Minggu, 26 Maret 2023

How Can European Companies Win in Indonesia’s E-Commerce Market?

Kelvin Phua
27 Okt 2021 | 12:17 WIB
A seller uses their smartphone to process payment from customers in a mall in Depok, West Java on March 21, 2020. (Antara Photo/Andika Wahyu)
A seller uses their smartphone to process payment from customers in a mall in Depok, West Java on March 21, 2020. (Antara Photo/Andika Wahyu)

If you see the words “Southeast Asia” in connection with e-commerce, you probably think of Singapore’s savvy online shoppers or the Filipino e-commerce boom that’s making Manila one of the world’s digital hubs. And for sure, these markets are exciting, important, and will continue to attract investment for a long time to come.

But one country is often left off the list of the region’s digital powerhouses: Indonesia. And that omission is likely to prove an expensive one for companies who don’t capture the opportunities this rapidly expanding market has to offer.

Indonesia’s growing market In 2020 alone, Indonesia’s digital economy grew by 11 percent to a value of US$44 billion. And the digital economy already contributes 4 percent to their national GDP.

This will come as no surprise to seasoned observers of Indonesia’s digital economy, and particularly its payment sector, which is both thriving and innovative. In May 2021, ride-hailing and payments giant Gojek and marketplace Tokopedia, Indonesia’s two biggest startups, merged to form payments and e-commerce giant GoTo.


With more than 100 million active users, the new group is opening up Indonesian and Southeast Asian e-commerce to new users, demographics, and markets. Indonesia’s preferred ways to pay

It would be a mistake to believe that GoTo, or its payments arm, GoPay, are the only kids on the block. There are almost 150 million Indonesians with Internet connections. This massive online population uses e-wallets and a wide range of bank-transfer apps (contributing to nearly 30 percent of online transactions) and a content of other local payment methods (7 percent). Indonesians even use cash in around 13% of online purchases.

One of the highly popular Indonesian payment methods is the local bank transfer app Jenius, with 3.3 million active users, up from 1.6 million just two years ago. Similarly, Indonesian e- wallet LinkAja recorded a 65 percent increase in the rate of new-user sign-ups in 2020. During that time, it quadrupled its transaction volumes and grew its revenue by 250 percent.

Even the Indonesian credit card market has a local twist. Used in just 34 percent of online transactions, cards are mainly issued by global giants such as Visa and Mastercard. But the cards used in 13 percent of transactions are administered by local schemes. This is a substantial chunk of the market which merchants entering the Indonesian e-commerce sector would miss if they only supported the standard payment methods for developed markets.

So, what should merchants, and the service providers who support them, do to prepare themselves for a successful entry into Indonesia’s booming e-commerce and online payments markets? The key is, as ever, localization.

Traversing a dynamic e-commerce landscape

The most obvious way merchants and others entering the Indonesian market need to adapt is by optimizing for mobile. According to the International Telecoms Union (ITU), just 4 percent of Indonesians have a fixed-broadband subscription, while 89 percent have a mobile-broadband subscription. And almost 100  percent of the adult population has a smartphone, while just 19 percent has a tablet computer.

Language is also an important aspect of localization for Indonesians. Over 90 percent of the population speak and read Indonesian, and the most commonly spoken language is actually Javanese, spoken by almost a third of the country’s inhabitants.

It may be worth noting that the English Proficiency Index, which ranks countries by the proportion of their citizens who speak and read fluent English, puts Indonesia at 74 out of 100. Probably the most important requirement, however, is to localize payment methods.

Only 29 percent of all online transactions in Indonesia are paid using globally recognized credit cards. And even this may be an overestimate.

With smartphones now ubiquitous and the uptake of e-wallets, bank-transfer apps, and other local payment methods (LPMs) surging, the Indonesian payment market seems set to diversify rapidly. To win in such a fast-evolving environment, merchants and payment service providers (PSPs) must work with a partner that understands local payment culture, preferences, and e-commerce conditions.

Kelvin Phua is the head of global market development at PPRO, a London-based local payments infrastructure provider. 

Tags: Keywords:


News 32 Minute ago

Pertamina Oil Tanker Catches Fire, Three Crew Members Missing

The tanker carries 5,900 kiloliters of gasoline and 17 crew members off West Nusa Tenggara.
News 2 Hour ago

Worry in Indonesia after FIFA Cancels Drawing in Bali for U-20 World Cup

The Bali governor earlier rejected any possible Israel match on the resort island during the U-20 FIFA World Cup.
Special Updates 12 Hour ago

How Danone-AQUA Preserves its Water Resources

Danone-AQUA revealed its way of preserving water resources to provide quality mineral water, while also safeguarding the planet.
News 23 Hour ago

Policeman Found Dead with Gunshot Wound inside Car

The car’s engine was engaged but the doors were locked when first responders from the district police came to the scene.
News 25 Mar 2023 | 20:33 WIB

Gov’t Prepares Bill to Revolutionize Healthcare System

The poor national health system has produced many heart-rending stories, especially from rural and remote areas.