With $900 million in funding, Hong Kong Fintech Unicorn WeLab is betting big on Indonesia

As more startups explore Indonesia’s fintech potential, WeLab co-founder and CEO Simon Loong believes digital banking can be a win-win game.

There are good “a-ha” moments and there are bad ones, according to Simon Loong. Developing a virtual bank at the height of the pandemic was a good “a-ha,” even if it involved an uphill learning curve for Hong Kong startup WeLab, an online lender nearly a decade old.

“We see digital banking as the future of financial services,” said Loong, co-founder and CEO of WeLab, in an interview on the sidelines of the Forbes Global CEO Conference held in Singapore. WeLab launched its eponymous banking app in Hong Kong during the summer of 2020. With services spanning time deposits and digital wealth advice, the bank has weathered Covid-19 uncertainty to amass a total of 500,000 users in Hong Kong, including users for the group’s lending platform WeLend .

Founded in 2013, WeLab has raised $900 million in funding from the likes of German bank Allianz, China Construction Bank, International Finance Corporation, Sequoia Capital and the Hong Kong billionaire. Li Ka-shingits TOM Group. WeLab became a unicorn—a startup valued at more than $1 billion—after a $220 million funding round in 2017; the company declined to disclose its current valuation.

Now the nine-year-old fintech company plans to bring its digital banking product abroad, starting with Indonesia. “As entrepreneurs, we’re always looking at ‘how do you build it once and sell it 200 times?’ For me, it’s about making money on the upfront investment at WeLab Bank,” continues Loong, 45, proudly sporting an orange and blue lapel pin of the company’s logo Whether he’s in Hong Kong or Indonesia’s capital Jakarta, he adds that the “basic thesis” behind the startup’s digital banking product remains the same — prepare it for export.

WeLab is the latest foreign startup to enter Indonesia, where banking as a whole is still nascent. British bank Standard Chartered, in partnership with Indonesian e-commerce company Bukalapak, launched digital bank BukaTabungan last month. Line Bank, the banking service of Japan-based chat app Line – backed by Korean internet giant Naver and Japanese tech giant SoftBank – launched a digital banking app in Indonesia last June.

As a first step, WeLab Indonesia acquired Bank Jasa Jakarta (BJJ) together with Hong Kong-based business group Jardine Matheson’s Astra International in early September. The move marks the Hong Kong fintech’s second joint venture with Astra, after the two bought a controlling stake in BJJ for $240 million last December and formed a joint venture company Astra WeLab Digital Arta (AWDA) in 2018. It launched Maucash, a digital lending product, in Indonesia that year.

“Investment in BJJ is in line with Astra [sic] ambitions in the pillars of financial services to become leading retail finance providers in Indonesia and support the growth of the financial industry as well as the economy in Indonesia, Djony Bunarto Tjondro, president director of Astra, said in a statement about the acquisition.

Nurturing a financial services industry is a huge task for the largest country in Southeast Asia, which lags behind in the adoption of financial services. Among Indonesia’s population of 270 million, at least 77% were either unbanked or underbanked as of 2018, according to a widely cited World Economic Forum article in January. Indonesia’s government aims to achieve 90% financial inclusion by 2024.

“In a [fully-banked] market like Hong Kong, quite similar to Singapore, you need to focus on a few high margin products for a digital bank to be profitable. For us it’s lending and wealth … there’s no point in selling someone the third bank account, says Loong. “In Indonesia, our strategy will be financial inclusion. We can actually offer accounts to people who have never had an account.”

The CEO cites the country’s youth as a factor in Indonesia’s openness to digital banking. Two-thirds of the country’s population are adults under the age of 41, according to government statistics this year. Younger demographics have driven a surge in demand for digital wallets, such as SeaMoney, the e-wallet of billionaire Forrest Li’s Sea Group, and GoPay, the payment platform of Indonesia’s GoTo. For Loong, these wallets are just “simple, low ticket size tools” that are a stopgap for bank accounts.

“A digital wallet, as a product, doesn’t pay interest, can’t lend money – it’s not a bank, right?” says Loong. “The younger generation will shift from cash, previously, to a digital wallet, to digital banking, where they can fulfill their more holistic and comprehensive needs.”

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Nevertheless, WeLab faces strong competition from established local players. Spurred by relaxed regulatory measures, local startups have launched digital banks in Indonesia over the past two years. GoTo-backed Bank Jago released its all-digital banking app in April last year, after becoming Indonesia’s first all-digital bank last February. SoftBank-backed Aladin launched an app for Sharia digital banking, or banking services that comply with Islamic law, in March last year.

Loong remains confident WeLab can keep up, with plans to launch a digital banking app next year – the same timeframe as Southeast Asian super app Grab, which will launch its digital bank in Malaysia and Indonesia. “Banking, as a whole, is not a winner-takes-all industry … it may allow more large players to exist,” he says. “We are quite happy with the market and we feel we are competitive because WeLab Bank in Hong Kong has already built many products.”

WeLab’s proven experience of running a digital bank in Hong Kong, along with its suite of online lending, will give it an edge over its competitors, Loong says. The market “underestimates the complexity of building a digital bank,” given the high expectations of regulators and customers. “You don’t just lend money or do stockbroking or give wealth advice. You are a bank, people give you their savings,” he explains.

“The younger generation will shift from cash, previously, to a digital wallet, to digital banking, where they can fulfill their more holistic and comprehensive needs.”

Southeast Asia is new territory for Loong, whose career has been split between Hong Kong and mainland China. Prior to co-founding WeLab, Loong spent 15 years in the retail banking divisions of Citibank and Standard Chartered. While earning a master’s degree in management at the Stanford Graduate School of Business, he met his wife, Frances Kang. Together, the pair would go on to found WeLab with Kelly Wong, Loong’s classmate from his time as a Bachelor of Commerce at the University of Sydney in Australia.

The fintech giant’s core operations are in Hong Kong and mainland China, where it operates online consumer lending platforms WeLend and WeLab Digital. In April last year, WeLab was in negotiations to go public later that year at a value of up to $2 billion, but the IPO fell through. The start-up refused to comment on the listing plans, but said so Forbes it remains fully committed to building and expanding its digital banks in Hong Kong and Indonesia while “assessing strategic opportunities.”

Indonesia acts as a springboard in Loong’s grand strategy, expanding the startup’s reach into other territories in the region. WeLab plans to enter Thailand, the Philippines and Vietnam, but did not reveal a timeline for the move. In the meantime, Loong says the company will continue its operations in both Hong Kong and mainland China, while learning lessons that can be applied to Indonesia and future markets.

“The technology, the knowledge … I know we will learn a lot and make a lot of mistakes,” says Loong. “Doing Indonesia is about creating an opportunity for us to use, ‘how to be smarter next time.’ So let’s not make the same mistakes again.”