Cashless payment has its benefits. Yet, many mobile payment apps failed to get off the ground. Here’s how an Indonesian app solved this problem.
Which Comes First?
Convenience, security, and accountability are some of the advantages of a cashless system. But despite these advantages, there are challenges that caused many e-wallet apps to fail. The most common reason is the chicken and egg problem. With limited resources, do you start from accumulating users or merchants? On one side, you need a compelling reason to get users to store money in your e-wallet system. On the other side, merchants are always wary about having yet another payment option that nobody uses. Giving incentives is also not a permanent solution because users have no loyalty. They will simply take your sign-up bonus and then never use the app again.
OVO is a mobile payment application created by Lippo Group’s digital arm, LippoX. It’s a new entrant in a digital payment arena that’s dominated by players such as Go-Jek’s Go-Pay, Telkomsel’s T-Cash and Paypal. Since it’s launch, the app has grown rapidly and is currently the fourth most popular app in Google Play Store Indonesia as of 20 December 2017, as we previously reported. We have done an independent test to see what the app has got to offer, and further analysed it’s potential. OVO has unique strengths and also benefited from a recent regulatory announcement.
So, how does OVO solve the chicken and egg problem? As a part of the Indonesian conglomerate group, it has conveniently eliminated the first problem of acquiring merchants. The group owns many shopping malls across Indonesia under Lippo Malls, as well as retailers such as Hypermart, Matahari Department Stores, and it’s digital incarnation, mataharimall.com. Lippo also operates cinemas, hospitals, universities, and several media channels. With such a wide range of merchants, OVO has better access than any other e-wallet apps out there.
While it has access to merchants, OVO is still facing a considerable hurdle of acquiring users. It is still a new product and hence there is little brand recognition. OVO tries to combat this issue by spreading words about its affiliation with the Lippo Group. Our survey shows that 63% of users recognised the app as a Lippo Group’s product.
In a lucky break, OVO got a major boost when Bank Indonesia enforced it’s e-money licensing procedures (SEBI No. 18/21/DKSP dated 27 Sep 2016). In October 2017, several e-commerce companies, including Grab, were forced to stop their top-up features while waiting for their e-money license. In the case of Grab, they decided to take a shortcut by obtaining the service of OVO, which received its e-money license in August 2017. This makes sense because the Riady family, the controlling shareholder of Lippo Group, is one of Grab’s investor through Venturra. Now, GrabPay resumes with a new branding ‘GrabPay powered by OVO’.
However, this does not mean that OVO is guaranteed success. Acquiring and retaining users, and incentivizing usage will continue to be an expensive exercise. Other conglomerate groups are also preparing their own mobile payment system, such as Salim Group’s PayPro. The biggest challenge is of course cash, namely how to shift consumer behaviour from using cash to e-money.
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