Q & A
Q & A
Online Payments in
Indonesia is the fourth largest country by population in the world, with a burgeoning middle class projected to double in size to 141 million people by 2020. But for online merchants, accepting payments from Indonesians is not straightforward. The landscape for online payments in Indonesia is dominated by a range of alternative channels, some of which are not known or used outside of the country. As a result, merchants looking to collect payment from customers effectively in this market need to implement a range of localised channels to be successful.
Only 1.6% of adult Indonesians reported having a credit card in 2014, up just slightly from 0.5% in 2011 (source:
World Bank Global Findex
). The low level of credit card adoption and slow rate of growth is a function of (1)
strict rules imposed by Bank Indonesia
stipulating that only customers with relatively high incomes are eligible for a credit card, and (2) a risk-adverse approach taken by issuing banks, which require that customers earn a significant income, provide a large amount of information and transaction history, and so on to be eligible for a credit card. One consequence of this is that the few Indonesians that do have a credit card typically have several each.
While credit card penetration is very low, 36% of Indonesians have a bank account with a formal financial institution, the largest of which are BCA, Mandiri, BNI, and CIMB.
However, unlike countries where account holders are automatically issued a debit card that can be used online via the Visa/MasterCard/UnionPay acceptance network, it's not so easy for Indonesians: banks in Indonesia typically (1) issue their customers an ATM card that does not have a 16-digit number that be used on global card networks, or (2) issue their customers a card with a 16-digit number that can theoretically be used on a global card network, but require customers to go through several extra and onerous steps to enable the card for online transactions. Finally, fear of having their card number stolen and used fraudulently deters many customers who have a debit card from actually using it.
As a result, Indonesians that have a bank account are accustomed to using it to make online payments three ways:
– the customer initiates the transaction online, and then walks to an ATM to complete it. With more than 100,000 ATMs in Indonesia, this is a widely used and trusted method of completing online payments, bill payments, and more. There are three main ATM networks in Indonesia – Bersama, Primo, and Alto.
Mobile banking applications
– in a mobile-first market like Indonesia, it's not surprising that mobile banking applications like
CIMB Go Mobile
BNI SMS Banking
are becoming popular: they already have tens of millions of collective users and benefit from a reasonably intuitive and clean user experience.
Internet banking website
– Each major bank provides it's own proprietary Internet payment service that can be accessed via the web (i.e. BCA offers
, Mandiri offers
, CIMB offers
, and so on). Adoption and use of these platforms suffers in part because customers are required to register in advance separately to use them, and to authenticate transactions by visiting a third party website and entering one or more challenge codes issued via a physical dongle (which they must also have). The user experience is also not mobile-friendly.
Bank transfers are extremely popular: according to one estimate, 94% of Indonesians use bank transfers as their main method for paying for online purchases. Merchants can use Codapay to accept payments from any bank account in Indonesia;
to learn more.
Cash Payments at Retail
One of the fastest growing payment channels in Indonesia is cash payment at convenience stores. By enabling a customer to initiate a purchase online, and then walk to any of tens of thousands of convenience stores (i.e. Alfamart, 7–Eleven) to make payment over–the–counter using cash, merchants can ensure that literally any customer can make a payment online – with no prior registration or login required, and without needing a bank account, credit card or e–wallet. This channel is also attractive to merchants because, as with bank transfers, there are no chargebacks.
The largest convenience store chain in Indonesia is Alfamart, with more than 8,500 outlets nationwide. Others include 7–Eleven (smaller, but with a strong presence in the capital city of Jakarta) and Indomaret.
Merchants that use Codapay can receive payments from customers made at nearly 10,000 Alfamart locations and hundreds of 7-Eleven locations in Indonesia.
to learn more.
Direct Carrier Billing (i.e. SMS billing, Telco payments, pulsa)
Customers in Indonesia have been using their prepaid mobile credit–known as pulsa–to purchase digital content for years. For merchants that sell such content, direct carrier billing is an essential payment channel: customers are not required to sign–up or login before making a purchase, so it's ideal for small–value (from $0.25 to $10.00) purchases of things like game credits, music, and videos. However, direct carrier billing in Indonesia cannot be used for the purchase of physical or other goods. It is also the most expensive payment channel in the country.
Indonesia is predominantly a prepaid market: 99% of customers have a prepaid account, and just 1% of customers have a postpaid account. As a result, risk of bad debt (i.e. the customer making a purchase, and then not paying their bill) is of less concern than in markets like China where postpaid account ownership is higher.
The biggest mobile operators in Indonesia are Telkomsel (with 144 million customers), Indosat (with 60 million customers), XL Axiata (with 55 million customers), and Hutchison 3 Indonesia. Smartfren and Esia also operate small CDMA mobile networks in Indonesia, each with 5 to 10 million customers. Bolt! has also recently launched an all–4G network. In late 2015 the big telcos introduced LTE services in Indonesia, which have dramatically improved data speeds. In 2013, an estimated
24% of mobile
phone users in Indonesia owned a smartphone and this figure is expected to rise to 37.5% by 2017
Direct carrier billing is Coda's flagship payment service.
to learn more.
Most game publishers in Indonesia also allow customers to redeem game vouchers at their sites (i.e. walk to a store, buy a game voucher, scratch off the surface to reveal a code, and then enter that code into the merchant's payment page). Typically, only dedicated gamers are aware of this payment channel. However, publishers typically do include it as one of their payment options because it's slightly less expensive than direct carrier billing (although more expensive than bank transfers and cash payments at convenience stores).
Widely available game vouchers available in Indonesia are Lyto's Kartu Game–On and Gemscool's G–Voucher: these are cards distributed in internet cafes by two of Indonesia's online game publishers, who also typically enable other publishers to leverage their cards as a payment channel.
Telcos in Indonesia have begun to enable third-party merchants to redeem prepaid mobile credit vouchers that they distribute in the same way that Thai telcos have for years. However, this payment channel is not especially popular in Indonesia because prepaid mobile credit is mainly distributed electronically and without the use of an actual voucher code in the country (finding a retailer that actually sells a prepaid mobile voucher code is much more difficult than finding one that can electronically transfer prepaid mobile credit) – so it is not a channel that customers intuitively understand and desire.
Merchants can work with Coda to redeem Telkomsel vouchers.
to learn more.
Over the years, dozens of e-wallets have been introduced in Indonesia, but there has yet to be a breakthrough success story like PayPal in the US, Alipay in China, or Paytm in India. Instead, there is now a long list of services that are in market, each with fewer than one million active users, including e-wallets issued by:
(1) Telcos (i.e. T–Cash from Telkomsel, Dompetku from Indonesia, XL Tunai from XL)
(2) Banks (i.e. Mandiri e–cash)
(3) Third–parties (i.e. Gudang Voucher, MOL, UniPin, Indomog, Doku Wallet).
E–wallets come in two flavours. Those issued by telcos and banks (along with Doku Wallet) are governed by the e–money rules stipulated by Bank Indonesia, and as such can be used for the purchase of physical goods. E–wallets issued by companies like Gudang Voucher, MOL, UniPin, and Indomog on the other hand can only be used for the purchase of digital content. In part because the user experience is not seamless (customers must register for an account and add credit to that account before they can transact, while transacting itself requires a redirect away from the merchant site and login), e–wallets have yet to catch on with customers in Indonesia.
Merchants can work with Coda to collect payments using Doku Wallet.
to learn more.
If you need help navigating Indonesia's landscape of payment channels, or are interested in learning more about how Coda can help you monetize in this market,
get in touch!
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