Indonesia seems to be gradually promoting financial inclusion clamoring to reach 75% in 2019. The digitization of financial services and social assistance have contributed to increasing financial inclusion rate to 65% in 2019, thus failing the government target of 75%. All in all, the situation in Indonesia does not appear to be desperate, unlike the other countries of the ASEAN region.

The benchmarking analysis of financial inclusion in the region is indicative of a better nation’s position in this respect as compared to, for instance, Vietnam (31%), Myanmar (26%), Cambodia (22%), the Philippines (34%). However, there is much to be done to increase the penetration of financial services in Indonesia.

Indonesian mobile operators

The country has a rather developed telecom structure for mobile services. The mobile networks cover 91% of Indonesians. The major players in the mobile networks market are Telkomsel, XL Axiata, Indosat Ooredoo.

Telkomsel is the first, largest, and most important telecommunication company in the country (about half the mobile market share) providing GSM, 2G, 3G, and 4G in Indonesia.

Indonesian banking system

Bank Mandiri
Bank Rakyat
Bank Central Asia
Bank Negara
Bank CIMB Niaga
Bank Danamon
Bank Permata
Panin Bank
Bank Tabungan Negara

Each of top 4 banks (Bank Mandiri, Bank Rakyat, Bank Central Asia, Bank Negara) holds a market share no more than 10–15%.

When compared to the market share of any Indonesian telecom company, it is clear that the mobile providers are able to reach the client a lot better. The solution to this problem seems to be simple and easy – reaching the unbanked client through a telecom.

Mobile financial services

The research by Statista predicts the inevitable growth of mobile payment transactions. The transaction value of the mobile POS payments sector is reported to amount to $607M in 2019. The number of mobile POS payments users is likely to reach 75.9 million by 2023. Mobile POS payments penetration rate makes up 15.9% in 2019 and is going to be 75.9% in 2023:

The largest part of mobile payments users are low-income residents making up a share of 49,2%. This reaffirms the fact that low income is not associated with financial exclusion, making this population segment attractive for financial institutions.

The most popular e-wallets in Indonesia are Ovo, GoPay, Dana, LinkAja, ShopeePay, Jenius, Moka, Xendit. The study shows that 58% of Indonesians give preference to Ovo, 23% favor GoPay, 6% – Dana, and 1% – LinkAja. The remaining 12% of the respondents like to pay by cards (Flazz, Brizzi, Mandiri E-money).

The above-mentioned e-wallets predominately offer B2C services – they do not differ significantly being used to store e-money, make digital transactions, pay for bills, and purchase e-commerce and digital goods.

The way to ramp up financial inclusion in the country

There are two global ways to trigger financial inclusion:

1. financial inclusion led by the bank
financial inclusion led by the telecom

The first type of financial inclusion implies employing banks (rather than telecoms) to have commercial entities increase banking penetration among the unbanked population. Indonesia is on this track so far. There are rather tight restrictions on the part of the government trumpeting the necessity of promoting financial inclusion in the country while at the same time hindering MFS development. In contrast, telecom-led financial inclusion is a worldwide practice used in the overwhelming majority of countries. Telecom companies, with their overarching market shares and a great customer base, are supposed to collaborate with financial institutions, assuming the function of client acquisition.

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