Moreover, 73 percent of them are 19 to 34-year-old, highly mobile “digital natives”. This age group generally not only evaluates products or services — including payment options — solely from their function or utility, but also their convenience of use, delivery time and efficiency. The adoption of digital payment services delivered by FinTech providers can fulfill such a demand as it makes payment transaction more efficient, practical, instant (one-touch payment) and secure.

Interestingly, contrary to the common assumption that FinTech benefits are only enjoyed by those who are technologically literate and connected to the internet, research conducted by the Indonesian Institute of Sciences (LIPI) found that those who are marginalized in regard to technological access and capability can better adopt digital payment methods. This is supported by the findings of a partnership between a digital payment FinTech Provider, Mandiri e-Cash and a local cooperative in Nusa Tenggara Barat named Wira Singa.

We conducted a survey involving 46 respondents who were users of four FinTech companies, namely e-Cash, T-Cash, OVO and TokoCash. Later, the analysis will be based on two classifications: e-Cash users who created an e-wallet account through a local cooperative, and the other three FinTech users, called “General” FinTech users, who made a direct partnership with FinTech providers so that they can accept payments using those platforms.

The first category lives in rural areas, whereas a majority of the latter are running a business in center of the city. The inclusiveness of e-Cash services can be seen mainly from two aspects other than their rural-urban differences. First, while all general FinTech users own at least a smartphone and have internet access, 65 percent of the e-Cash users only own a phone that only be used for calling and texting using Short Message Services (SMS). Second, a majority of them (65 percent) also lack internet connection.

Innovative services provided by e-Cash allow them to enjoy the benefits of digital payments as they do not require a smartphone nor internet connection. While general FinTech companies requires an internet connection for an Electronic Data Capture or QR code scanning feature to make a payment, e-Cash payments can be done from a conventional phone through Unstructured Supplementary Service Data, a service resembling SMS.

Currently, there are about 300 villagers — mostly farmers and small retailers — who have opened an e-Cash e-wallet account. By creating an e-wallet, they can enjoy several advantages. First, purchases and sale transactions such as the purchase of agricultural equipment between users of
e-Cash and the Wira Singa Cooperative can be done using e-Cash. Therefore, transactions can be done faster and are well-recorded as they do not require cash, which sometimes can be cumbersome.

Second, they can also use other services that are not sold by the cooperative, such as pay electricity bills, buy phone credit, pay for the national health insurance and so on, from anywhere. Such facilities eliminate their transportation costs because they do need to go to a modern retailer or post office. Third, cooperative members will get a share of the profit made by the cooperative from transactions made through e-Cash.

Not only is it beneficial for its users, e-Cash also generates benefits for the cooperative itself. First, for every transaction made using e-Cash, additional income is generated from the e-Cash provider, as much as Rp1,000 (7 US cents) per transaction. Second, their bookkeeping becomes well managed as transactions are recorded automatically and accurately.

Second, considering that the share of profit and prizes are only given to cooperative members, it can be an incentive for non-members to become members and reap those benefits. Given this, the number of Wira Singa cooperative members is likely to increase faster.

Although they stated that they get many benefits from using digital payment systems, surprisingly, when we asked how they preferred to make their payments, a majority said they favored cash over digital payments. This indicates that there is either a conceptual or technical problem.

It is likely that they do not fully understand the concept, flows, benefits and consequences of e-wallets and digital payments. This is proven by the fact that they doubt the security of their funds. To minimize their doubt, cooperative officials created a double recording system — other than records stored in e-Cash server — of every transaction made by e-Cash by writing it manually into a book.

This certainly contradicts the efficiency principle of digital payments. From the technical aspect, it can be caused by several issues, such as stability of cellular network in the neighborhood and the reliability of the technology behind it. In addition, in order to make a digital payment, they require a one-time password (OTP) in the form of an SMS as a transaction verification. Each SMS will be charged Rp 550 by cellular providers, which is considered a burden for some e-Cash users.

Judging from the findings, there are some policies that can be made by authorities or stakeholders. First, a partnership scheme with local financial institutions has been proven to accelerate the penetration and inclusiveness of digital payment use. Therefore, they should encourage such types of scheme.

Second, although it may sound like a cliché, but it is very important to raise awareness about the concept of e-wallets and digital payments, particularly in rural areas and people who are considered technologically illiterate.

Third, to waive or at least reduced SMS charges for transaction verifications, it would be better to encourage mutual partnership agreements between FinTech providers and cellular providers.

_____________________

The writer is a researcher at the Economic Research Center of the Indonesian Institute of Sciences (LIPI).
The views expressed are his own.

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