Drivers, key players and innovation in mobile payment in Indonesia

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Mobile payment industry has recorded strong growth in Indonesia. On 22nd June 2017, Bank Indonesia introduced the National Payment Gateway (NPG) which was Indonesia’s first interconnected payment system network that put into effect the interoperability of different payment systems.

Indonesia has the fourth-largest unbanked population after China, India and Pakistan. It also has about 95 million adults who still don’t have an account at a financial institution. In light of this market opportunity to serve the unbanked, Indonesian  mobile payment companies have experienced investment from investment firms such as KKR, Warburg Pincus, Sequoia and tech giants such as Google, Alibaba and Tencent.

Go-Jek, Indonesia’s startup unicorn, which started as a ride-hailing service launched its financial service GoPay in April 2016. The first institutions that introduced electronic money were Indonesia’s major banks Bank Central Asia and Bank Mandiri. They entered and created the electronic money industry about ten years ago. Following their pioneering launch, Indonesia’s top three telecom operators Telkomsel, Indosat, and XL Axiata introduced their digital money services. As of August 2019, Indonesian central bank has issued 31 e-money licenses and new players continue to enter the market.

The top three mobile payment processors in Indonesia are GoPay (owned by Go-Jek), OVO (from Lippo in partnership with Grab) and Dana (owned by Ant Financial and Emtek). Go-Jek had acquired three local fintech startups in December 2018 and more consolidation is expected to happen to bring stability in the market. 

According to PayNXT360, in 2019, Indonesia’s mobile payment industry is expected to reach US$ 18.8 billion in transaction value terms, and by 2023 it is expected to be US$ 43.3 billion. According to Indonesia’s financial authority, there were 490 million e-wallet transactions in September 2019 alone and they amounted to a total value of IDR 13.82 trillion or US$ 980 million.

OVO’s recent strategy includes partnering with lending platforms Teralite and Do-It to offer a mutual investment fund feature, in collaboration with Lippo backed Bareksa. The investment product will allow micro, small and medium-sized companies to have more opportunities to obtain capital and it also allows OVO to move beyond just payments. According to PayNXT360’s Q2 Consumer Survey, introduction of lending and investment products by mobile payment companies is going to be essential to gain markets share in emerging economies such as Indonesia.

In March 2019, GoPay partnered with point-of-sale software developer Pawoon, supermarket FoodHall and retail giant MAP to further increase cashless transactions using the GoPay platform. GoPay also launched a program called Go Online to bring micro, small and medium business into the cashless economy using the GoPay technology.

As GoPay and OVO continued to dominate the market, LinkAja came into the scene in February 2019 as a joint-venture between state-owned companies Telekomunikasi Indonesia, Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia, and Bank Tabungan Negara. LinkAja is to merge their mobile payment services into one.

The services that merged to form LinkAja are Telkomsel’s TCash and Mandiri, BNI and BRI’s e-cash, Yap! and T-Bank, respectively. Then, LinkAja’s ownership is divided into 25% by Telkomsel, three out of four banks owning 20% each, 7% by state-run petroleum company Pertamina and 1% by insurance company Jiwasraya.

In April 2019, Bank Mega announced their plan to launch their own mobile payment service. Bank Mega’s strategy includes leveraging their owner CT Corp’s large retail network. Bank Mega wishes to differentiate itself by having both a digital wallet feature and also enabling it to be linked to a bank account for higher value transactions. Bank Mega’s parent company CT Corp. owns supermarket chain Transmart, and they also operate the Wendy’s and Baskin-Robbins chains.

To know more about changing mobile payment market dynamics in Indonesia, click here.