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Beyond the Transaction: Every Transaction Has a Story

Delivering on Financial Inclusion in Indonesia

Indonesia Financial Inclusion

Already Southeast Asia’s largest economy, Indonesia is a vast country made up of 238 million people and projected by McKinsey to become the world’s seventh-largest economy by 2030 – which would put it ahead of the more developed nations of Germany and the U.K.

While ranked 15th in the world for gross domestic product, only 50 million adult Indonesians have access to a bank account – access is a major hurdle across Indonesia’s sprawling archipelago of 17,000 islands.

In line with this the Indonesian government through the central bank launched the National Non-Cash Movement in Jakarta, aiming to build public awareness, as well as that of the business community and government institutions.

The fundamental first step of financial inclusion is providing consumers with a unique identity, based on which financial services can be delivered and ultimately linked to a payment account.  Indonesia already has one of the largest national identity systems in the World, e-KTP.From here, there is the potential to link the e-KTP to various government support programs with a payment instrument instead of distributing cash.

Only 20 percent of Indonesians have access to financial services, and its debit card penetration rate is approximately 30 percent, mostly concentrated in urban cities. But then, over 90 percent of Indonesians have a mobile phone and that represents a massive opportunity for mobile commerce and the ability to access financial tools.

So what is financial inclusion all about in an emerging market like Indonesia?

It’s about having a safer place to keep money and gaining access to safer, cashless and electronic forms of payments such as debit, credit or prepaid cards. It is about creating opportunities for people to harness their own skills and resources to improve their quality of life.

Innovations in payments technology also play a key role as they can quickly bridge the gap between the formal financial services sector and the millions of low-income, underserved or unbanked individuals across the nation.

There are many opportunities for new programs, ranging from greater government adoption to e-Services and payments, to the adoption of “open loop”prepaid programs commonly used in other ASEAN countries for supporting the expansion of financial services to non-banked mobile phone customers as well as the delivery of government (and payroll) programs.

It is largely acknowledged by most of the key policy makers and market participants that financial inclusion must happen in Indonesia. It is no longer a question of what and if, but rather a question of when and so MasterCard Indonesia is ready to support the achievement of this important national objective with payments technology, expertise and resources.

This article first appeared in Koran Sindo on 23 September 2014.

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