Indonesia's Cashless Journey 2015

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1. 1 SEPTEMBER 2013ADVANCING INSIGHTS ADVANCING COMMERCE Cashless payments in Indonesia account for only 31% of the total value of consumer payments. This is shown by the Share Indicator. The Share score puts Indonesia in a category of countries we describe as Inception, alongside places like Nigeria, Russia and Colombia. These countries have only just begun to move away from cash. Only 20% of Indonesians over the age of 15 have bank accounts, and only 11% have debit cards, however this does not necessarily mean that a move away from cash is impossible. Other markets show that new technologies such as mobile payments can act as substitutes for bank accounts and payment cards, and offer shortcuts on the cashless journey. The Trajectory Score of 23 for Indonesia indicates that some progress away from cash is happening. Small reductions in cash share of consumer payment value occurred between 2006 and 2011 but this does not appear to have favored any one payment instrument, as small share growth was seen in cheques, credit cards, debit cards and direct debit. Indonesias Readiness Indicator score was 24, slightly better than Nigeria and Egypt, but worse than Russia and India. Readiness is a composite of macro-economic measures found to be correlated to consumer cash usage. Improvements to Readiness will be a matter of prioritization, as challenges include poor availability and affordability of nancial services, infrastructure challenges, poor ease of doing business scores and lack of merchant scale. % of Population With a Bank Account: 20% Debit Card: 11% Consumer Payments: 2011: $811 bn (USD) 2006: $380 bn (USD) The Cashless Journey Study measures nations progress in evolving consumer payments from cash to cashless. The study evaluates 33 countries from ve regions, including both developed and developing nations. The study measures three indicators of progress along the cashless journey: 1. Share: a calculation of the share of non-cash consumer payments of the total value of consumer payments 2. Trajectory: a measure of the shift in cash share of consumer payments value between 2006 and 2011 3. Readiness: a measure of the potential for conversion of cash payments to electronic payments. The Cashless Journey ndings for Indonesia are: MasterCard Advisors Cashless Journey Share Indonesia Indonesia Indonesia Trajectory Readiness Highest 0 10 20 30 40 50 60 70 80 90 100 Mean Lowest 31 93 52 7 Highest Mean Lowest 23 100 24 10 Highest Mean Lowest 24 91 57 19 CASHLESS PAYMENTS IN INDONESIA ACCOUNT FOR 31% OF THE VALUE OF ALL CONSUMER PAYMENTS.31% Spotlight on... INDONESIA GDP: 2011: $846 bn (USD) 2006: $365 bn (USD) Cashless Journey Spotlight 2. 2 SEPTEMBER 2013ADVANCING INSIGHTS ADVANCING COMMERCE SHIFTING SHARE WILL REQUIRE A FOCUS ON FUNDAMENTALS In Figure 1, we see Advisors estimates for instrument share of consumer payments by volume and value for Indonesia. Cash clearly accounts for the strong majority of both the value and volume of transactions here. In Figure 2, we see that Indonesia is reducing cash usage at a pace that is expected, given its Readiness score. China and Kenya are shifting cash at a faster pace than would be expected, given their low Readiness scores. The rapid shift in China can be attributed to a strong government focus on growing electronic payments and rapid urbanization. In Kenya, it is the disruptive solutions like M-Pesa that are removing barriers to nancial inclusion, by substituting mobile phones for formal bank accounts. Spain, Taiwan, Japan and Germany are moving at slower pace than indicated by their Readiness scores. Other factors, such as cultural attitudes or economic conditions may explain why these countries are not shifting away from cash as quickly or as thoroughly as might be expected, given all the typical factors appear to be in place to do so. Cashless Journey Spotlight With a low Readiness score indicating many of the macro-economic prerequisites for going cashless are absent, Indonesia may benet from non-traditional routes to expanded cashless payments such as those seen in Kenya. Payment providers in market are working with telecommunications providers to develop electronic wallets, which will circumvent the traditional need for a bank account to pay without cash. Other initiatives in Indonesia include prepaid programs to support the Hajj, acceptance expansion initiatives into heavy cash categories like petrol, groceries and taxis, and efforts by banks to promote use of debit cards at point of sale. Figure 2 Some Countries Are Going Cashless Despite Low Readiness, While Others Remain Cash Intensive Despite High Readiness Countries where cashless share is growing despite low Readiness Indicators Countries where cashless share is in line with Readiness Indicators Countries where cashless share is smaller than would be expected, given Readiness Indicators China Australia Belgium Brazil Canada Colombia Egypt France Greece India Indonesia Italy Korea Malaysia Mexico Germany Japan Spain Taiwan Netherlands Nigeria Peru Poland Russia Saudi Arabia Singapore South Africa Sweden Thailand UAE UK USA Kenya Source: MasterCard Advisors analysis, BIS CPSS, McKinsey Global Payments Map, World Bank Statistics For additional insights, please visit and 2013 MasterCard. All rights reserved. Proprietary and Confidential. Insights and recommendations are based on proprietary and third-party research, as well as MasterCards analysis and opinions, and are presented for your information only. Mix of Consumer Payment Instruments (Value and Number of Transactions) % of Value of Consumer Payments % of # Consumer Payment Transactions Figure 1 Cash Cash Cheque Credit Card Credit Transfer Direct Debit Other Debit Card All other payment types