New report on payment options in Indonesia

The latest market research report, entitled “Payments in Indonesia 2017: What Consumers Want” has examined the consumer payment market in Indonesia through 2017, with an analysis of the payment methods used, and reasons why certain payment methods have no been adopted in the country.


Report shows the details of Indonesia’s financial market

The report, designed for businesses to use to analyze options for improving payment methods in third-world countries, examines the consumer attitudes to the various financial services available in the country. It also examines the local population’s use of credit and debit cards, how the position of card issuers has changed in the country and looks at the various reasons why mobile payment options are not being utilized to their fullest advantage.

Cash is still the most used option

The report shows that cash is still the main payment option in the country, accounting for around 98 percent of global payment volumes in 2017 so far. It is believed that this is mainly due to the lack of awareness of other payment options, limited access to the banking system, and a high population of unbanked people. Despite a modernization of the country’s payment system, and the introduction of EMV technology on debit and credit cards in Indonesia, the expected transition to cashless payments has not happened.

Debit cards are the most-preferred cashless payment option

For those who do have debit and credit cards, the debit card has remained the highest used method of cashless payment in the country. That usage has been restricted to mainly ATM transaction, however, and the report shows that ATM use accounts for more than nine times the number of point of sale (POS) transactions. While the use of POS payments has increased, there is still a preference for both customers and merchants to use cash in their daily transactions.

Government to aid in growing e-commerce industry

The Indonesian government has enhanced the POS payment structure for cashless payments and is promoting the use of mobile and card payments across the country, to bring their payment economy in line with other Asian countries, and to aid in the nation’s growing e-commerce industry. In order to bring a larger proportion of the population into the mobile payment market and the formal banking system, the government has initiated a scheme in cooperation with the Indonesian Central Bank.

Inclusive finance and improved POS from Central Bank

The Central Bank has introduced its national strategy of “inclusive finance”, which is aimed mainly at the small business community, such as farmers, laborers, fishermen, and small to medium enterprises (SMEs). The aim is to increase the financial access available to these businesses in order for them to be better able to manage finances and obtain small, short or long-term loans.

The Central Bank has also enhanced and improved the POS systems in use across the country and has declared a mandatory switch to EMV technology cards for all banks and financial institutions by the end of 2021. This follows the change of ATM and debit card PINs from four digits to six digits as of July 1, 2017. The change was implemented to reduce the amount of ATM and debit card fraud in the country and increase security for users.

Online transactions popular with the young

In the e-commerce market in Indonesia, there has been a significant growth in the use of online transactions, mainly among the younger population, with total sales of 10.7 billion dollars to date in 2017. The Indonesian e-commerce market shows a large growth-rate potential, with a forecast compound annual growth rate of around 23 percent, which is the third highest forecast growth rate in Asia, compared to China at 11 percent and Malaysia at 15 percent. The highest forecast growth rates are in Pakistan (33 percent) and India (24 percent).

Mobile payments expected to increase

Finally, the report also analyzes how the use of mobile payment systems, peer-to-peer payments, and online payment options will be used and increased over the coming 4 years to 2021. With a higher number of people now using smartphones in Indonesia than ever before, the expected use of mobile payment options and mobile wallets should increase, as should the use of PayPal within the online shopping market, now that it has been better integrated into the country’s online economy.

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