Jakarta. Technological advancement in the form of digital financial services can give a boost to financial inclusion, but challenges still remain, according to the recent Y20 Indonesia 2022 Second Pre-Summit in Lombok, West Nusa Tenggara.

The use of digital financial services is not possible without internet access.

A study by digital survey-based research firm Cint revealed 61 percent of youths across the G20 countries had issues with internet connectivity. The problems range from slow, unstable internet connection to prohibitive prices. 

G20 country Indonesia also struggles with its internet infrastructure gap. People living in remote villages, particularly in the eastern region, have to cope with an unreliable internet connection. This might pose a hurdle to financial inclusion through digital means.

Another alarming statistics is that only 0.5 percent of all households in Indonesia are advanced users of digital financial services, which would include remittances and insurances, according to the World Bank’s flagship report “Beyond Unicorns”.

The report attributed this low digital financial services adoption to the lack of trust, even for the more sophisticated would-be users who worry about unauthorized data disclosures.

Financial literacy is also key to financial inclusion. 

According to Youth and Sports Minister Zainudin Amali, the young generation should improve their literacy on digital financial services amid the pandemic-driven cashless trend. 

“The massive development of digital financial services, if not coupled with an increase in youth’s literacy, will certainly have a negative impact. The Youth and Sports Ministry encourages the young people to become more curious and have greater interest in reading about digital finances,” Zainudin said in his virtual remarks at the Y20 Second Pre-Summit on Saturday.

It is also crucial to verify all information related to digital finances by checking credible sources to avoid scams.

"There are currently many cases of digital finance misuse by irresponsible parties," Zainudin added.

The pre-summit also revealed that the Indonesians' participation in the investment sector was still far behind its digital inclusion.

Data shows Indonesia is home to a young, tech-savvy population. Indonesia’s population stands at a whopping 270 million with a median age of 30 years old. About 150 million people of the population are internet users who mostly access the net via their smartphones. 

“Despite all this, study shows that only 5 percent of the population have ever invested. Investment products remain inaccessible and expensive for the average consumer. Most people have no idea where to start when it comes to investing," Ronny Hutahayan, the chief of special projects at investment app Pluang, said.

Close the Digital Divide, Improve Financial Literacy

Efforts are currently underway to close the digital divide and boost financial literacy — two things that can lead to better financial inclusion. 

The government, for instance, is ramping up its focus on providing WiFi connectivity to villages.

"In the past, it has always been village electrification. Now we are entering the new era of [bringing] WiFi to villages. We build WiFi connectivity using broadband satellite access that can reach every area across the archipelago so as to give access to inclusive information for all Indonesians,” State-Owned Enterprise Minister Erick Thohir told the Y20 pre-summit.

Fellow G20 member UK is helping Indonesia address its digital divide with its Digital Access Program (DAP). 

At the DAP, the UK is working with relevant ministries in Indonesia to improve the existing programs on digital connectivity.

The UK also teams up with local non-government organization Commonroom Network Foundation to set up community internet infrastructure for the unconnected indigenous village of Kasepuhan Ciptagelar in Sukabumi regency. Partnerships with other organizations also resulted in training programs for marginalized groups in the eastern part of Indonesia, according to DAP leader Chris Agass.

"We have noticed the challenge in the security side in a lot of our training [programs]. There is a low level of cybersecurity awareness and understanding online harms, including when accessing digital financial services on what sort of data are you sharing and so on," Chris said.

Startups like Pluang have also launched educational initiatives on financial literacy. Among others is Pluang Academy, a platform where people can learn investing 101.

“There needs to be joint efforts between public and private sectors to promote digital financial awareness and hence ultimately achieving financial inclusion. And the starting point would be financial literacy, [...] which encompasses budgeting, debt management, saving, and investing,” Ronny said.