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With very low e-banking penetration, here’s how Indonesian startups still make money

indonesia low e-banking

Credit: Criminalatt

MasterCard issued an interesting report today highlighting the current conditions of key markets across the world regarding the usage of cash and cashless payment methods.

One of the markets discussed inside the report is Indonesia. It essentially says the country has a very low e-banking penetration rate. The country’s bank account penetration is 20 percent, with debit card penetration just hitting 11 percent. Is this a nightmare scenario for e-commerce and payment gateway players?

Note to self: Indonesia is huge

Indonesia is still very much reliant on cash payments, which account for a whopping 99 percent of all transaction volume. The good news is that even with such volume, they account for 69 percent of overall transaction value, which means there’s room for cashless payment methods.

About 10 percent of transaction value comes from debit card transactions. The second biggest cashless payment method goes to credit transfer (also known as bank transfer), accounting for about five percent. And credit card transactions? They make up less than five percent.

Though the numbers are indeed small, remember that Indonesia is a country with a huge population, and consumer spending is high 1. 11 percent debit card penetration still equals 27 million people. Indonesia’s consumer payments in 2011 came to a resounding $811 billion. A five percent slice of that is still $40 billion. The only way for Indonesia’s e-banking society to go is up.

Paying attention to non e-banking users

While the aforementioned numbers are nice, it’s a lot nicer to cater to the bigger portion where the money lies: the non e-banking users. Whatever good numbers you saw above, multiply them by four, and you’ve got yourself a market huge enough to live in.

Here are some examples of how Indonesian companies and startups are catering to that market:

1. E-commerce players

For e-commerce players like Rocket Internet’s Lazada Indonesia and Zalora Indonesia, it shows that the cash-on-delivery payment method is important and relevant, even for the bigger e-commerce sites. Of course, COD was famously used in the C2C marketplace sites first, like TokoBagus and Kaskus, whereby customers want to see the goods first before committing any amount of money to the sellers.

2. Payment gateways

For payment gateways, we’ve also seen a couple of players catering to offline payment methods in Indonesia. They include Indonesia’s Indomog and the Malaysia-based MOL. The former has been selling its in-game vouchers through offline places like internet cafes, minimarts, cafes, and even universities. A similar approach is also used by the latter company, which sells its Facebook game credits through convenience stores, too. This lets users who don’t have any bank accounts purchase those products more easily.

3. App startups

Some app startups are starting to cooperate more with the telcos for carrier billing. With it, users can easily purchase anything in the app with something that they already have: phone credits.

Indonesia’s three biggest telcos – Telkomsel, Indosat, and XL Axiata – show great interest in collaborating with more startups to give more added value to their services. Not only that, handset manufacturers like Cyrus, SpeedUp, Samsung, Microsoft, and Smartfren are also open for collaborations on its local app stores, which use carrier billing prowess, too.

More collaborations, please

Startups can now consider all the above elements to start offering more payment options to their users. At least this is what photo sharing app PicMix has been doing. Aside from the carrier billing and cooperation with Telkomsel, PicMix is also selling its vouchers together with Indomog in internet cafes and convenience stores.

Yes, internet payment methods are lacking in Indonesia, but there are ways to get around it. It might be a hassle to cooperate with so many entities like the ones mentioned above, but I’d say it’s worth it for dedicated entrepreneurs.

(Editing by Paul Bischoff and Steven Millward)


  1. Indonesia’s population in 2012 is 246.9 million.


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