Internet payment gateway

Fintech services that are focusing on supporting payment activities are referred to as Internet Payment Gateway (IPG). The services can be categorized into three areas: those that are based on the money flow (from customers’ bank accounts directly to sellers’ accounts or via IPG aggregator accounts that kept the money temporarily); based on sources (hard cash, credit cards, debit cards, e-money, personal bank accounts, corporate saving accounts, micro loan accounts and commercial loan accounts); and based on payment channels (via agents, including through a point-of-sales system and gadget-based channel system, or without agents).

Through such approaches, fintech companies offering payment gateway services are trying to build an integrated payment solution to support, for example, sales transactions, billing payments and fund distributions, through various delivery channels (electronic data capture machines, websites, mobile gadgets) and to facilitate interbank or multi-merchant transactions.

Those services are translated into various products and attractive transaction programs, such as gift cards, benefit cards, prepaid cards, loyalty programs, member cards, coupons and vouchers, to guarantee consumer satisfaction. In the public service sector, fintech facilitates the payment process through financial institutions (money wiring), billing payment (electricity, landline, water, property taxes, insurance, state-sponsored health insurance or BPJS), distribution of funds (pensions, school operational funds, scholarships for poor students) and other micro transactions.

The benefits

The IPG services will open up opportunities to introduce more payment options, help customers access a faster check-out procedure, invent new sales promotions and customer loyalty programs, automate reconciliation reports in real time with high accuracy and quickly validate online transactions. The services can also minimize fraud risk, improve the efficiency of the payment management system and combine the goods and services distribution channel to speed up the time-to-market – all will help optimize business performances.

With a long list of benefits, IPG services will provide consumers with a guarantee in terms of security and practicality. Retail merchants, meanwhile, will enjoy bigger business opportunities, improved certainty in revenue targets and a minimized risk in fraud and fund leaks.

(Read also: Peer-to-peer lending: A new form of financial inclusion)

Growth potential

The expected growth potential of payment gateway companies is massive, along with the development of 2.6 million wholesale retailers and the growth of modern retailers in Indonesia. Bank Indonesia (BI) has estimated the amount of online transaction payments to reach US$130 billion in 2020, up by 778.4 percent from $14.8 billion in 2016.

The huge potential is also reflected in the growth of the country’s digital landscape, in which 72.7 million of the country’s 255.5 million population are active internet users and 74 million are active social media users. The number of mobile connections has also exceeded the country’s population with 308.2 million, explaining why Indonesia has a whopping 64 million active social media users that go online using mobile gadgets.

(Read also: The emergence of fintech: disruptive or collaborative?)

Public awareness

The government should help regulate IPG activities by improving regulations regarding data security; electronic signature usage and its validation; fingerprints or biometric uses and validation; and, of course, the payment digitalization itself. The government is also expected to encourage small banks to introduce e-payment services to make them fintech-ready and shift further from manual to digital transaction.

Intensive dissemination campaigns are also highly needed to educate the public that the payment solution is not meant to replace transactions with physical money, but to introduce digital transactions that will create efficiency, with guaranteed security and reliability.

Meanwhile, education to financial industry players are also needed to ensure that payment gateway companies will not replace banks, but instead serve as a complement or supporting element for various types of transactions and provide access to financial services for more people in the archipelago.

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