In The Top Up this week, we look at the growing pains of online lenders in Indonesia and Sea Groupâs potential acquisition of an Indonesian digibank. [Read from your browser]( The Top Up ðµ Welcome to The Top Up! Delivered every fortnight via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If youâre not a subscriber, get access by [registering here]( IN FOCUS In today's newsletter, we look at: - Online lenders [facing increased scrutiny in Indonesia]( amid concerns over their debt collection practices
- Sea Groupâs plan to acquire a minority stake in Bank Negara Indonesia-owned Hibank
- Wealth management platforms [struggling to turn a profit]( despite seeing a bump in their assets under management --------------------------------------------------------------- Hello {NAME} As a journalist, itâs usually hard for me to interview those in deep financial trouble. However, this weekâs Big Story features a source who volunteered to speak about his firsthand experience with online debt. His struggles, compounded by his lenderâs aggressive debt collection tactics, are profound. In Indonesia, these tactics have even driven some borrowers to self-harm. For online lenders in the country, such aggression stems from the pressure to recover owed funds and is exacerbated by rising default rates. As default rates climb, Indonesian regulators are increasing their scrutiny of the industry by imposing stricter capital and compliance requirements. Theyâre also lowering interest rates and instructing banks to cease channeling loans to online lending platforms. While lowering interest rates could ultimately reduce default rates and ease pressure on borrowers to repay their loans, thereâs a potential downside: It could limit the pool of borrowers that online lenders can serve. Meanwhile, in this weekâs Hot Take, I delve into the potential acquisition by Sea Group of a Bank Negara Indonesia-owned digital bank. How might this move advance Sea Groupâs position in the digital banking market? -- Budi
 --------------------------------------------------------------- THE BIG STORY [Indonesia puts more constraints on online lenders, but at what cost?]( The OJK is moving to protect borrowers, but the regulatorâs actions could also curtail financial inclusion for an underserved segment of the market.
 --------------------------------------------------------------- THE HOT TAKE How will a Hibank acquisition benefit Sea Group? Hereâs what happened: - Sea Group will [reportedly be acquiring]( Indonesia-based digital bank Hibank as soon as Q2 2024.
- State-owned Bank Negara Indonesia (BNI), which owns a controlling stake in Hibank, will retain its majority stake after the transaction, according to BNI president director [Royke Tumilaar](.
- Currently, BNI holds 63.92% of Hibank, while the rest remains with multinational F&B firm Mayora Group. Hereâs our take:
A potential acquisition of Hibank comes as no surprise considering BNI and Sea Groupâs past relationships. For one, BNI joined hands with Sea Group in 2022 to transform domestic lender Bank Mayora into a digital bank. Sea Group was involved in both [the business model and IT design]( for Bank Mayora, which rebranded to Hibank in 2023. Tumilaar said at the time that BNI was [open to the possibility]( of selling part of its shares in Bank Mayora to Sea Group and diluting its stake âto some 50%.â Under BNIâs ownership, Hibank has performed well. During the first half of 2023, it recorded a net profit of [127.7 billion rupiah]( (US$8.2 million), marking a 312% year-on-year growth. This surge was propelled by a 76.5% year-on-year increase in net interest income. Its total credit disbursed reached [4.7 trillion rupiah]( (US$302.8 million) during the same period. Nevertheless, the size of its lending book still lags behind some local banks in Indonesia. Bukalapak-backed Allo Bank, which reported a profit of [216.3 billion rupiah]( (US$13.8 million), had a total credit of [7.4 trillion rupiah]( (US$472.8 million) in the first half of 2023. Meanwhile, Sea Group itself has ventured into the digital banking sector by acquiring Bank Kesejahteraan Ekonomi in 2021, which it rebranded to SeaBank Indonesia. However, though SeaBank Indonesiaâs performance has improved significantly since then, it still remains considerably smaller compared to Hibank in net profit. The digibank made [34.8 billion rupiah]( (US$2.2 million) in the first half of 2023, which represents only 26.8% of Hibankâs figure. SeaBank Indonesiaâs total credit, on the other hand, was over 3x larger than Hibankâs at [14.5 trillion rupiah]( (US$926.3 million). Acquiring a stake in the Indonesia-based digital bank would therefore give Sea Group a stronger foothold in the countryâs banking segment. This move carries significant implications, particularly considering BNIâs stature as a major bank, with [10.4 trillion rupiah]( (US$664.5 million) in net profit and 650.8 trillion rupiah (US$41.6 billion) in total disbursed credit in H1 2023. An acquisition would further bolster Sea Groupâs competitive position in a market where many still [rely heavily]( on banking services offered by traditional banks due to a lack of financial literacy. As [one of the largest players]( in Indonesiaâs banking sector, BNI wields considerable influence. Meanwhile, Mayora Groupâs products - sold by retailers across the country - are consumed by millions of Indonesians daily. By acquiring a share of Hibank, Sea Group will gain access to Mayora Groupâs established network and expertise in the food and beverage industry, as well as its customer base. These could, in turn, become potential customers of the bank down the line. Currency converted from Indonesian rupiah to US dollar: US$1 = 15,650 rupiah.
 --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asiaâs coverage of the fintech scene [here](. 1ï¸â£Â [Julo hits breakeven, logs $120m in annual recurring revenue]( The Indonesia-based online lending platform said it disbursed over US$454 million in loans in 2023, a 50% increase from the previous year. 2ï¸â£Â [DCS Card Centre customers lash out as fee changes spark confusion]( The complaints come after the company revised interest charges on all DCS Mastercard and UnionPay cards, as well as its Diners Club Credit Cards, in October 2023. 3ï¸â£Â [Revolut says itâs gross profitable in Singapore for 2nd year running]( The UK-headquartered fintech firm more than doubled its revenue in the city-state between 2022 and 2023. 4ï¸â£Â [UnoAsia nets $32.1m, eyes profitability in 2024]( The parent company of Uno Digital Bank in the Philippines says profitability will be its priority in 2024. 5ï¸â£Â [SG-based Xalts acquires finance network owned by top banks]( Xalts, which is backed by Accel and Citi Ventures, is a financial infrastructure builder that allows institutions to create multiparty apps for digitalization and tokenization.
 --------------------------------------------------------------- FYI [Digital wealth platforms report growing AUM, but have yet to see profits]( New product offerings have led to a spike in AUM, and while players are not profitable yet, they claim they arenât far off.
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