SINGAPORE (BLOOMBERG) – PT Bank Central Asia will invest US$200 million (S$271 million) into its digital arm to fend off competition from tech giants Gojek and Sea that are expanding into one of the world’s largest unbanked markets.

The South-east Asian nation’s biggest lender by market value will use the funds to help Blu, its one-month old digital unit, to increase market share ahead of an initial public offering for two years’ time, BCA president director Jahja Setiaatmadja said in an interview from Jakarta. He plans to increase Blu’s capital to 4 trillion rupiah (S$380 million), from about 1 trillion rupiah currently.

For tech giants, Indonesia offers an opportunity to reach more than 83 million people – nearly a third of its population – who still lack access to formal financial services. With a population strewn across thousands of islands, many of the country’s lenders are struggling to reach potential customers and banking services, while mobile phones offer a solution.

BCA, once the world’s most expensive bank, lost its title to smaller digital banks like PT Bank Jago whose market value leapfrogged traditional lenders. Investors piled into Jago after Gojek and Singapore’s sovereign wealth fund GIC backed its shift to become a digital bank. Meanwhile Sea, which recently won a licence to run a digital bank in Singapore, bought PT Bank Kesejahteraan Ekonomi, an unlisted lender, in January.

While BCA has about US$77 billion of assets and enjoyed decades of profitability, Jago is currently loss-making with less than US$1 billion in assets. Still, shares in Jago have gained more than 350 per cent this year, compared with a 2.5 per cent decline for BCA.

BCA is focused on gaining more customers, partners and merchants on its digital platform before the IPO, Setiaatmadja said. It also plans to keep a majority stake in Blu after the share sale.

Blu has about 110,000 customers as of mid-August, Blu’s CEO Lanny Budiati said in the interview, declining to disclose which partners she plans to bring in.

The competition is set to be “tough” and it may end with just three to four digital banks left standing, Mr Setiaatmadja said. BCA is setting its sights on new and younger customers as well as on offering new products and leveraging on its well-staffed call centres, he added.