3 Reasons Why E-Money Stalls in Indonesia
Whatever happened to e-money in Indonesia? The field seemed so promising but the numerous attempts by startups, big telcos, and even bigger banks met no major success. After years of trying, we have a handful of closed-loop card based transactions to pay for toll roads, bus fare, or ticket to the movies, but not much else. The market will likely stay small and fragmented if these three issues are not resolved:
1. Trust
It’s amazing how all those brilliant minds in banks and telcos ignore this basic building block when it comes to customer relationships. The lack of trust Indonesians have for their mobile operators and financial institutions is reflected in high churn rates and low NPS scores. The reasons are numerous (selling customer’s private numbers to advertisers, hidden service charges) yet companies continue to prioritise user acquisition (via short term campaigns) over the long term goal of profit optimisation (via improving recommendation scores).
Be honest, be reliable, keep confidences: if you can’t provide these for your customers, how can you expect them to trust you with their money?
Being honest, being reliable, keeping confidences: without these, your customers won’t trust you with money, virtual or otherwise (tweet this)
2. Cash Complimentary
Don’t expect e-money to replace cash. Rather, expect e-money to compliment cash.
Like many developing economies, Indonesia is a cash-based economy. Deal with MSMEs (which comprise 97% of businesses in Indonesia) and they will most likely insist on cash payments. The act of converting e-money to cash needs to take no effort at all, otherwise people would just avoid e-money altogether. Telcos may force their employees to take part of their salary in e-money format, but it won’t motivate increased usage. Of the varieties of human activities one conducts in Indonesia, the majority requires one to simply have cash in hand.
When it comes to cashing out virtual currency, current regulations favours the top four banks. But the four top banks are mostly focused on urban areas. How about the other half of the population?
Don’t expect e-money to replace cash. Rather, expect e-money to compliment cash. (tweet this)
3. The Rural Early Adopters
The prevailing rhetoric around e-money refers to how the technology could address the challenge of getting unbanked Indonesians (up to 80% of the population) into the financial system. But what’s the reality?
Current efforts are biased to capturing urban early adopters. The technology being developed and the benefits being communicated reflect an effort to address Rogers’ Five Factors for Diffusion of Innovation, but they exclusively address the urban segment of the population.
No one uses technology for the sake of using technology. Except maybe technologists.
This urban bias is the unintentional result of asking the wrong questions when studying the market. Thus, the industry base its decisions on reports that state such things as, “the market is interested in adopting m-banking services because it saves time.” If time savings is really the number one advantage m-banking has over its alternatives, then it is more relevant for those who experience time poverty. That’s something that matters more for someone who has to deal with Jakarta’s heavy traffic everyday than someone living in rural Sukabumi or Wonosobo.
To be successful, e-money and m-banking need to be aimed at Rural Early Adopters, not just their urban brethren.
E-money needs to be aimed at Rural Early Adopters, not just their urban brethren. (tweet this)
The three issues addressed above are fundamental issues that are easy to spot but complex to address. Whether it would be the government, private sector, or academics who take the first step, the answer starts with getting a better, more meaningful understanding of the Indonesian people.
image courtesy MEMANG RIZALIS ENT.
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