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lobal online payment service provider PayPal, will expand its business to Indonesia’s small and medium enterprises (SMEs) as well as large companies by forming a partnership with Doku, an Indonesian online payment gateway company.

Faraz Ahmad, PayPal general manager for Southeast Asia, said in Jakarta on Wednesday that PayPal had witnessed “good organic growth” from their business of providing SMEs with payment services.

“Historically, [SME] merchants come to us,” he said.

PayPal works by encrypting financial transfers between devices. The company has at least 117 million active accounts worldwide and facilitates transactions in 25 different currencies. In 2011, the company handled US$118 billion in payment transactions.

Yet, he pointed out that “the story was very different” when it came to netting enterprises, given that these enterprises had “very complex” system requirements in relation to payment gateway services.

“Typically, they require a lot of customization,” he said. Therefore, he added, PayPal has decided to join forces with Doku, given that Doku’s client list included enterprises.

PayPal charges a fee of 2.9 percent per transaction, plus $0.30 charge, although the fees could be readjusted depending on factors such as increased transaction volume and the nature of business the merchant was in.

Nabilah Alsagoff, chief operating officer of Doku, said that the company handled around 300 enterprises, including airline operators, online ticket boxes, import and export companies and companies in the tourism sector.

Observers have previously pointed out that airline operators have played a key role in introducing the online payment concept to Indonesians by enabling people to purchase their tickets through airline websites.

Doku’s clients include state-owned airline operator, Garuda Indonesia, online ticket box Raja Karcis, and children’s play land Kidzania. Doku, in a unified method, connects these clients with six banks, including Bank Mandiri and Bank Central Asia (BCA).

She further said that, although Doku had discussed partnership with PayPal for over two years, they decided to seal the deal this year given that merchants had now grown more aware of the importance of allowing online payments and e-commerce.

A survey by Frost & Sullivan predicts that Indonesian e-commerce transaction revenues will hit $650 million in 2015, 40.2 percent more than in 2010.

“They [merchants] are now saying that they want to expand their customer reach,” she said, adding that 15 percent of online transactions came from foreign buyers.

She added that with PayPal on board, merchants could now accept payment in foreign currency. Hence, the company would start offering companies, especially those in tourism, airlines as well as import and export, an extension of services to include PayPal.

“PayPal facilitates cross border payments and allows our merchants customers to pay in the currency they are most comfortable with,” she said.

She further added that PayPal would help build the trust of consumers toward a merchant.

One of the greatest challenges e-commerce faces, industry insiders pointed out, was building
consumer trust, especially for Indonesian consumers, who are still testing the waters regarding online purchases.

She added that the company saw Rp 2.5 trillion (US$260.41 million) in transaction volume go through their system in 2011, and expects the number to double by the end of this year.

“Our forecast next year is Rp 7 trillion to Rp 8 trillion,” she said.

“We have also targeted to expand our client base from 300-500,” she added.