How this digital wallet is accelerating digital financial inclusion in Indonesia

Small businesses are the powerful heart of the Indonesian economy.

Numbering over 64 million, micro, small, and medium-sized enterprises (MSMEs) account for well over half the archipelago’s total gross domestic product. MSMEs collectively employ 97% of Indonesian workers and are key to the future of the nation’s development.

Covid-19 dealt a major blow to these firms, with supply chain disruptions and low demand shuttering over 70% of these businesses either temporarily or permanently. As a result, the Indonesian economy spiraled into its first recession since the 1998 Asian financial crisis, triggering a wake up call for MSMEs to digitalize quickly to counter movement restrictions and fewer in-person transactions.

A lifeline for MSMEs

Over the course of the pandemic, digital platforms have proven to be a lifeline for MSMEs by allowing them to connect with the 21 million new digital customers who have come online.

There has been a marked uptick in digitalized services in Indonesia. According to Google’s 2021 e-Conomy report, 98% of Indonesia’s digital merchants now accept digital payments, and more than half offer online lending solutions.

“The pandemic has made us aware of the need to improve innovation, adaptation, and skills – not only by selling and making payments online, but also creating creative content so that business can continue to be sustainable,” Sandiaga Uno, Indonesia’s Minister of Tourism and Creative Economy (Menparekraf), said at a webinar organized by Indonesian e-wallet firm Dana in August 2021. He views the pandemic as a catalyst that could bring a sea change for MSMEs.

Vince Iswara, Dana’s chief executive and co-founder, says the digitalization of MSME businesses is “inevitable,” and would create the “ability to avoid the risk of face-to-face payments and strengthen business opportunities to survive during these uncertain times.”

Vince Iswara, CEO and co-founder of Dana / Photo credit: Dana

However, although 13.7 million MSMEs entered Indonesia’s digital ecosystem amid the pandemic, Sandiaga noted that they only account for 12.5% of the entire industry, hinting at the huge potential for Dana’s digitalized payments platform to spur the economy’s development.

Educating for a financially-inclusive Indonesia

“Dana was built from our belief that technology is an enabler to move people forward including Indonesia,” says Iswara. “As a nation with a lot of potential and great resources, Indonesia still faces problems because we are divided by the ocean and land – it makes it impossible to move goods and transact easily.”

Dana – named after the Bahasa Indonesia word for “funds” – sees the solution to the country’s geographical challenges in Dana’s vision of a “cashless society.” Founded in 2018, Dana’s app-based platform offers an all-in-one solution that allows customers and businesses to make and receive digital payments conveniently.

“We are focused on becoming the bridge to all economic ecosystems,” says Iswara. “Especially by connecting more banked or underserved peoples for better access to financial technology and literacy.”

Iswara calls these solutions “digital payments 4.0,” referencing the much-vaunted Industrial Revolution 4.0 that could pave a path for the future of business through technology and online platforms.

Dana’s e-wallet offering is underpinned by educational initiatives and collaborative partnerships that aim to tackle some of Indonesia’s persistent societal challenges such as a lack of skilled talent, market access, and financial inclusion.

For example, Dana Bisnis, the startup’s enterprise-facing offering, makes it easier for MSMEs to accept digital transactions through QR codes and keep records in real time. When the take-up of this technology rose sharply over the last year, Dana began offering complimentary education and training to help MSMEs make the most of its solutions. Dana has been able to connect to 14 million QRIS (Quick Response Code Indonesian Standard) merchants with the help of the standardized QR code from Bank Indonesia.

“During the pandemic, we continued to provide assistance and training virtually to encourage optimal absorption of knowledge,” says Iswara. “As a result, the number of Dana Bisnis MSME partners has grown, as has their digital financial literacy.”

Building a bridge for Indonesia’s unbanked

Dana’s aspirations for a “cashless society” have produced significant synergies between the startup and the Indonesian government, which launched its own “no cash” movement back in 2014. As a result, Dana’s initiatives contain an element of national service, which has gained steam as MSMEs struggle to recover from the pandemic.

These struggles stem from a lack of access to basic financial services like bank accounts. Most MSMEs operate in an informal market that doesn’t require business registrations, which further complicates their access to credit lines and cash-based aid.

“During the pandemic, we initiated our ‘Daftarkan Warung Sekitar Kamu’ program, in part to support the initiatives of the Ministry of Cooperatives and SMEs,” says Iswara. “This is a community-based initiative where users can help register a warung (a brick-and-mortar business) by using our app.”

The registration campaign is part of the startup’s “Siap Siaga Covid-19” program – an umbrella initiative in collaboration with digital donation platform Kitabisa.com to raise donations from the general public to help pandemic-hit businesses.

Despite its internet-savvy population, Indonesia is home to the world’s third-largest unbanked population. In order to combat this persistent issue, Dana collaborates with Women’s World Banking (WWB) – a nonprofit that promotes gender-sensitive financial inclusion – and local authorities to expand MSMEs’ access to digital financial services.

Photo credit: Dana

“Our WWB program aims to increase digital financial literacy, helping people to adapt to existing and emerging challenges for the welfare of their families,” Iswara says.

Aside from facilitating access to financial aid, Dana has also helped MSMEs gain access to new markets and users by digitalizing the fundamentals of logistics, especially as lockdown policies have limited consumer movement.

“With Bhanda Ghara Reksa Logistics, we launched our Miniservice Warung Pangan to help regular people access affordable food staples and empower MSMEs by opening up this market,” says Iswara.

He also shares that through its Dana Delivery service, the startup enables brick-and-mortar MSMEs digitalize their logistics via a network of couriers to deliver goods to a wider pool of customers.

Empowering the MSME through education

From an education standpoint, Dana has also played an active role in boosting skills of local MSME entrepreneurs. Through the Dana Academy, the startup has empowered more than 400,000 Dana Bisnis entrepreneurs with skills covering health and safety, business management, and digital marketing.

“In Dana, our tech and capabilities allow us to go beyond making great fintech products, transferring knowledge and skills to improve the quality life of all Indonesians,” says Iswara.

Photo credit: Dana

He adds that the startup’s Dana Untuk Negeri initiative enables its employees to volunteer with MSMEs in designated cities. For Iswara, these activities are key in building trust between Dana and its wider community.

“This trust gives us the ability to remain in communication with our business partners to discuss and find solutions on how to continue to work in accordance with the current context, where health is a priority for all of us,” he says.

Iswara also notes that Dana is “very optimistic” about the job opportunities for all Indonesians presented by Southeast Asia’s growing internet economy, especially in areas like food delivery and ecommerce.

The focus, he says, will be on financially -underserved populations, taking advantage of the next two years of growth in the digital financial services sector.

Dana’s open platform is designed to promote financial inclusion and literacy for MSMEs and customers all across Indonesia by reimagining the potential of the all-in-one digital wallet.

To find out more how you can accelerate your business’s digitalization, download Dana’s app through this link.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.