The rapid development of financial technology (FinTech), which involves the delivery of financial services that use the latest technology and innovation is also visible in Indonesia. Stronger smartphone penetration has helped speed up the digitalization of the finance industry further, increasing from 32.6% in 2014 to an estimated 47.6% in 2019.

More and more Indonesians are also talking about going cashless and digital transactions are getting more popular. Compared to conventional transactions, digital transactions seem to be more dominating in recent years. Public and online transportation services, electricity bills, food service, and cellphone credit, now can be paid easily through any kind of digital transaction. Now, let's take a quick look at some interesting insights about FinTech in Indonesia.

The differences between e-money, e-wallet, and payment gateway

Indonesians seem to have embraced cashless transaction wholeheartedly, with a wide range of businesses and services across the city offering them as a payment alternative. Some cashless services refer to themselves as e-wallet, while others say e-money or payment gateway. So, what’s the difference between each of those terms?

E-money, as you may know, is a short form for electronic money. It’s a digitalized system of payment with monetary values stored electronically on devices, such as a chip card or a hard drive in personal computers or a server. On the other hand, e-wallet is a server-based system of payment, such as DokuPay, BNI Yap, Dana, and Bayarind. However, e-wallet is also a form of e-money. E-wallet allows consumers to use their smartphones to pay or make product purchases without a card. All data is stored on the operator's server, so there’s no need to bother carrying money or cards to make transactions.

Most of the e-wallet segmentation itself is online shoppers and they need to install the application to make transactions. Thus, in terms of efficiency, the popularity of e-wallet keeps increasing since it’s installed on the phone with no additional media needed.

Meanwhile, payment gateway is a service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for online transactions or business.

The current market share of e-money and e-wallet in Indonesia

According to the data compiled by iPrice and App Annie, GoPay is an e-wallet with the largest number of active users and downloads in Indonesia in the second quarter of 2019. Ovo came in second place, followed by Dana and LinkAja.

The future of FinTech in Indonesia

As a country with vast internet penetration and smartphone usage, also with rapid middle-class growth, the FinTech industry will have a bright future in Indonesia. 

Because of its growth potential, there are three actions should be taken:

  • Increase public awareness about financial and technology literacy
  • Do collaboration and consolidation between FinTech companies, banks, and other financial institutions
  • The government should create a sound business environment and better FinTech regulation

The current popularity of FinTech will continue to be at the forefront of Indonesia’s startup scene. It also may give birth to new FinTech-related business models such as financial protection services. All in all, Indonesia’s FinTech landscape is heating up and we are excited to see its impact in the future.

Author: I Ketut Hartawan (Sr. Business Development Manager)