministry of Communication and IT (Kominfo). BI launched the National Open API Payment Standard (SNAP) in 2021. SNAP provides data, technical and security standards and specifications, and governance guidelines for interconnected and interoperable open API payments.

OJK is working closely with BI to support digital payment and data-sharing infrastructures through support for open APIs and Open Banking. The goal is to empower consumers to decide how and whether to share their data to access financial services that are more affordable, convenient, and easy to use. Indonesia’s Personal Data Protection in Electronic Systems (PDP), issued by Kominfo in 2016, has established consent as the core foundation of data privacy protection. All personal data processing can only be implemented after obtaining permission.

How can global Open Finance learn from Open Finance in Indonesia?

Open Banking and Open Finance are now reasonably well-established in Europe and, more recently, North America. But other global regions, such as Southeast Asia, which are growing more rapidly, have huge potential. Indonesia, for example, is the fourth largest country in the world measured by population. In Indonesia, hundreds of millions embrace new digital services while many more are still without access to basic financial services such as bank accounts.

Ayoconnect’s API-led approach in Indonesia demonstrates the potential for Open Finance to develop very rapidly in these environments. We started just six years ago, and already we have created an API-led platform that is connecting the entire economy. We’re giving people more control of their financial data, we’re providing financial inclusion through reaching more people without access to financial services, and we’re establishing the infrastructure for virtually any business to build more innovative services for their customers.

Why are more businesses accepting Open Banking Payments?

Open banking technology has enabled faster access to a host of tailored and flexible financial products and services – previously the preserve of larger businesses such as payments but also lending and at competitive rates. And in doing so is levelling the playing field for many SMEs. The benefits of open banking payments are myriad and extend far beyond reducing transaction fees. Built for the digital economy, the opening banking payment process also reduces fraud, offers an enhanced digital experience for businesses and their customers and improves earnings. The seamless payment experience businesses can offer to consumers also works to increase conversion rates which is critical for any checkout experience.

What is in the pipeline for 2022?

Ayoconnect continues to focus on growth, particularly in building the API economy in Indonesia. Our product development vision involves the expansion of our current API stack into an all-encompassing full-stack API platform comprising all financial API use cases that have proven traction in other countries but are not yet existent in Indonesia, as well as insights APIs that uniquely covers both banked and unbanked data.

We are particularly excited about our new Direct Debit API solution that will make it possible for any company in Indonesia to set up direct debits from its customers for the first time in the country’s history. We believe that direct debit will mark a new chapter for the Indonesian economy, transforming payments for banks, businesses and Indonesia’s 275 million consumers.

It simplifies operations for banks and improves cash flow and working capital for companies, as well as making people’s everyday lives simpler and more convenient. In the UK and other parts of the world, we take direct debit for granted, but the reality is that it doesn’t exist everywhere. This approach will help Indonesia leapfrog the legacy-infrastructure approaches that were necessary where direct debit was established before APIs were a possibility.

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