Transportation is seemingly leading the fold towards cashless in Indonesia.
Public transportation has turned out to be the sector that has adopted electronic money the most. A transaction using e-money is commonly found on public buses, the commuter line train service, and toll gate payments. The e-wallet is used to pay for the ride-hailing and ordering food.
CATEGORY OVERVIEW
- Digital transactions are growing in recent years. 20% of the transactions in Indonesia are already done digitally, and the number is still growing. Indonesia’s digital payments grew 280% in value in 2018, while transaction volume increased by 210%. Research company Morgan Stanley predicted that the total value of transactions through digital payment will reach USD 50 billion by 2027.
- Public and online transportation services, food service, electricity bills, cellphone credit, nowadays can be paid easily through any kind of digital transaction. To do digital transactions, people use electronic money, which consists of e-money and e-wallet.
- E-money is a pioneer of electronic money in Indonesia. It’s chip-based money, which means there is a microchip embedded in the face of the card. E-money is more like a physical and real item one can hold in his or her hands. Until now, people have still been using e-money to pay for their public transportation fares such as trains or the Transjakarta bus.
- Transaction from e-money has become the biggest contributor to cashless transactions. The value of e-money transactions grew sixfold between 2012 and 2017 to IDR 12,3 trillion (USD 840 million).
- In 2018, according to data from Bank Indonesia, the transaction value of digital payment or e-money has reached IDR 47,19 trillion, which is a 4-times increase from the previous year.
- E-wallet is a software application that allows users to store electronic money, check balances, complete transactions and receive payments through a digital device. It’s server-based electronic money. E-wallet is like an application installed on one’s phone and requires an internet connection. It is typically linked to a bank account thus providing an alternative to credit and debit cards. People use the e-wallet for online transportation, online shopping in the e-commerce platform, and utility billing payment. Recently, it was also possible to shop using e-wallets in some offline merchants.
- E-wallet is one type of fin-tech products. Fintech, a combination of the words “financial” and “technology”, is the use of technology to deliver financial services and products to consumers. This could be in the areas of banking, insurance, investing – anything that relates to finance. In Indonesia, payment, lending, and capital raising are the most popular fin-tech.
- A survey by Morgan Stanley revealed that 20% of consumers preferred to make digital payments through e-wallet developed by fin-tech companies rather than digital payment products developed by banks, telco or e-commerce. The monthly transaction can reach up to IDR 600,000 on average.
COMPETITIVE LANDSCAPE
- According to data from Bank Indonesia in 2018, there are 38 companies in Indonesia have licenses to operate digital transactions. Digital transaction in Indonesia is currently dominated by fin-tech companies rather than banks.
- The main players in e-money (chip-based) are Flazz BCA, e-money Mandiri, Brizzi BRI, Tap Cash BNI and Blink BTN.
- E-Money Mandiri was a pioneer in the pre-paid cards in Indonesia. As of December 2018, the bank had issued 16.4 million e-money cards, which can be used with more than 45,000 merchants. The number of transactions using e-Money Mandiri cards was 1.1 billion in 2018 with a total value of IDR 13.4 trillion (USD 952.99 million). Transportation sector had the highest transaction (94%), particularly in the toll road Trans Jawa, Bali Mandara, Medan-Kualanamu and Ujungpandang Seksi 1 and 2.
- Flazz BCA has issued 15 million e-money cards as of December 2018 with the transaction in public facilities, like toll road and Transjakarta bus, are dominated the transaction. The number of transactions using the Flazz BCA cards in 2018was 104 million in the first 3-months of 2019. Within the same period, the total value reached IDR 1.35 trillion, doubling compared with the same period in the previous year.
- Brizzi BRI has issued 12.7 million e-money cards as of December 2018. The number of transactions using the Brizzi BRI cards was 621 million in 2018 with a total value of IDR 5.81 trillion.
- TapCash BNI has 1.6 million e-money cards issued as of 2018. TapCash being used in the digital transaction of toll road payment (60%), other transportation fares (35%) and payment in the retail/merchant (5%).
- In e-wallet (server-based), Daily Social Fintech Report 2018 showed Go-Pay, OVO and T-Cash being the most popular apps.
- Go-Pay (backed by Go-Jek). Go-Pay, which was established in 2016, has grown significantly – with average transaction reach Rp 50 million per month or 1,6 million transactions per day. The number equals 19% of the digital transaction by BCA, 135% of the digital transaction by BNI, and 35% of the digital transaction by Mandiri. In February 2019, Go-Pay has processed USD 6,3 billion from gross transaction done in 2018, higher than digital money provided by BCA, Mandiri, and BNI.
- OVO (backed by Grab and Tokopedia). Over 110 million people currently use Ovo, which is spread across 300 Indonesian cities. The company said OVO was now available in 90 percent of shopping malls across the country, offering cashless payment options to customers at hypermarkets, department stores, coffee shops, cinemas, parking operators, hospital chains and food and beverage outlets. In its report card, Ovo announced that it witnessed 1 billion transactions in 2018 or a 75 times increase since November 2017. Its user base also saw a whopping 400 percent growth over the same period.
- T-Cash is owned by Telkomsel, the biggest telco company in Indonesia. As of 2018, T-cash has 30 million users, however, only 35% are active users. In 2019, T-Cash merges with other government-owned companies’ e-wallet (BRI, BNI, BTN, Bank Mandiri, Pertamina, and Asuransi Jiwasraya) into a new brand, LinkAja. By launching LinkAja, the government wants to increase the adoption of the digital transaction to support the acceleration of the national cashless society program (Gerakan Nasional Non-Tunai, GNNT).
- Other players in e-wallet are DOKU, PayTren, XL Tunai, Rekening Ponsel CIMB Niaga and BBM Money Permata Bank.
- Go-Pay and OVO were very aggressive in doing promotion in order to increase user penetration.
CONSUMERS HABIT
- Marketeers magazine in collaboration with Alvara Research Center, Google Indonesia, iPrice, KATADATA, McKinsey & Company, Snapcart, The Asian Parent and Visa shared the trends in digital payment in Indonesia, as follows:
- Women will be eager early adopters. Digital Wallet Study 2017 conducted by Google and GfK shared the finding that women are early adopters of digital payment. They used the digital payment to shop online, top-up mobile phone voucher and pay online transportation. While men usually cover overhead payments such as household utilities and bills.
- The Internet becomes the main source of information on electronic money. When people looked for information on electronic money, they searched in Google and read comments on social media.
- Indonesia is ready to go cashless. According to the Visa Payment Study 2017, 76% of consumers are confident without cash within 24 hours.
- QR Code is fast, easy and practical to use. Payment using QR code is potential in Indonesia. A Visa study showed 57% of consumers are already aware of QR code and interested in trying it for different reasons, ranging from fast, easy to use and no need to share personal details.
- Thanks to the smartphone. Internet data is cheap in Indonesia, second after India. McKinsey research, The Digital Archipelago, showed that digital transaction using a smartphone is increasing from 17% to 25% in 2014 vs 2017.
- Bank transfer is still dominated the digital payment. Snapcart and Marketeers’ research showed 69% of online shoppers in Indonesia using bank transfer. Online shoppers are very familiar with this method and feel that it is trusted.
- E-wallet being used due to its discount/promo. Snapcart’s study showed that 84% of consumers using an e-wallet to get the promotion, discount, or cashback. This percentage is higher compared with other methods of payments like credit card or debit card.
- Indomaret and Alfamaret play important roles in online shopping. According to Snapcart’s study, 80% of consumers doing the payment in Indomaret and Alfamaret after they shop online. The two retailers are widely available in Indonesia.
- Consumers try contactless for transactions in a small amount. 45% of consumers are willing to use contactless payment to buy food and beverages, clothes, accessories, shop in minimarket, and toll road fares.
- A joint study by GfK and Google had some interesting findings:
- Merchant partnerships will be instrumental to e-money adoption E-money usage in offline shopping (e.g. in fashion stores, daily transport, or food) is still low as it requires a partnership between e-money providers and merchants. The majority of respondents (87%) said they wanted more food-related discounts and promotions from e-money brands, and 85% wanted more store partnerships, both online and offline.
- Need reassurances about e-money. Because digital banking is relatively new in Indonesia, consumers still have valid concerns about its safety and benefits. In our study, 50% of unbanked Indonesians said they didn’t see any benefit in using a digital wallet app. And both unbanked Indonesians (20%) and Indonesians with bank accounts (33%) said they have concerns about personal data loss and phone theft.
- Despite the bombardment of promotional discounts given by Go-Pay and OVO, Morgan Stanley believes it the service quality and ease of use that retains the customers.
