The growth of smartphone penetration, supported by development in the fintech field, alters how consumers behave and do their daily errands, and making a payment is no exception. Making payments conventionally, such as using cash or debit cards, has shifted to a more convenient way, digitally through a mobile wallet.
How did it start?
The digital payment scheme in Indonesia was first coined by its central bank, Bank Indonesia. In August 2019, Bank Indonesia launched a digital payment system called QRIS (Quick Response Code Indonesia Standard) as a means to accelerate the digital payment system in Indonesia. QRIS aims to provide real-time and secure payment for both consumers and merchants, especially MSMEs. Therefore, it provides them with an additional payment channel and adds a competitive edge.
The introduction of QRIS enticed digital wallets (as known as e-wallets) to expand even further by incorporating the QRIS system into their platform, thereby increasing their practicability.This growth is supported by government agencies such as Bank Indonesia and the Financial Service Authority (OJK). E-wallets are meant for smaller transactions and purchases, usually below Rp100,000. Furthermore, the average number of transactions using an E-Wallet is Rp 55,000 compared to debit (Rp 350,000) and credit cards (Rp 525,000).
The Pandemic Effect
Digital wallets started to become a preferable method in 2020, especially with the effect of a pandemic. The preference of digital wallet usage accounted for 50% of all transactions compared to other methods such as direct debit, virtual account, retail outlet, and debit/credit card. This is a drastic increase from the prior year with only 10%.
With most people having to quarantine, grocery and online shopping surged, and transactions for those are made digitally using E-wallets. On-demand services like online groceries, courier services, and food deliveries have become the majority of transactions that use E-wallets. Besides that, increased entertainment necessities such as subscriptions for video streaming services and in-game purchases also contributed to the increased usage of E-wallets.
Indonesia’s E-Wallet Landscape
Indonesia has several digital wallet platforms. For instance, GoPay and OVO are the most prominent apps used for mobile wallets. GoPay is embedded in Gojek, Indonesia’s top on-demand app. The e-wallet is mostly used for ride-hailing and courier services. Meanwhile, OVO also established a partnership with Grab, another notable on-demand app in the country.
Other top contenders, such as Dana and ShopeePay, are also competitive in this emerging market. Shopee is a stand-alone app, while ShopeePay is embedded in Shopee, another leading e-commerce site in Indonesia. Not only can these apps be used for online e-commerce payments, but they are also feasible for offline transactions with partnered merchants, such as fast food chains and supermarkets. Transactions with partnered merchants could give cashback, discounts, or redeemable points that can be used in the future.
Another selling point of these mobile wallets is the PayLater option, one of the biggest trends in the digital payment field. ShopeePay, GoPay, and OVO have this feature. Shopee PayLater is an alternative for consumers to pay their purchases in installments, while GoPayLater enables users to pay for used on-demand services at the end of the month.
