Indonesia ina002 1366684227


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Indonesia ina002 1366684227

  1. 1. Mobile Payment Successes and Challenges of the Industry and the Consumer’s Perspective 47th APEC Telecommunication and Information Working Group 23 April 2013 Rudyanto Herlambang ST., M.Sc. Head of Mobile Payment and Digital Money Business Management Division
  2. 2. Indonesia – Facts on Banking and Telcos services Total population • 245 Million Bank Addressable population • 165 Million (unbanked 86M and bankable 79M)* Telco Addressable Population • 190 Million Banks Telcos operators Penetration • ~40% from addressable population Geographic coverage • 7,71 Branches per 1000km2, ATM • ~61,000 terminals per 1000km2 12,39 ATM per 1000km2 (~95% coverage) • 30,000 branches & 47,000 ATMs • ~400,000 reseller points Cost per transaction • Branch: 8000 Rp/trx • ATM: 3000 Rp/trx • Mobile banking: 1,100 Rp/trx Customer Segment Income • Middle High • All Low – Middle - High Source: AT Kearney Analysis, WorldBank 2011, KKSK BI Mar 2012, Mobile Banking, IFC 2010, * Unbanked avg annual income Rp 8 – 12 Million, Bankable Avg annual income above than Rp 12M • 118% from total population 2
  3. 3. Given low bank penetration and high mobile penetration, Indonesia has high m-payment potential across multiple services In ‘000 283 1.955 5.576 1.794 174 225 200 150 Paying Toll KRL Jabo- Taxi* 562 4.883 7.908 11.184 User 19.235 Non User 1.406 Payment Shopping user in Jakarta* Usership Mini Market Buy Gas in Shopping Utilities in Payment SPBU SPM/HPM F&B in Modern Merchant Legal Parking Movies 21 / Modern Book- Blitz store tabek* Routine Payment Activities Source : Brand Health Tracking Project for Telkomsel – Q3 2012 * Prediction only 3
  4. 4. However current e-money offerings in the market remain highly fragmented with no integrated solutions, leading to low take-up Lower penetration Higher penetration Train No. of payment points (vehicles, stations, shops etc) 157 stations all over Indonesia 63 KCJ stations Prepaid offerings Bus Taxi E-Toll, Indomaret and Gaz cards: 12 toll ways, 520 toll booths in Jabotabek Flazz: Trans Jogja, Trans Pakuan Bogor: 30 EDC in 30 buses BCA Flazz card accepted in Express taxis Jakcard: TransJakarta: Corridor 6, aim to cover all corridors by end of 2012 Railcard: 9 train stations in Java, and 1 mall Intermode card: Prambanan Ekspress Modern Grocery Modern Retail 250 hypermarkets, 2,157 supermarkets, 18,000 convenience stores Parking TransJakarta: 11 corridors, 46,990 vehicles all 31 toll ways, 1,300 toll 217 stops, 700 buses over Indonesia booths Total: 49,000 buses Smartcard: Batik Solo Trans Flazz, in partnership with PT. KAI Toll 156,000 stores E-Toll: parking managed by ISS E-Toll and Indomaret cards: Indomaret, EToll and Gaz cards: 125 gas stations BCA Flazz in Secure parking >23k merchant outlets Jakcard: 156 Indomaret stores in Jakarta Intermode card: Batik Solo Trans, Trans Jogja Brizzi card accepted in TransJakarta Brizzi: 100 merchants (restaurants, gas stations, dept stores) 4 Sources: Jakarta Post, Jakarta Globe, Bisnis Indonesia, Detik, Kompas, Solo Pos, Company Websites
  5. 5. Going forward, there is a clear objective of moving Indonesia to a cashless society Cashless Society - Objective Deputy Director of BI – Puji Atmoko Cashless Society "it will improve efficiency in transactions and it is relatively inexpensive to maintain. Moreover, electronic transactions are easier to trace, thus helping in the prevention and eradication of corruption and money laundering crimes“ “Printing new currency costs a lot of money and maintenance costs are also quite high,” “a Cashless society can be established only if there is cooperation between the Ministry of Communication and Information Technology (Ministry) and BI” We need a solution that is effective, efficient and fast in achieving a cashless society 5
  6. 6. Access to e-money and moving towards a cashless economy will deliver variety of macroeconomic benefits Macroeconomic benefits Indonesia has a long way to go e-payment penetration Cash displacement will create macroeconomic benefits Proportion of electronic to total tx. (%) Benefits of increasing e-payment penetration by 10% (IDR Tn) • “Shadow Economy” is commercial activities Transparency – hidden from public reduce 428 authority “Shadow • Shadow economy can Economy“ account for 30% of GDP Cost savings • Reduction of cash from 86 usage can contribute up reduced cash to 1% of GDP 100 Netherlands Canada 80 Australia France U.S. 60 South Korea Japan 40 India 20 Induce consumption and production Singapore Italy China Malaysia To move to cashless society Thailand Indonesia 0 0 50 250 300 # of electronic tx. per capita 650 Total • An increment of 1% 9 penetration in epayment will contribute 0.01% of GDP 522 Bubble size: GDP per capita Source: “The Shadow Economy in Europe, 2011”, A.T Kearney-JKU-Visa, “What does it cost to make payment” Humphrey, Willesson, Lindbolm, Berdendahl , 2003, “The Impact of Electronic Payments on Economic Growth”, Moody’s analytics, 2010, A.T. Kearney analysis 6
  7. 7. Telkomsel’s payments strategy is a long-term play that will modernize and bring benefits to the country Telkomsel vision Modernize the country Change people’s payment habit Electronic retail payment Government voucher Indonesia as a cashless society NFC platform Mobile payment Convenience to users Reduce cost from cash handling Better monetary control Modernize public transportation Electronic transport payment Modern society 5 - 10 years 7
  8. 8. Telkomsel aims to create an end goal m-payment ecosystem Payment and Banking roadmap Current products Telkomsel currently offers a range of payment and banking services to customers Remote e-money payment • • • • • • Cash-in/out P2P transfer Airtime purchase Bill payment Online payment Retail payment Future development Telkomsel is expanding its services to improve service and capture larger market Proximity payment: contactless payment with NFC Transportation payment (train, bus, toll) End-goal The end goal is to create an ultimate payment mode for Indonesia with Telkomsel e-money Mobile financial svcs. • Loan - Deposit • Remittance • Insurance Retail payment Single mobile money platform with NFC capability Low-cost banking Mobile banking USSD and SMS based m-banking service • Branchless banking • Mobile EDC Advertising and loyalty program Proximity payment Remote payment • Transport and retail NFC payment • Server based e-money 8
  9. 9. An open payment system will promote usage of e-payments Cashless payments Payment service provider (mobile payment NFC / Card) Multi-issuers (banks and telcos): • Sales and marketing, product development, customer data management, float management One single platform of payment: “One payment media for All” • Interoperable between different issuers and transport operators • Standardized technology • National Principal capability Public transportation KRL Trans Jakarta Source: A.T. Kearney, Telkomsel, Telkom Other usage Taxis Future Monorail MRT • • • • • Retail stores Restaurants Gas stations Public facilities Government vouchers Multi-purpose: • Multiple payment applications • Cash substitutes for micropayments 9
  10. 10. An open integrated payment system will create benefits to all stakeholders Benefits to stakeholders Payment providers (banks, non-banks) Customer • Economies of scale from greater acceptance and penetration • Provide greater convenience in transport experience – less queue, less cash handling • Minimize duplicate investments • Value added benefits – loyalty programs, promotions • Improve business model –potential monetization for future business expansion Transport operators • Improved operations – reduce congestions with faster transactions • Better accountability of revenue – fully automated • Reduce cost from less cash handling – minimize manpower, logistics, cash loss • Better monitoring and control of passenger traffic Source: A.T. Kearney, Telkomsel, Telkom Government • Quick win in improving public transportation service • Better efficiency in a cashless society • Better monetary control and monitoring for regulators • Future G2C applications of e-money – government vouchers, subsidies, etc 10
  11. 11. We need to leverage strengths of both banks and Telcos to drive consumer awareness/ confidence and uptake of services Leverage strengths of each stakeholder Banks Strengths Weaknesses Telcos • High Experienced in financials transactions • Trusted brand name in cash mgmt. • Ability to facilitate foreign exchange, clearing, and settlement • Regulatory compliance expertise • Financial Product and Service competencies • Nation wide network coverage (95%) • Large customer base (~229 Mn simcard)* • Capability to handle enormous transactions • Significant distribution/ dealer network (~400K points) with capabilities of day to day cash management for 17 years • Low transaction cost • Regulatory compliance expertise • Advanced technology for huge data base, storage capacity and customer tracking • Significant customer service infrastructure • Fully interconnect among operators • Limited coverage penetration in term of geographic and customer segmentation by income • Low penetration overall (40% of addressable population) • Lack of brand awareness for financial products and services • Less experienced in financial services * Big three telcos (Telkomsel, XL, Indosat) 11
  12. 12. Banks and Telcos need to rely on each other’s licenses to implement comprehensive mobile low-cost financial services Banks Telcos Service scope/ licenses • Full financial services covering deposits, loans, insurance and payments (credit, debit, e-money) • Full network services license including ISP, Jartup, ITKP, SLI • Payment/eMoney and KUPU/ remittance Infrastructure • Branches, ATM network and EDC with limited coverage • Full Operational Licensed. : Frequency ( 2G, 3G, 4G) with nation wide coverage and 95% population Fund mgmt • Manage float for interest and investments • Manage float by a custodian bank • Transactions at branches and ATMs • KYC required at branches • New regulation on Cash-out through agent now without KUPU license • KYC required at Telcos premises • Cash-in/Cash-out for eMoney from/to Bank/ATM network Required regulatory framework Compliance • Regulation to integrate banks and telcos services for lowcost mobile financial services • Optimize prudent vs. efficiency required on KYC regulation and AML/CFT 12
  13. 13. Benchmark : Collaborative approach to building mobile money solution has seen greatest success Case 1: Different objective, but successful only after collaborating Case 2: Same objective, and successful via collaboration Case 3: same objective, but failed due to no collaboration Oi Paggo, Brazil (Telco centric model) G-Cash, Philippines (Collaborative/Hybrid model) Mobile money, Liberia (Bank centric model) Background • Large unbanked population, highly skewed income levels (42% income held by 10% population) • Large prepaid customer base • Low banking penetration (~50%), ATM penetration at 0.1 ATMs/1000 people • Large prepaid customer base • One of the lowest GDP/capita in the world (USD 370) • Nascent banking sector • Large prepaid customer base Objective • Target unbanked population without access to credit/debit cards • Objective to promote m-payments and move to Cashless society • Providing basic banking facility especially to overseas workers requiring low cost remittance solution • Basic banking especially access to secure remittance services for unbanked population Business model • Remote payments using SMS based mobile interface – initial model non-bank based • Modified model to have a profit sharing model with partner bank operating as co-issuer and a 50-50 JV with acquiring partner • Hybrid business model, collaboration with rural banks as cash-in, cash-out agents • Low cost of remittance ~1% of transactions compared to 2.5%-10% via traditional • Mobile money services provided by banks and its agents and MNO operating as transmission channel only • However, MTN has offered its mobile money platform to Lonestar bank for services Key outputs • Building a closed loop network by MNO alone did not yield traction • Collaboration with banks for coissuing and acquisition of large merchant acquirer led to success • Collaborative model proved highly successful and saw high take up • Lack of innovation expected in this model as operators are offered a dormant role in the model Name of service 13 Source : AT Kearney, Telkomselis
  14. 14. Benchmark : Collaborative approach has been seen ideal to build NFC payments over the years, worldwide Collaboration has increased between entities over the years Collaboration over the years Case 1: 1 MNO, 1 bank and 1 transit player, 1 handset Case 2: 1 MNO, 1 bank, 1 payment player, multiple handsets Case 3: 3 MNOs, 1 bank, 1 transit operator, multiple handsets Name of service Maxis (Malaysia) (2009) Telenor (Norway) (2011-12) Singtel, Starhub and M1 (Singapore) (2013) Objective • To create a technology leader positioning by launching world’s first NFC payment solution • To deliver superior customer experience by enabling major transit and retail payment solutions over NFC phones • To bring greater value to high end postpaid subscribers using NFC handsets Business model • Launched Maxis Fast tap over Nokia 6216 in 2009 and for use at Visa Paywave and touch n go terminals • Fast tap can be used to pay at retail stores, transit and toll points • Partnered with DNB bank (Norway’s largest bank) for launch of NFC payments in Norway for Android users • Also partnered with Mastercard to allow use over Paypass terminals • Collaboration between 3 largest operators – Singtel, Starhub and M1 along with DBS bank and Ez link transit payment service for Android users • Common TSM established by all entities and each MNO has its own wallet Key outputs • Initial launch did not see a very high take up on account of only one handset being compatible • Maxis now launching the service over iPhone with external NFC jacket • Early pilot results have has witnessed high interest levels amongst customers and is expected to see high acceptance on commercial launch • Initial launch has seen healthy take up, with more number of NFC handsets arriving in the market, penetration expected to be high. 14 Source : AT Kearney, Telkomselis
  15. 15. Conclusion ■ Large potential for mobile payment services in Indonesia ■ However low penetration of e-money services due to fragmented offerings and low customer awareness to drive behavior change ■ Telkomsel’s vision is to drive mobile payments usage across multiple usage areas from transit to retail to remote payments to drive Indonesia’s growth to a cashless society ■ By having the end goal m-Payment ecosystem, it is generating direct revenue plus defensive & synergy value – Revenue stream from mobile payment and financial service – Revenue from new marketing platform on mobile wallet – Create customer stickiness and reduce churn – Reduce distribution cost of airtime (direct sales) ■ An open payment system will promote usage of e-payments ■ A collaborative approach between Banks and Telcos is critical for success ■ Benchmarks show that collaboration model has highest probability of success – needs to be applied in Indonesia as well, but customized to local situation 15
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