Domestic base five times Korea's, backed by middle-class spending power

KB Kookmin plans to wrap up procedures by second quarter of next year

JB targets two-wheeler loans, Kakao Bank backs digital bank expansion

K-finance firms compete with locally tailored financial products

An exterior view of KB Bank Indonesia. [KB Kookmin Bank]
An exterior view of KB Bank Indonesia. [KB Kookmin Bank]

South Korean financial firms are picking up the pace in Indonesia as they seek new growth engines, laying the groundwork for collaboration across banking, card and securities operations through the establishment of local financial holding companies, while also expanding businesses aimed at local demand — from digital banking to electric two-wheeler financing. Strategies are diversifying as each firm pursues its own approach to broadening its customer base and strengthening financial soundness.

KB Financial Group is also moving to establish a local holding company in Indonesia. KB Kookmin Bank received approval from Indonesia's Financial Services Authority, known as the OJK, in August to set up a financial holding company there. "We plan to complete the relevant procedures within the second quarter of next year," KB Financial Group said, adding that it is "in close consultation with local financial authorities."

Both Shinhan Financial Group and KB Financial Group are preparing to set up local holding companies because Indonesian financial regulators have made the transition to a financial holding structure mandatory. The requirement is intended to reduce harm to financial consumers by enabling group-level capital support when problems arise at a subsidiary and by containing the spread of risk to other affiliates.

The transition can take one of two main forms: establishing a separate holding company, or having an existing financial firm take on the holding company role while continuing its core business. Shinhan has opted for a model in which its local bank retains its banking license while holding card and securities subsidiaries beneath it. KB Financial is pursuing a conversion of its existing local IT subsidiary into a financial holding company.

KB Financial plans to convert KB Data Systems Indonesia, its existing IT subsidiary, into a financial holding company and transfer KB Kookmin Bank's 66.88 percent stake in KB Bank Indonesia to the new entity. Once the conversion is complete, KB Bank Indonesia will shift from being a direct subsidiary of KB Kookmin Bank to an indirect subsidiary held through the local holding company.

The appeal of Indonesia for South Korean financial firms lies in its vast domestic market and financial growth potential. Indonesia is the world's fourth-most-populous country, with about 280 million people, and the largest economy in Southeast Asia. With a domestic consumer base more than five times the size of South Korea's and the added purchasing power of a rising middle class, expectations for expanding financial demand are high.

More than half the population is under 30, offering South Korean financial firms — which have strengths in digital finance such as mobile banking — ample opportunity to capture a young customer base. Indonesia also serves as a gateway to the broader ASEAN market of more than 600 million people, adding to its appeal as a regional hub.

Kakao Bank Chief Executive Yoon Ho-young (first from right) attends the official launch event for Superbank in Jakarta, Indonesia, in June 2024. [Kakao Bank]
Kakao Bank Chief Executive Yoon Ho-young (first from right) attends the official launch event for Superbank in Jakarta, Indonesia, in June 2024. [Kakao Bank]

South Korean financial firms are rolling out products tailored to local lifestyles and financial needs as they accelerate their push into the Indonesian market.

JB Financial Group is targeting the market through a financial business aimed at motorcycle riders. The group is expected to finalize an equity investment in the Indonesian subsidiary of AI-based fintech firm Aizen Global by the end of this month. Aizen Global has been offering motorcycle purchase loans in Indonesia since December last year.

Building on that, JB Financial plans to introduce unsecured credit loans for motorcycle riders in the second half of next year through a collaboration between local credit finance firm KB Bukopin Finance and Aizen Global. "We will combine Aizen Global's mobility data with JB Woori Capital's credit and risk management capabilities to expand from purchase financing into rider credit loans," the group said.

Kakao Bank is broadening its customer base by sharing its mobile banking expertise with a digital bank. Kakao Bank invested in Superbank in October 2023 as part of a Southeast Asia business cooperation arrangement with Grab. In the roughly two years since, Superbank has surpassed 7 million customers and turned profitable in less than a year after launching customer-facing services in June 2024.

Kakao Bank is also directly involved in product development, drawing on its mobile banking experience and technological capabilities. "Kartu Untung," a product developed from an idea Kakao Bank proposed, attracted 100,000 subscribers within two weeks of its launch. The product lets customers save 50,000 rupiah and draw a daily cashback prize through the app — a gamified savings format that spread by word of mouth among local customers.

Card companies are also pressing ahead in Indonesia, leveraging their payments and credit capabilities. Woori Card operates 75 branches in the country, with most branch staff dedicated to sales, enabling rapid expansion of its local network. As the company has refined its loan screening standards and shifted toward higher-quality customers, its delinquency rate has stabilized and provisioning costs have trended downward.


forest@heraldcorp.com