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Major lenders see gold in e-commerce boom
Major domestic lenders are racing to get a foothold in the growing e-commerce industry, as more people are using digital transactions for online shopping
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ajor domestic lenders are racing to get a foothold in the growing e-commerce industry, as more people are using digital transactions for online shopping.
As digital infrastructure improves and more people access the internet, big and small businesses in the country are taking to the online world to expand their marketing and boost sales, according to Bank Central Asia (BCA) consumer card head Santoso.
Santoso said he was convinced that that trend would last, given that the government had thrown its support behind online marketplaces in a bid to boost economic activity in the digital age.
'E-commerce will be prospective for the future of Indonesian businesses. It's not impossible for local e-commerce firms to become global players like Amazon and eBay someday,' he said recently.
On Friday, President Joko 'Jokowi' Widodo launched the country's 4G/LTE telecommunication network and expressed high hopes for the application of online technology.
'The digital revolution will revolutionize Indonesia's economy,' he said in his speech.
Santoso added that the e-commerce industry was becoming more popular due to macroeconomic challenges faced by the country's real sector in the past two years. These include rising operational costs for physical commerce, such as retail outlets, hypermarkets and wholesalers.
The rapid growth of e-commerce transactions in the past few years was triggered by the country's rising internet usage, with user numbers growing by an average 23.6 percent each year to 88.1 million as of last year, up from 16 million in 2005, according to data from the Communications and Information Ministry.
The data also show that Indonesia's total e-commerce transactions amounted to US$12 billion last year and were expected to grow tenfold to $135 billion by 2020.
However, Lila Nirmandari, chief financial officer at Elevenia, one of the country's popular online marketplaces, said 57 percent of e-commerce transactions nationwide still relied on the traditional method of ATM transfer, followed by 38 percent through cash on delivery (COD), credit cards, internet banking and electronic money (e-money) and the remaining 5 percent via online debits.
The high reliance on ATM transfers, also known as the 'two-step way of payment', is deemed very inefficient, as customers need to leave their computers or gadgets to find ATMs, rather than use credit cards or phone applications, according to Bank Mandiri vice president for e-banking Budi Hartono.
'E-commerce players tend to like a seamless and continuous payment system, which is integrated with their platforms, so that customers would have a simple yet unique experience when shopping online,' Budi said.
Catering to that demand, Bank Mandiri senior executive vice president for transaction banking Rico Usthavia Frans said the lender's cardless e-money product, called Mandiri e-cash, could act as an online payment tool that was 'versatile and simple' for e-commerce and other transactions.
Rico said the bank expected to move forward next year with innovations for its e-cash system with a smartphone app that would enable users to do small payments as well as withdraw money from Mandiri ATMs using only their cell phone numbers.
Meanwhile, BCA's Santoso said that his company had also introduced a cardless e-money app called Sakuku and was eager to offer more simple online payment solutions, including an upcoming initiative for online transactions on social media platforms.
Joining the race, Djamin Nainggolan, senior vice president for consumer asset and alternative channel at Bank Danamon, said the lender already had its own cardless e-money app called D-Cash that allowed customers to perform retail transactions and transfer funds through Facebook.
'We will also introduce in 2016 a new cell phone feature for non-smartphone users, because despite the country's high number of cell phone owners, only 30 percent of them use smartphones,' Djamin said, adding that the new feature for regular cell phones was expected to provide banking access to a wider population.
E-commerce players are set to continue to innovate on digital features in the near future, including using online chatting platforms as tools for e-commerce payments, according to Indonesian E-commerce Association (idEA) chairman Daniel Tumiwa.
'The future of social media and e-commerce will be in online chatting platforms, where people could do faster transactions. China has led this kind of e-commerce trend through WeChat, which enables people to interact with sellers during online shopping and pay their purchases right away through their account numbers there,' he said.
As digital payment systems get more advanced each day, the Financial Services Authority (OJK) is in the process of revising its regulations on e-banking, which were inherited from Bank Indonesia's (BI) previous rules, so as to ensure better risk management of banks in that field.
