Voice of the Industry

How can European companies win in Indonesia's ecommerce market?

Tuesday 21 September 2021 08:15 CET | Editor: Andra Constantinovici | Voice of the industry

Kelvin Phua of PPRO makes a rundown of the latest trends, new-comers, innovation and dynamics of the current Indonesian ecommerce market

If you see the words ‘Southeast Asia’ in connection with ecommerce, you probably think of Singapore’s savvy online shoppers or the Filipino ecommerce 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% to a value of USD 44 billion. And the digital economy already contributes 4% 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 ecommerce giant GoTo. With more than 100 million active users, the new group is opening up Indonesian and Southeast Asian ecommerce 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 not just e-wallets but also a wide range of bank-transfer apps (contributing to almost 30% of online transactions) and a range of other local payment methods (7%). 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, which has 3.3 million active users, up from 1.6 million just two years ago. Similarly, Indonesian e-wallet LinkAja recorded a 65% increase in the rate of new-user sign-ups in 2020, during which time it quadrupled its transaction volumes and grew its revenue by 250%, according to The Asian Banker. 

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

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

Traversing a dynamic ecommerce 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% of Indonesians have a fixed-broadband subscription, while 89% have a mobile-broadband subscription. And almost 100% of the adult population has a smartphone, while just 19% has a tablet computer

Language is also an important aspect of localisation for Indonesians. Over 90% of the population speak and read Indonesian. And the most common 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% 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) need to work with a partner that understands local payment culture, preferences and ecommerce conditions. 

That’s where PPRO can help. Our local payments infrastructure gives PSPs fast, compliant and seamless access to Southeast Asian local payment methods. All in one place.

For advice or additional insights, contact PPRO today.

About Kelvin Phua

Kelvin Phua joined PPRO as the Global Head of Payment Networks. Based in Singapore, Kelvin is responsible for accelerating the acquisition and management of local payment networks onto PPRO’s payment platform. He is also responsible to lead PPRO’s entry into key markets across the globe.

Prior to his role in PPRO, Kelvin spent the last eight years in PayPal in the South-East Asian (SEA) region. Kelvin had created a successful channel partner strategy, implemented partnerships with PSPs to acquire and integrate new merchant business, and worked directly on transformation and turn-around projects for enterprise customers and global marketplaces. Most recently, he was PayPal’s Country Manager for Malaysia.

About PPRO

PPRO (pronounced 'p-pro') is a fintech company that globalises payment platforms for businesses, allowing them to offer more choice at the checkout and boost cross-border sales. Payment service providers, enterprises, and banks that run on PPRO’s infrastructure are able to launch payment methods faster, optimise checkout conversions, and reduce the complexities of managing multiple fund flows.

Citi, PayPal, and Stripe are just some of the names that depend on PPRO to expand their platforms beyond borders. In 2020 alone, the company processed EUR 8.84 billion for its partners. And with a growing global team of over 400 people, it’s no wonder why they’re considered the go-to local payments experts.


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Keywords: ecommerce, e-wallet, online payments, marketplace, local payment method
Categories: Payments & Commerce | Ecommerce
Countries: Indonesia
This article is part of category

Payments & Commerce