Indonesia has emerged as the largest digital payments market in ASEAN. The volume of payments jumped almost 40% in 2020, and e-commerce platforms doubled their transactions to about 430 trillion rupiah (about US$30.1 billion)9.
This is symptomatic of a fundamental shift in a commercial culture that formerly valued cash transactions above all others – partly because Indonesia’s scattered archipelago of 6,000 inhabited islands left many communities with no alternative option.
The change has been accelerated by Indonesia’s central bank, which has introduced a mandatory national QR code system (the Quick Response Code Indonesia Standard, or QRIS) with the purpose of stimulating interoperable digital payments among the country’s 65 million MSMEs and the many consumers who have difficulty accessing credit cards and other mainstream financial services.
This is particularly important for Indonesia’s future growth. MSMEs account for about 61% of the country’s economy but access to credit is an ongoing problem. A US$50-70 billion financing shortfall in the MSME sector has resulted in an estimated US$130 billion in lost value creation.
Banks have an important role to play in plugging these gaps and driving transformation.
“In the e-money market, banks will increasingly serve as funding conduits because growth in this market hinges on increasing the levels of card and bank account ownership,” said Winnie Yap, Head of Global Liquidity & Cash Management, HSBC Singapore. “Mobile wallets need links with bank-run infrastructure to draw funds into their proprietary systems.”
In the Philippines, it’s a similar story. While remote, rural areas of the archipelago remain cut off from the digital economy by underdeveloped infrastructure and skills shortages, digital adoption has still taken off. Among digital merchants, 97% accept digital payments and two-thirds have adopted digital lending facilities. According to one survey, about 40% of merchants say they would not have survived the pandemic without access to digital platforms.10
Likewise, as the region’s biggest recipient of overseas remittances, mobile wallets have partnered with banks and other service providers to offer cheaper international transfers as a primary feature.