As Southeast Asia’s largest economy by GDP (US$932 billion [1]) and the most populated market (264 million [2]), Indonesia has been attracting technology companies to start or expand their business in the country. While cash is the dominant payment method, the innovation in eCommerce, transportation and consumer finance potential drives nation-wide demand for alternative payment methods. This report aims to provide an overview on the current payment landscape, and help investors and corporate innovators on their business evaluation.

As Southeast Asia’s largest economy by GDP (US$932 billion [1]) and the most populated market (264 million [2]), Indonesia has been attracting technology companies to start or expand their business in the country. While cash is the dominant payment method, the innovation in eCommerce, transportation and consumer finance potential drives nation-wide demand for alternative payment methods. This report aims to provide an overview on the current payment landscape, and help investors and corporate innovators on their business evaluation.

Cash is still the king

Among the most common payment methods (cash, bank transfer, credit card and electronic payment), cash transaction makes up around 90% of all transactions in Indonesia [3]. Although 36% of Indonesians have a bank account [4], bank related payments have very low penetration.

Other than payments, domestic money transfer also largely depends on cash. About 18% of Indonesians have made a domestic transfer. Among those who have made a domestic transfer, cash is the most popular while mobile transfer is the least.

Why cashless payments are not gaining ground

The majority of the population is still unbanked (about 64% [4]). Thus, the options for them to make payment and transfer money are limited, and cash is the most familiar medium to unbanked population.

Financial literacy is relatively low in Indonesia. About 26% of the population are financially included, and among those, only 20% are financially literate [5]. Without sufficient financial literacy, it is difficult to understand and use non-cash financial services.

As the awareness of mobile money (about 15% [5]) and financial literacy are low, Indonesians are skeptical about the security of mobile payment and transfer. The concern of fraud hinders the adoption of eWallet, mobile money and mobile payment.

Cashless Payment – Past and Present

In Indonesia’s payment industry, banks are the biggest players. They provide transfer or switching services through their networks of ATM and POS devices. Banks also provide debit card and internet banking service. However, they are not mobile friendly, and the user experience is poor to Indonesians due to multiple steps to use these services. Banks are now trying to develop their own eWallets without standardization across the industry. Of the 26 licenses issued to electronic money operators by Bank Indonesia (BI), 11 are obtained by banks [6].

The largest billers by volume in Indonesia are telecom operators and state-owned utility providers. Most of these payments are made by debit transfers through banks, and cash through non-bank collecting agents. As 80% of the telecom industry is dominated by three main players [7] and 99% of customers have a prepaid account [8], telecom companies are trying to expand the function of their mobile prepaid credit and to develop their own eWallets. For example, Telkomsel has developed its own eWallet TCASH wallet, which is currently (20th December 2017) the top finance app in the Google Play store in Indonesia.

The fourth most popular app(as of 20th December 2017) is OVO, which was launched by PT Visionnet Internasional in June 2017. Its electronic money operator license was obtained in August 2017 and it one of the five new companies which secured this license in 2017. OVO provides rewards & deals through merchant partners, simple payments and smart financial services. However, OVO is currently only accepted in Jakarta and Karawaci areas, not nationwide.

The other two main players in payment gateway and eWallets are Payfazz and DOKU. Payfazz was launched in 2016, and provides services including bill payment, account recharge and free bank transfer among 88 banks. DOKU was launched in 2015, which also provides services of bill payments, credit purchase and purchase on several online stores. However, it only enables the transfer of balance among DOKU users.


Other than specialized payment apps, the demand for transportation and retail service has led to the evolution of extended e-money services such as Go-Pay, GrabPay, TokoCash and ShopeePay.

These e-money apps allow users to top up their account, withdraw from their account, and pay for services provided by parent companies and other daily transactions. However, only Go-Pay has managed to obtain the e-money operator license from BI through its subsidiary. In 2017, other extended e-money services, such as GrabPay, TokoCash and ShoppePay, have suspended their credit top-up features while waiting for the approval from BI for their e-money operator licenses.

The Recent Wave of Investment and Acquisition

Believing in the potential of Indonesia market, foreign investment is rapidly entering the market. Recently, Fintech Capital (a Fintech VC firm) has led a Series A investments in Ayopop, an Indonesian mobile bill payment company [9]. Ayopop is a one-stop payments solution that provides a wide range of products. However, the company has yet to obtain an e-money operator license from BI.

With the formidable growth in payment services, the leading transportation service provider Go-Jek just took one step further to conquer the payment market in Indonesia. Recently, it announced the acquisition of 3 companies to strengthen its position in offline payment processing, online payment gateway and community based savings and lending network [10]. This is an important step to outpace competitors like Grab and Uber, and to dominate the payment market.

In response to Go-Jek’s acquisition, Grab announced its partnership with the latest payment player, Lippo’s OVO, to enter the co-branding of “GrabPay powered by OVO” [11]. This is a win-win situation for both companies. GrabPay solved the burning issue of not getting an e-money operator license from BI, while OVO can tap on much needed customer base for expansion.

Regulatory Environment

The Indonesian government has been encouraging the development in cashless payment. The government has set a goal to expand bank account ownership to 75% of adult population by 2019 in the announcement of National Strategy for Financial Inclusion (SNKI). With higher bank penetration, the payment by debit card, ATM and credit card is likely to increase. To solve the pain point of usage, BI launched the National Payment Gateway (NPG) regulation which provides a shared payment infrastructure among banks and creates a nationally integrated electronic payment channel [12].

A shared infrastructure of NPG can reduce the cost of interbank transactions. It has the potential to make transactions easier, cheaper and more efficient for banking customers by integrating the acceptance of all electronic money, debit cards and credit cards. Further, the regulation requires foreign principals to work with local switching companies. Other than the benefits stated above, the NPG may also strengthen the dominant position of local banks and contain the potential disruption from non-bank electronic money providers and foreign capitals.

Since 2009, electronic money regulation has detached from cash-based payment instrument regulation. The number of license issued has been steadily increasing until now, without any revoking of such license. This shows that BI has noticed the importance of cashless payment long time ago and has been supporting the expansion of this sector of the payment industry. At the same time, the percentage of license issued to non-bank corporations has increased over the past years, indicating the regulator’s openness to alternative payment system outside traditional banks. In 2016, BI issued new regulations that for the first time captured payment gateway and eWallets [13]. The regulation aimed to provide a regulated and healthy environment for new players, and to ensure the protection of consumers.

Opportunities and Risks

As the second biggest cash-based economy [14], the potential growth in cashless payment is tremendous. With the government’s effort in financial inclusion and financial integration, the demand and supply for cashless payment will increase. However, only local Indonesian company are allowed to apply for the license to operate [15]. Therefore, for a foreign company to enter the market, incorporation of local context is a must.

Even for existing players in the market, there are risks from the change of regulations. For example, GrabPay had to suspend its credit top-up feature due to the regulation issued by BI in December 2016. The approval for GrabPay’s e-money operator license is still unknown as the queue outside BI piles up. Additionally, based on past trend, BI has been cautious in issuing licenses for electronic money operators. The number of new licenses and the type of new operator fluctuated in each year. Therefore, it is advisable to obtain the license as early as possible to remove the risk of the tightening on license issuance.

Another way is to acquire or corporate with local companies which have already obtained the license. A mentioned, GrabPay achieved this by partnering with the latest e-money provider, OVO, which obtained their e-money operator license in August 2017. With the new “GrabPay powered by OVO”, the top-up feature of GrabPay has been re-instated[11].

Another driver for cashless payment is the growth of eEconomy. The eMarket in Indonesia is expected to grow from $7.8 billion in 2015 to $78.8 billion in 2025 with annual growth rate of 29%. Among all sectors in eEconomy, eCommerce is expected to have the fastest growth from $1.7 billion to $46 billion, and comprises 52% of Southeast Asian market [16]. Therefore, the fastest growing demand will be on the most convenient payment with the lowest cost. With the recent launch of NPG, the integrated banking system has a great potential for growth. On the other hand, non-bank electronic payment companies may encounter fierce competition from the banking system. Further, Indonesian consumers are skeptical about online and mobile payment, which leads to challenges in user acquisition at low cost in the long term.

With the expectation of strong growth in eCommerce, more extended payment apps may be developed in the future, just as Go-Pay of Go-Jek. The success story of Alipay may be applied to Indonesia’s context as well. However, consumer awareness and receptiveness take long time and much effort to change.


With the government’s attitude towards a digital nation and the growth potential in electronic payment, Indonesia is a promising market for investors and corporate innovators who look to enter the market. However, as always opportunities and risks go hand in hand. Companies that have obtained the electronic money operator license are advantageous over other players looking for entry. The gap of payment between consumers and e-service providers needs to be bridged at low cost and with user-friendly technology. Non-bank e-payment providers who can achieve these will have a long term competitive advantages over banks. Finally, investors and corporate innovators can also look at the opportunities in eCommerce extended payment platforms.



  1. World Bank Data: Indonesia, GDP (current US$)
  2. United Nation Population Prospect 2017: Indonesia Population
  3. BI: Cash Transactions Still More Popular than E-payments,
  4. World Bank Data: Indonesia, Account (% age 15+)
  5. Financial Inclusion Insights, Indonesia Wave 3 Report FII Tracker Survey 2017
  6. List of electronic money operators licensed by Bank Indonesia, September 14th 2017, Bank Indonesia Website
  7. The Structure of Indonesia’s Telecoms Industry,
  8. The Latest Numbers on Web, Mobile, and Social Media in Indonesia,
  9. Finch Capital Announces Two New Investments in Key Geographical Markets,
  10. Go-Jek buys 3 fintech firms to conquer Indonesia payments,
  11. Lippo Group’s OVO enters co-branded partnership with GrabPay in Indonesia,
  12. The National Payment Gateway signals major progress in Indonesia,
  13. Bank Indonesia Regulates Payment Gateway and E-Wallet Services,
  14. Infographic: what are the top 10 cash-based economies of the world,
  15. BANK INDONESIA REGULATION NUMBER: 11/12/PBI/2009, Bank Indonesia
  16. Unlocking the $200 billion digital opportunity in Southeast Asia, Google & Temasek

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].