Indonesia's e-money space heating up with new players

Conglomerate Lippo's Multipolar is the latest to jump on the bandwagon. Indonesia now has to ensure synergies between telcos and banks, and watch out for anti-competitive behavior.
Written by Goutama Bachtiar, Contributor and Blogger

Multipolar Technology, an affililate of Indonesian conglomerate Lippo, last month announced it would enter electronic money services with a US$5 million investment in its latest subsidiary.

It had set up PT Artomoro Prima Internasional, which will aim to develop an e-money service within five years, according to Detik.

This marks more than 12 similar services available in Indonesia flourishing ever since the Indonesian Central Bank (Bank Indonesia or BI) introduced Regulation (Peraturan Bank Indonesia or PBI in short) No. 11/12 of 2009. This allowed banking and non-banking financial institution to offer such services.

Show Me the E-Money (Credit: Pieria)
Indonesia's e-money space heating up with new players.

I’d like to flip the page, and look at the challenges and obstacles as the e-money space evolves especially with a newcomer entering.

Regulators tackling interconnectivity

From the regulator end, BI has been playing an active role in driving e-money utilization over the past two years to achieve what they term "financial inclusivity" and less-cash society. Either aspects will help the administration arrangement and expense alot as 120 banks are currently under their folds.

A problem they are facing at the moment is interconnectivity. Since this is relatively new, e-money providers see it as competitive advantage to seal exclusive deals with their preferred merchants. Hence one reader is allowed to serve only one card issued by a bank or provider.

However from what ZDNet understands, the Central Bank now has the power to ask providers to open themselves to others.

Telcos vs banks

Another challenge BI acknowledges is competition between telco and banking sectors.

For example, earlier on February, Indonesian telco Indosat's subsidiary, Artajasa, marked a milestone by kicking-off "MYNT" e-money. From the banking sector, state-owned Bank Rakyat Indonesia (BRI) unveiled a target of reaching three million e-money cards by year-end.

In August, BI's deputy director of accounting and payment systems, Ida Nuryanti, raised the urgency of a "hybrid" approach to achieve synergies from a strategic alliance. For example, telcos which are very strong in infrastructure can benefit from banking ATM networks for topping up of credits. Conversely, banks could capitalize on telcos to reach their customers.

For reference, the nine telco operators in Indonesia will be able to capture 236.8 million subscribers residing across 12,000 islands. So we'll probably see them working more closely very soon to reach the unbanked segment.

One thing left to see is how BI communicate the value of using e-money to unbanked communities of around 50 million out of Indonesia's 245 million population.

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