Competition in Indonesian mobile payment industry is expected to intensify

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Indonesia has one of the highest average usage of smartphones globally and with a high population based, it is an attractive marketplace for the major fintech companies. Since the inception of President Joko Widodo’s term, the government has taken a series of initiatives to create cashless economy. This has led to the Bank of Indonesia (BoI) starting a movement called “Gerakan Nasional Non-Tunai” or as translated, National Cashless Movement. Currently, roughly 30% of the smartphones users in Indonesia make use of mobile payment services.

According to PayNXT360, the mobile payment transaction value in Indonesia expected to increase at a CAGR of 20.8% during 2018-2025. Over the forecast period of 2019 to 2025, the market is expected to reach US$ 107 billion by 2025, increasing from US$ 36.6 billion in 2019.

The Bank of Indonesia has been focusing on the growing cashless marketplace after it issued ‘e-money’ licences to 15 fintech companies. This was followed by BoI’s announcement of GPN or the National Payment Gateway. One of the movements under this program is the ‘popularization’ of existing QR Code system for transactions through mobile. The first pilot tests were successfully conducted in August 2018 with Telkomsel's digital payment service T-Cash being part of them. This will allow them to offer their services to the cash dependent rural sector through the QR Code system being set up in local shops.

The major players in the mobile payment industry of Indonesia include GoPay, GrabPay or OVO and T-cash. Key global players have entered the market, investing in mobile payment businesses. Investment trend in the industry reflects a huge potential over medium to long term. GoPay, part of the GoJek Company which started as a bike taxi app, is now funded by global firms such as Google and KKR & Warburg Pincus. GrabPay is funded by the Japanese Conglomerate Softbank, and T-cash by one of Indonesia’s Big Three Telecom network, Telkom Indonesia.

In line with global markets, discounts and cash-based marketing strategy is the primary focus to drive customer acquisition in Indonesia. GoPay and GrabPay are providing their customers discounts on taxi rides and food delivery, which has led to widespread usage of their mobile payment service. In addition, there is increased focus on introducing loyalty programs to drive customer acquisition and retention.

BoI has made the e-money licence mandatory to carry any form of online transaction mandatory. This regulation led GrabPay join hands with OVO to get their wallet refill service working as OVO already had an e-money license. It also led other mobile payment apps such as TokoCash and ShopeePay to join hands with OVO and AirPay, respectively. Companies are still entering the Indonesian mobile payment market. Recent key entrants include BlackBerry Messenger’s DANA and Indonesian fintech company, MC Payment’s Instapay.

To know more and gain deeper understanding of mobile payment and mobile wallet industry in Indonesia, click here.