Indonesia’s long road to cashless payments

Driving in Bali, Indonesia. Photo credit: Harsimran Julka.

When Uber launched in Indonesia in 2014, the vast majority of the country’s 260 million people couldn’t use it. Credit card ownership isn’t common here, and payment by credit card was the app’s only option.

Uber’s magic depends on it: You add your credit card number once and never worry about payment again. Everything happens in the background.

To serve more Indonesian customers, the ride-hailing firm had to sacrifice some of its dearly-held user experience and had to learn to handle cash.

Indonesia, like many developing countries, lacks established cashless payment methods and that’s a major hurdle to digital economy growth.

It’s not just credit cards. Per World Bank’s 2014 data, the majority of the adult population didn’t even have bank accounts.

For the digital economy to reach its expected US$130 billion target by 2020, it needs a breakthrough in cashless payments.

Now, government agencies, banks, telcos, and fintech startups are scrambling to lead the shift away from cash.

There are two main scenarios: one involves the formal banking sector casting a much wider net, dramatically increasing the number of bank accounts, debit, and credit cards in use. In the US, for example, credit cards are a ubiquitous form of cashless payment. According to Statista, there are over a billion credit cards in circulation there. That’s for a population of around 320 million people.

Indonesia’s Central Bank (BI) counts roughly 17 million credit cards in a country of around 260 million people.

It looks a bit better when it comes to debit cards – 143 million are in circulation according to BI. Most of these cards can’t be used for online shopping, and there are only about one million card readers (EDCs) across Indonesia, which means that debit card owners often can’t use them when they want to.

The state of pay