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Three steps to large-scale financial inclusion
The more agents available to assist in helping people use and understand cashless technology, the bigger the impact to Indonesia’s financial inclusion and cashless society objectives.
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Illustration of the use of e-wallet. (Shutterstock/Paisit Teeraphatsakool)
T
he declaration by the Indonesian Financial Authority (OJK) that the month of October be recognized as Financial Inclusion Month is an important step in raising public awareness about the importance of financial inclusion, especially here in Indonesia where half of the population is either unbanked or underbanked.
Fortunately, GoPay is just one of many organizations in the banking and nonbanking financial sector that exercises financial inclusion activities. Encouraged by the National Committee for Financial Inclusion (DNKI), Bank Indonesia (BI), and the OJK, we applaud the pockets of activities that are being undertaken in the areas of financial
literacy, financial infrastructure, the drive toward a cashless society, and many other regulatory initiatives.
Unfortunately, we sincerely believe that the independent efforts currently being carried out by the aforementioned organizations are well-intentioned but not enough to result in the large scale financial inclusion Indonesians in the informal sector deserve. To reach large scale financial inclusion is not about taking individual steps but it is about creating an all engaging financial ecosystem supported by a conducive regulatory framework. So where do we start?
There are three key areas.
First, all financial industry stakeholders need to make a true collaborative effort to drive financial inclusion. The government, OJK, BI, banks, nonbank financial institutions, and FinTechs must sit as equals at the policy-making table to use our combined industry know-how, rich data sources, innovative technology and complementary perspectives to bring the unbanked and underbanked into the formal financial system.
A large part of our users are unbanked or underbanked, reflecting the direct access we have to those who will benefit the most from financial inclusion. We always talk about wanting to partner with banks and yes, GoPay has great examples of working together with banks.
Under our Swadaya program, a partnership with BNI Syariah, we created two products together (Tabungan Umroh and Tabungan Siaga) that now have a total of 40,000 new driver customers. That is why we find it unfortunate that some banks still see fintech as a threat.
In a PriceWaterHouse Survey titled “Digital Banking in Indonesia 2018” it reports, “a majority of Indonesian bankers, around 72 percent consider Gojek to be one of the emerging banking competitors with its GoPay and other services.“ We need to be open to be truly collaborative because there is room for all stakeholders and with a diversity of services and service providers, the real winners are the people of Indonesia.
Second, we need to focus on building a conducive ecosystem to help the unbanked. In urban areas, we have been able to build a cashless ecosystem by being present in everyday transactions, from transportation, to food, groceries, services, entertainment, billing, etc. A similar approach needs to be built in rural areas, where most of the unbanked reside.
Government-to-person (G2P) payments, which include social transfers like pension payments, and conditional and unconditional cash transfers for the poor, are significant income sources in rural areas and are excellent fintech use cases.
In the revers, person-to-government (P2G) payments, such as regional taxes and retributions, are also excellent fintech use case. By building a holistic ecosystem we achieve the government’s goal of a cashless society, which is an entry point to access other formal financial services.
Third, we need better utilization of agent networks. Currently, electronic money regulations have a one-size-fits-all approach for agent networks. The regulations only permit banks to utilize individual network agents, significantly limiting the reach to many unbanked and underbanked Indonesians who can greatly benefit from access to those financial products.
Society benefits if regulations takes a more risk-based approach, enabling nonbanks to utilize individual agent networks for specific low-risk activities. The more agents available to assist in helping people use and understand cashless technology, the bigger the impact to Indonesia’s financial inclusion and cashless society objectives.
There is work to do and in-depth discussions to be held but taking these three important steps removes the large invisible wall that has been inhibiting the scalability of financial inclusion. Imagine what we can achieve in terms of financial inclusion in Indonesia when we combine the actuarial prowess of the nonbanking financial sector, the multilayered infrastructure knowledge of banks, the cutting-edge data-driven capabilities of fintech, and the guiding hand of the government and regulatory bodies.
Large scale financial inclusion is possible, and it is possible to extend the benefits enjoyed by, for example, app-based motorcycle taxi drivers through their ability to use their savings to pay for additional school costs, to the millions of Indonesians who are currently part of the unbanked. It all starts with better utilization of agent networks, building the ecosystem to help the unbanked, and real collaboration with all players working on solutions as equal partners at the table.
