For a long time, cash has been Indonesia's second largest cash priority economy in the world. About 52% of the Indonesian population still do not have a bank account, and the credit card penetration rate is only 0.07 credit cards per person. (Data from JPMorgan Chase!！)
At the same time, Indonesia is the world's fourth largest smartphone economy. The country skipped the previous financial development model of developed countries and directly shifted from cash payment to digital payment based on smartphones.
According to data from Bank Indonesia, by the end of 2018, the volume of e-wallet transactions surged by 209.8% to 2.9 billion, compared with 943 million in 2017. The surge is mainly driven by the growth of digital services brought by ride sharing and super apps, such as online services provided by Gojek. Nowadays, mobile payment can now be used in most of the daily transactions online and offline.
In addition, the Indonesian government has launched a national non-cash movement in recent years to gradually build a society that is less dependent on cash, and as time goes by, more and more participants have joined this movement. However, according to Bank Indonesia data, Indonesians can still carry more than 46 billion US dollars in cash on any given day, so there is still a lot of room for growth in electronic payment services.
In January of this year, the country’s central bank announced that all mobile payment providers will replace QR codes with standardized QRIS (Indonesian Standard QR Codes), thus providing an integrated platform for all transactions conducted using QR codes across multiple e-wallet providers.
There are a total of 37 local payment methods (LPM) in Indonesia, and this number is expected to increase as Alipay officially enters Indonesia in cooperation with Bank Mandiri and Bank Indonesia. The head of China's electronic payment business joined WeChat Pay, and in January of this year, he officially obtained a license to operate in the country in cooperation with CIMB Niaga.
Currently, there are four e-wallets of the e-wallet master; OVO, GoPay, Dana and LinkAja. According to a recent study, from the second quarter of 2019 to the second quarter of 2020, these four e-wallets had the highest activity and download volume.
Recently, Gojek’s round of financing and Facebook’s plan to build an e-commerce ecosystem around WhatsApp may accelerate the adoption of digital payments by millions of small and medium-sized enterprises (SMEs) in Indonesia, who are already using popular messaging services to interact with them Customers.
Similarly, the arrangement between PayPal and Gojek will enable users of the latter to use GoPay among PayPal merchants worldwide. Perhaps, with the entry of foreign payment services and investments to cater to higher consumer demand while creating the digital infrastructure needed to facilitate higher payment volumes, Indonesia is preparing to become the next digital payment battlefield in Southeast Asia.
What does it mean for businesses and consumers?
So far, there are more than 40 large and small electronic wallets in Indonesia. The electronic payment industry in Indonesia is still very fragmented, and any form of merger seems to be far away.
In addition to doing a lot of work for merchants, these e-wallets are also required to adopt a variety of different payment methods, and the discount war is also very cruel in Indonesia. These Weibo profits make the world welcome whether they can stick to it for a long time.
However, when connecting a large number of consumers and business services through a platform, the new partnership will bring greater efficiency.
Having said that, the Indonesian market may not be complicated, and the new e-commerce regulations will come into effect in November 2021, which will hinder those companies that have no local entities in Indonesia from entering the field.