Flourishing Amid the Pandemic
Electronic money usage continues to surge during the Covid-19 pandemic. This is believed to accelerate the digitalization of the payment system.
NUMEROUS Shopee-Pay promotional ban-ners were displayed at the food court area in Margocity shopping center, Depok, West Java, during the long weekend at the end of October. Almost every stall had the orange piece of paper near their cashier. The electronic money payment service offered 30 percent cashback for customers’ transaction.
Other electronic money services, such as LinkAja, OVO, and GoPay, were also present. OVO had a similar cashback offer, but only in select kiosks. “Not bad,” said Rohmat, an OVO user who was shopping at Krispy Kreme Doughnuts on Wednesday, October 28. Online ojek (motorcycle taxi) drivers were lining up in some other outlets to collect their GoFood and GrabFood delivery service orders.
Customers of the increasingly growing online-based payment systems are truly being pampered by all sorts of facilities and conveniences from the service providers. The number of electronic money users continues to increase year after year. Bank Indonesia noted a significant growth in 2019, when total transaction volume reached 5.22 billion, worth Rp145.16 trillion in value. It was a drastic rise compared to the 2.92 billion transactions worth Rp47.19 trillion recorded in 2018.
Electronic money can now be used for various kinds of payments, both online and offline. Visionet Internasional Chief Executive Officer Karaniya Dharmasaputra said that the top five contributors to OVO transaction are from the retail sector, namely food and goods, online transportation and food delivery, e-commerce, and bill payments. “We are available through 700,000 merchants, from both modern outlets and micro, small, or medium businesses,” he said on October 26
While its application initially only offered payment services, loyalty points, and financial services, OVO has now grown to become a financial technology company and one of Indonesia’s unicorns. Rumors say it has also acquired a local peer-to-peer lending company, Taralite, to pave the way for expansion into the financing sector. Four years after the electronic wallet was first launched, OVO’s application has been installed on 115 million devices.
GoPay also underwent a rapid change from its original function as payment solution for driver partners of Gojek, the ride hailing application developed by Aplikasi Karya Anak Bangsa. GoPay Managing Director Budi Gandasoebrata said the digital wallet service is now offering various financial services, such as billing payments, housing mortgage loan installments, education savings, minor haj pilgrimage umrah savings, to payment services in merchant partners. GoPay is now present in 390 cities in Indonesia, going ahead even before Gojek reaches some of them.
Starting this year, GoPay offers insurance service GoSure and investment service GoInvestasi, aiming to provide an easier and more affordable alternative for the public. GoPay is also available as as a payment option in Google Play app store, Viu, HBO Go, YouTube Premium, YouTube Music, and Spotify.
TATA has never visited the public market ever since the Covid-19 pandemic struck Jakarta and its surrounding area. This resident of Bumi Serpong Damai (BSD) housing complex in South Tangerang, Banten, no longer shops for groceries at BSD City Modern Market.
However, that is not a cause of concern for Tata. Instead, she now enjoys shopping in virtual markets using electronic money. “They offer promotional programs, discounts, or cashback,” she said on October 29.
She goes to different online shops. Sometimes the 41-year-old woman visits Alfamart online. The other times, she comes to Tokopedia, Blibli.com, or other e-commerce platforms. “Practically wherever, as long as they have some promotion,” she said. Payment is also simple. “There are OVO, GoPay, and ShopeePay. Sometimes I use debit card through mobile banking.”
Bank Indonesia Deputy Director of Indonesia Payment System Blueprint 2025 Project Management Office Agung Bayu Purwoko said that the pandemic has caused the public to adapt to the situation. There have been many adjustments, including in payment systems. More and more people are taking up non-cash payment methods to minimize contact with others. “Some resort to mobile banking, while others to electronic money,” he said during a discussion organized by the Institute for Development of Economics and Finance (Indef) on Wednesday, October 21. “Payment system has been going towards the electronic route since a couple years ago. Covid-19 evidently accelerates that.” Agung said that electronic money usage hit a brief plateau in early 2020, when Indonesia entered the pandemic era with the discovery of the first Covid-19 case in March. Bank Indonesia noted that average daily transaction value was only Rp15 trillion during the first quarter of the year. It began to increase in April, recording Rp17.55 trillion. Then the trend took a downward turn to Rp14.95 trillion in June.
The decline of electronic money usage, Agung suspects, was caused by the large-scale social restrictions (PSBB) implemented in some regions. In Jakarta, for example, after it came into effect on April 10, the regulation only allowed certain types of business to continue operating. Meanwhile, most stores or merchants had to shut down.
Financial technology business requires a healthy digital ecosystem. If the merchant network utilizing electronic transaction services is weakened, lacking growth, then transactions through payment service providers go down as well.
When the government started the transitional PSBB on June, digital wallet transactions began to climb again. “Along with the easing of mobility restriction, merchants reopened and resumed electronic money transactions, said Agung. In August, average daily transaction of electronic money returned to around Rp17.23 trillion. It was also far above the Rp12.88 trillion recorded in August 2019.
GoPay experienced a similar phenomenon. Digital transaction has been accelerating faster since the country entered the Covid-19 pandemic. Growth is driven not only by customers’ desire for more convenient and secure contact-less transactions, but also by more business partners and merchants adapting to the situation by moving to online channels.
GoPay Managing Director Budi Gandasoebrata said that, among others, this acceleration can be seen in the four-fold increase of GoPay transfer between users during 2020 Ramadan fasting month, compared to the same period last year. “Money gifts were also done in a cashless way through GoPay,” he said.
The number of GoPay users increased significantly during March to May, compared to January to February. GoPay mutual funds investment transaction, for example, grew to almost twice as high. Games voucher purchase through GoPay rose by three folds. Meanwhile, GoPay transaction in GoMed service—established through cooperation with affiliate startup Halodoc—saw a two-fold increase. “The public is putting their health first, one means to achieve this is by adopting telemedicine service,” said Budi.
Also increased by a substantial amount was the donation received by GoPay, which was then distributed to hundreds of places of worships and foundations, including through Kitabisa.com. The value of donation amounted to Rp45 billion during March to May, or two times more compared to the period before the pandemic.
AS in many other countries, the enormous potential of the digital economy market, especially payment services, have lured numerous technology and telecommunications company to dive in. They developed their own similar platforms. Profit in this financial technology business comes not only in the form of revenue sharing from transactions, but also the big data, which are believed to be even more valuable. In Indonesia, Telekomunikasi Selular (Telkomsel), the largest player in cellular service industry, has been developing its own electronic money since March 2018. This subsidiary of Telekomunikasi Indonesia initially called its service as Tcash. Later on, along with the merging of electronic money from state owned enterprises in February 2019, Tcash changed its name to LinkAja.
It was Tcash that began the payment digitalization in BSD City Modern Market. The market was viewed as an ideal ecosystem to deliver education about the digital lifestyle. Lately, competitors such as OVO, GoPay, and ShopeePay have also joined in. LinkAja Marketing Director Kilian Suwignyo said that digitalization of transactions in the micro businesses segment requires more effort. The pandemic presents a new momentum for digital payment. “The migration from cash to cashless used to be motivated by promotion on average. Now, health and hygiene considerations have also become the driving factors,” he said on October 7. LinkAja is also pushing efforts to modernize traditional markets through digitalization in 34 provinces for the on-boarding of the Quick Response Indonesia Standard (QRIS) transaction system, which began to be adopted by payment system providers in January. LinkAja cooperates with local technology partners to help ‘move’ traditional markets to digital. “There are currently more than 500 traditional markets all across Indonesia that have joined LinkAja ecosystem and Syariah LinkAja service,” said Edward.
As of October 27, LinkAja has more than 58 million registered users, including 1 million users of Syariah LinkAja service. The number has grown from the 26 million registered users when LinkAja started its journey in June 2019.
Agung Bayu Purwoko said the central bank will continue to push the adoption of QRIS by all electronic money providers, both banks and non-banks. “So that users will not need to download every electronic money application. Having just one application will be enough to do transaction in many outlets,” he said. Some 39 non-bank institutions have now been connected to various sources of funds. “Just aim at the QR code, everyone can do that.” Agung is optimistic that Indonesia will be highly competitive in the digital economy era. He said that the country has a strong digital foundation. Demographically, millennials or Gen Y makes up 59 percent of Indonesia’s population. This group, whose members are between 22 to 35 years of age, is the largest users of social media. On the other hand, the number of cellphones in Indonesia reaches up to 124 percent of the population. “Just imagine, there are many people who own more than one account.”