#Asia Not so fast: Indonesia’s mobile commerce growth is slower than thought

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While mobile commerce’s future remains promising, a MasterCard report revealed that growth is not as steep as expected

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Growth of Indonesian mobile commerce is often perceived with great prospect, with e-commerce platforms claiming that the majority of their National Online Shopping Day (Harbolnas) purchases coming from mobile device. In fact, Tempo reported that Kun Arief Cahyantoro, an e-commerce expert from Bandung Institute of Technology, predicted mobile commerce growth to reach up to 172,8 per cent by 2017.

However, a recent report from global financial service company MasterCard revealed that it might not be the case. While the number of mobile commerce purchases by Indonesian respondents grew between 2013 and 2015, the number is not as significant as expected.

The Mobile Shopping Survey was conducted between October to December 2015, taking data from 8,500 respondents aged 18 to 64 years old in 14 Asia Pacific countries.

While Indonesia remains in top positions of Asia Pacific countries who purchased through smartphones — after India, China, South Korea, and Thailand– the growth rate between 2014 and 2015 was only 0.06 per cent, from 54.9 per cent to 55.5 per cent.

This is a relatively small number especially when compared to India’s (0.35 per cent) and neighbouring countries such as Singapore (0.18 per cent) and Thailand (0.23 per cent). Countries who experienced slower growth than Indonesia are Malaysia (0.01 per cent) and Taiwan (-16 per cent).

Another important data is on the number of Indonesian respondents who use digital wallet services. Despite new services launched by banks and financial institutions who partner with e-payment startups such as Dimo and Doku, the growth rate between 2014 and 2015 actually declined by 4.5 per cent, from 15.6 per cent to 11.1 per cent.

In this section, Indonesia became one of the countries with slowest growth together with Malaysia (-1.2 per cent) and Vietnam (0.19 per cent). Meanwhile, top performing countries in the list are Singapore (17.6 per cent), China (16.5 per cent), and Australia (9.0 per cent).

Also Read: Step aside China, India is the go-to market for mobile payments

Why are mobile commerce and payment adoption in Indonesia tends to be slower?

First and foremost, we should look at the most basic problem of all: Financial inclusion rate in the country.

Data from World Bank Financial Inclusion Database shows that in 2014 only 36 per cent of Indonesia’s 250 million population have access to bank accounts, compared to Singapore (96 per cent) and Malaysia (81 per cent). Though population size needs to be taken into account, the fact that the majority of Indonesian citizens have no access to basic banking service is a concern on its own.

The quest to transform the country into ‘a cashless society’ –a mission brought forth by the government through Bank of Indonesia– is very much an uphill battle.

Then there is also the matter of trust; even those with access to banking services, such as the country’s growing middle class, would often be wary about using mobile payment services for security reasons. This is related to lack of clear regulation on online financial services — but thankfully, the newly launched e-commerce roadmap will also include strict consumer protection and the setting up of a National Payment Gateway.

Also Read: What is the key to building a Fort Knox for the mobile payment space?

What can be done about this? Another report by certified public accountant firm EY called “Mobile Money – the next wave of growth” cited the importance of ‘strong enabling environment’ for long-term success of mobile payments (and eventually, mobile commerce).

“Around the world, support from governments and central banks has provided the bedrock for scalable mobile money transfer services,” said the report.

It also stated that while ‘full interoperability is proving difficult to achieve’, with proper government support, it is something that can be achieved.

Perhaps the future is not so dark after all, considering the steps Indonesia had taken.

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Image Credit: Gratisography.com

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