Indonesia is experiencing a surge in the number of retail investors thanks to the proliferation of local investment platforms such as Bibit, Bareksa, and Ajaib.
Ajaib, for instance, in just a year since its launch, reached the third position among the most popular investing platforms in Indonesia, according to App Annie. It all started in 2018, when Anderson Sumarli, at that time a consultant for Boston Consulting Group (BCG) and part-time investor, struggled to keep up with the volatility of stock and bond markets.
“I was busy with my job and had no time to monitor the changes [in the investment market], but I wanted to invest. Apparently, the problem wasn’t unique to me. Many of my peers faced a similar issue,” Sumarli, co-founder and CEO of Ajaib, told KrASIA.
Sumarli teamed up with Thai classmate Yada Piyajomkwan during his MBA program at Stanford Graduate School of Business to form Ajaib. They both had a background in financial consulting, while Piyajomkwan also had experience working as a consultant for McKinsey.
Sumarli took inspiration from other online brokers around the world, including US-based trading platform Robinhood and Brazil’s XP Investimentos. His goal was to create a platform where young people could start investing with small sums from the convenience of their smartphones.
“I started Ajaib to create a mobile-first stock trading experience for first-time millennial investors in Indonesia. Ajaib combines an easy-to-understand interface with in-app education for millennials,” he added.
The duo brought their business project to US-based startup incubator program Y Combinator and got accepted as part of the summer 2018 batch. In 2019, Ajaib —which in English means wonderful— started its operation in Indonesia.
Lowering the entry barrier for new investors
Investment has been traditionally considered an activity for the rich and privileged. The belief is that investors need to have a considerable amount of disposable income, and enough time to monitor the volatile market. There’s the option to hire a stockbroker or financial advisor, but that costs even more.
A majority of first-time millennial investors are deterred by such obstacles and beliefs, according to Sumarli. “Retail investor penetration in the country has been low because stock trading has traditionally been reserved for high net worth individuals who can afford high commissions when working with offline brokers.”
Ajaib allows beginner investors to buy investment products such as stocks, mutual funds, money market, and fixed-income securities without minimum purchase requirements. Users are also offered relevant information about stocks within the app, such as historical data, drawback rate, and other relevant details to help them make decisions.
“We don’t use recommendation algorithms in our product. Rather, we believe in providing users with as much information as possible to make an educated decision,” Sumarli said.
Ajaib charges a broker fee of between 0.13% to 0.15% when purchasing shares, and 0.23% to 0.25% for selling actions. The company doesn’t take commissions for mutual fund transactions. “The larger your transaction amount is, the smaller the fee,” said Sumarli.
The platform boasts more than 1 million users, 80% of them aged under 30. Currently, Ajaib only operates in Indonesia, yet, expansion to other Southeast Asian countries is not off the table, Sumarli said, which added that Thailand, Piyajomkwan’s home country, harbors large potential.
Boosting financial literacy
In January, Ajaib closed a USD 25 million Series A round from Alpha JWC Ventures and Horizon Venture. A substantial amount of the new capital will be allocated for the company’s educational campaign called #MentorInvestasi, which translates to “Investment Mentors.”
“It is to support the government’s effort to educate millennials on investing and financial planning,” Sumarli said.
The campaign mainly targets young Indonesian retail investors, aged between 18 and 30 years old, and living in first-tier cities. According to the Financial Service Authority (OJK), the number of such investors reached almost 4 million in 2020, 56% more than in 2019, thanks also to the proliferation of local investment apps.
However, OJK found that most new investors lack fundamental knowledge of the stock market, while others get financial information from unreliable or biased sources.
The country has experienced cases of people borrowing money from online lending platforms to buy stocks or mutual funds, risking serious financial problems. Others have listened and bought stocks endorsed by popular religious or political figures, which didn’t perform well financially.
The OJK has advised new retail investors to avoid these practices, as they will bring more harm than benefits in the long run. Ajaib has been supporting OJK’s advice through social media channels and in-app educational articles. The company has also worked with South Korean actor Kim Seon-ho as ambassador. He’s popular in Indonesia for his role as an investor and mentor in a Netflix series called Start Up.
Ajaib also works with the Indonesian Stock Exchange (IDX) in a joint financial literacy education initiative named “1,000 programs for the stock generation,” which targets millennials residing in districts with low financial and investment literacy.
The program has two variants: The Sekolah Pasar Modal (Capital Market School) offers participants the opportunity to learn basic knowledge about the stock market, such as how to open an account on the IDX, fundamental and technical analysis of the stock market, and other useful tips. The one-day program, available online and offline, has two levels, beginner and intermediate, and participants can join for an IDR 100,000 (USD 7) fee.
The second variant is called Galeri Investasi, or Investment Gallery, which is similar to the Capital Market School, but classes are offered directly at partner universities such as Multimedia Nusantara University and Muhammadiyah Malang University.
“I believe in the power of millennials in Indonesia. I believe millennials will drive Indonesia’s capital markets growth in the near future. Education is very important to ensure the youth of Indonesia understand the importance of investing from an early age,” said Sumarli.
“The end of our goal is to contribute to increasing financial inclusion in Indonesia,” he added.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.
