Indonesia’s e-wallets have hit a ceiling – but there’s a way to break it

Alipay has 711 million monthly active users (MAUs), according to its prospectus – that’s a penetration rate of roughly 50% of China’s total population.

Indonesia’s fintech apps, on the other hand, don’t appear to be close to that level.

Photo credit: Gojek

MAU data is not publicly disclosed by most players in the country, but Gojek claims to have about 29.2 million MAUs, or about 11% of the Indonesian population.

While there are certainly factors that favor China, industry experts are bullish that Indonesia can match China’s penetration rate within the next five years, though they concede that the task will involve more than just the fintech companies in the country.

The key is in developing use cases specific to micro, small, and medium-sized enterprises (MSMEs), as well as Indonesian consumers outside major cities – groups that are still largely left out of the fintech ecosystem.

At the same time, a cashback war is likely to rage on, with sleeping giant ShopeePay entering the fray backed by Shopee’s user base and Garena’s cash reserves.

While this could boost penetration, it may also have the reverse effect. E-wallets could be forced to spend on subsidies and drive up customer acquisition costs, instead of investing in infrastructure.

Nothing to worry about?

Third-party estimates suggest that the adoption of Indonesia’s fintech apps is still significantly below China’s. The average MAUs of platforms like Gojek, Ovo, Dana, and LinkAja in the past year have ranged between 2% to 11% of the Indonesian population – lower than Alipay’s penetration rate in China.

A senior executive at a leading payments app corroborates this, putting internal estimates of the country’s fintech platforms at roughly 10% to 15% penetration nationwide.

Alipay had a huge head start, of course. “I think Alipay’s timing and momentum very much made a difference. They started very early back in 2004, piggybacking the initial wave of ecommerce,” says Aldi Hartanto, the vice president of investments at MDI Ventures.

Like many other parts of Southeast Asia, much of Indonesia’s GDP is concentrated in major cities.

Alipay had also come right at the cusp of China’s rapid growth. When the service launched in 2004, the country’s GDP per capita was US$1,509. By 2010, it had gone up to US$4,550 and rose to US$10,262 by 2019.

“The initial phase might not have positive economics, but once users were hooked and gradually prospered, the unit economics got better, but at a much larger scale,” Hartanto says.

Looking beyond Jakarta

Silver lining