Insights into the state of online payments in Indonesia

Day two of Startup Asia Jakarta kicked off this morning with an exciting focus on the role of ecommerce and epayments in Indonesia. Nabila Alsagoff, COO of Doku, shared with us her perspective on the state of epayments today. She noted that the topic could not be more timely because online shopping is set to grow this year as the public gets more familiar with spending online.

Understanding the payment culture

Alsagoff mentioned that even though the majority of online users in Indonesia are young and tech-savvy, only 10 percent of them have made an online transaction. In addition to that, online sales in Indonesia represent only 0.7 – 1.2 percent of total retail sales. Although we have seen a boom in online shopping, these numbers show there is still much more room to grow.

Alsagoff cited the fashion industry, followed by the travel and entertainment industries, as the most successful online. However, she also noted that most of these online shoppers are looking for products that are not available in retail and that the current generation of online shoppers are looking for unique alternatives and cheaper deals.

With regard to online payments, Alsagoff observed that in this past year there have been 5.3 million online shoppers with an expected jump to seven million in 2015. However, the majority of these shoppers are doing their payments offline. With less than five percent credit card penetration in the industry, most of these online shoppers prefer to pay via cash on delivery or bank transfers.

Alsagoff disclosed that the reason is that 80 percent of Indonesians are non-bank users. Even among those who have bank accounts, only seven percent use online banking and a sparse two percent have credit cards. This means that cash is still the main payment method for Indonesia.

In a survey conducted by Doku, they learned that 94 percent of people use bank transfers as their main method of payments. In the same survey, Doku asked users whether they were unhappy with the current payment methods available, and a whopping 82 percent of them were fine with the options available to them.

Alsagoff claims that the reason for the preponderance of cash payments is that merchants have a tendency to only offer a few options, as they fear fraud and cash is cheaper to process. Additionally, small businesses must fulfil many criteria in order to get bank accreditation for supporting credit cards and other payment methods.

Complicating matters further is the fact that even users who have credit cards prefer to not pay with them online as they fear merchants will abuse their credit card info.

Changing the perspective

Alsagoff continued on to say that payment is driven by customers and in order to reach more markets, merchants need to expand their options. In order to do that, she said that merchants should provide not just a few of the methods but all of them. She gave us some examples of new payment methods that Doku has used in order to enter different markets. For example, in order to expand into the more general public market in Indonesia, those who don’t have bank accounts can make payments via convenience stores. Also, in order to make payment methods seem more appealing to teens, Doku launched a mobile wallet platform.

See: Evernote adds a new way for people to pay for premium in Indonesia

Alsagoff concluded with a few tips for gaining customer confidence;

• Display well recognized logos of payment methods
• Provide customers with support in the form of hotlines, email and live chat.
• Develop a fair and clear refund policy.
• Images of items online must be representative of the actual product.
• Work with reputable logistics.

Alsagoff cited Guvera and AliExpress as websites which do the above points well.