TheJakartaPost
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PayPal in our pockets
As the country’s economy continues to thrive and consumer spending continues to grow, there is huge potential for cross-border commerce to develop in Indonesia.
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here was a largely unnoticed factor amid the backlash against the government’s recent crackdown on tech companies, also known as electronic service providers (ESPs).
While the public loudly condemned the Communications and Information Ministry’s regulation for accruing to itself the potential ability to stifle freedom of expression through censorship, the companies themselves quietly complied, with very few not registering with the ministry by the deadline.
Social media was flooded with complaints from freelancers and e-sport enthusiasts who could not access their PayPal accounts. The United States company was blocked due to its failure to register before the deadline and was only granted temporary access later because of the public outcry.
Despite the fact that there are not as many PayPal users in Indonesia as in other countries, the uproar surrounding the company’s blockage reveals how cross-border transactions through electronic payments or digital wallets are an economic force to be reckoned with.
The digital payment sector has made significant progress in the country amid a declining use of cash as a method of payment. According to Statista, the market share of digital wallets at points of sale in the country grew from 5 percent in 2017 to 19 percent last year, surpassing credit cards and debit cards, each of which accounted for 12 percent.
The rapid expansion of digital wallets has been assisted by the rise of e-commerce, transportation and delivery services run by local tech giants like Gojek, Bukalapak and Tokopedia, amid low penetration of card and other banking services in the country.
The Center for Indonesian Policy Studies (CIPS) says at least 5 million freelancers in Indonesia received their income from overseas, mostly using PayPal to get paid. They prefer PayPal despite a significant cut taken per transaction as international bank transfers and other forms of payment are more complicated.
Similar international wallets like Google Wallet or Apple Pay are also available in Indonesia but they involve fewer merchants and are more complicated compared with PayPal, which can be used easily across digital ecosystems, beyond Google and Apple.
There are also local alternatives such as Doku and Midtrans, whose services are cheaper than PayPal. But the digital infrastructure of these companies has yet to make it seamless for cross-border transfers.
As the country’s economy continues to thrive and consumer spending continues to grow, there is huge potential for cross-border commerce to develop in Indonesia.
In its report titled “2020 E-commerce Payments Trends”, JP Morgan recorded that cross-border e-commerce is “exploding” in Indonesia as the country experienced a more than eightfold increase in imported e-commerce parcels, from 6.1 million packages to 49.7 million in 2019.
While COVID-19 may have slowed down the growth of the digital wallet sector, it is not hard to imagine that things will start to bloom again given recovering consumer confidence in the country.
The question is whether Indonesia is ready to seize this low-hanging fruit. Without proper government policies and sufficient infrastructure to support the growth, this will be another story of a missed opportunity for Indonesia, which lost its growth momentum during the oil boom of the 1990s and the first commodity boom in the 2000s.
