Migrant workers face many challenges in sending money from abroad. Starting from the language barrier when they want to use the country’s banking services, up to 77% of migrant workers have bank accounts but do not use them. Besides, many of these migrant workers are not used to using financial technology to manage their money.
Now, a startup engaged in financial technology (fintech) in Indonesia facilitates migrant workers and their families to manage and send money. The tech start-up said the problems faced by Indonesian migrant workers in managing and sending their money home are real.
Many of these workers are family breadwinners with both elderly parents as dependents and, children who live in homes, most of whom do not have bank accounts.
Moreover, migrant workers are often used by multiple intermediaries regarding remittances or third-party relatives which generally expose them to high risks or must pay high cash handling fees. All the existing limitations limit them from complete control of their income and the difficulty of making direct transactions for various necessities of life in their hometown.
Therefore, the tech start-up developed an app, intending to be the leading IDR electronic money service serving Indonesian people abroad, especially the migrant worker community. The tech developers aim to give migrant workers the flexibility to take full control of the money they earn, with a more transparent approach.
With the platform, migrant workers can deposit their salaries through official outlets in the countries they work for to top-up balances. Users also have access to funds in electronic money and can make various cross-border transactions without cash to send money to their families in their home country, and make daily payments such as buying credit, paying monthly bills, and buying various necessities. Withdrawing cash from the platform will only cost IDR 2,500 (around US$ 0.5), which is up to 10 times cheaper than similar services. Meanwhile, users can make transfers to fellow users for free.
Since its launch in June 2020, the digital money platform has received a total gross transaction value (GTV) volume of IDR 90 billion from 45,000 users. The platform has also acquired 37,261 agents throughout Indonesia, Taiwan, Singapore, and Hong Kong. Through the app, migrant workers can now plan their finances digitally, in real-time, and flexibly with better security and efficiency, anytime and anywhere.
Accordingly, reports say that Fintech is expected to become a major driver of financial inclusion in Indonesia. The country is preparing itself to embrace future disruptions with the government’s 2020 Go Digital Vision to boost overall growth, improve workers’ skills, and create jobs.
Fintech is at the core of plans to meet the target of 75% of Indonesians gaining access to a formal bank account by 2019 set out in the National Strategy for Financial Inclusion. Being less homogeneous than banks, fintech companies can create a more diverse, secure, and stable financial services landscape.
Also, unburdened by legacy systems, fintech companies have greater scope to reduce costs and improve service quality. For example, by leveraging big data, machine learning and alternative data, fintech firms can develop innovative risk assessment models to generate credit scores for customers with limited credit histories. Shaping a stable and cost-efficient ecosystem for fintech in Indonesia is a significant but manageable challenge. Fintech offers a veritable gold mine of insights and applications that can transform governance, and support Indonesia’s efforts in planning for a future with smart solutions
It has been reported that the use of digital technologies has experienced significant growth in Indonesia in recent years. This trend has accelerated since the COVID-19 pandemic began, with face-to-face services forced to close or dramatically cut their hours and visitor numbers to reduce the spread of the virus. Further, there has been a lot of interest in Indonesia’s booming tech sector – both domestically and from overseas. Indonesia is slated to have three new unicorns – a privately held start-up company valued at over US$1 billion – in the next five years. Currently, Indonesia has one decacorn or start-up with a valuation of more than US$10 billion and four unicorns valued at over US$1 billion.
Based on research from a survey of over 2,100 end consumers and 1,100 retailers in 23 cities along with and interviews with stakeholders in 13 cities, these massive startups could come from the three sectors – e-commerce, fintech and digitisation of Micro, Small and Medium Enterprises (MSMEs).
First, e-commerce, because people switched predominantly to online shopping during the COVID-19 pandemic. Social commerce also has the potential to become a unicorn. A study by an international tech company shows that the number of digital consumers in Indonesia is estimated to increase from 119 million in 2019 to 137 million last year. The percentage also jumped from 58% to 68% of the total population. Meanwhile, the number of digital consumers in Southeast Asia is also on the rise, data shows that more potential transactions can be achieved by online merchants, including in e-commerce.
Second, fintech, especially financing (lending). Apart from the need, this sector has been boosted by e-commerce. The researchers also see that credit scoring by fintech lending is getting better. As is well known, start-ups in this sector have a data centre in place. This tool, which is also known as the Fintech Data Centre (FDC), has captured 26 million borrowers’ data as of the end of last year. With data and an increasingly mature ecosystem, the researchers are sure that there will be unicorns from this sector.
Third, providers of MSME digitisation solutions, including business to business (B2B) commerce.
Education (EdTech) and health (Healthtech) start-ups were also in the running. Researchers believe that the use of the services of these two startup companies was indeed rapid during the pandemic. The use of online learning applications has increased in ASEAN due to the impact of COVID-19, based on data from the World Economic Forum (WEF). In terms of Healthtech, it is estimated that the value of the health industry in Indonesia was US$21 trillion last year, up from US$7 trillion in 2014.
However, researchers said that many things need to be considered. Not all health services can be adopted digitally. Previously, the Founder and Chairman of the Indonesian Healthtech Association, said that the use of virtual health services was not yet massive in the country, even though it had increased during the pandemic. Not all citizens have switched to virtual consulting. The government has indeed spent large funds for handling COVID-19. However, it does not go to Healthtech, but offline services, the association added.
Local governments, below the national level, are responsible for most of the service delivery in Indonesia. Subsequently, both the quality of services and their use of digital tools and technologies vary significantly from one region to another. Areas with higher human development index rankings have generally led digitisation efforts, but rural and less developed districts are by no means left behind.
COVID-19 has forced Indonesia’s local governments to quickly adopt digital methods of providing public services. Some agencies and service providers have shifted quickly and successfully, while others are still experimenting to discover what works best for their users. With the pandemic still ongoing and the number of cases in Indonesia predicted to continue rising into 2021, digital service provision and tech adoptions will need to remain a key focus area to keep vital services flowing while reducing the spread of the virus as much as possible.
A Singaporean multinational ride-hailing company announced that it has collaborated with an Indonesia-based food solutions provider to develop cloud-based kitchens in Indonesia. This cloud kitchen or virtual restaurant is claimed to be a form of business to develop the digital economy in the country. With this collaboration, the two companies will open more than 80 locations operated by both.
For the ride-hailing giant, the collaboration not only helps them support the expansion of the culinary business more comprehensively but also opens more opportunities for businesses to test new menus and concepts to stay ahead. According to them, this cooperative step is suitable, as they are also a food delivery platform while the food solutions company handles operational management.
The benefits obtained by their merchants cover at least four things. First, operational management will be directly guided by the two companies. Next, they will be connected directly to the delivery network owned by the two companies. Then, their promotion of brands that are within the scope of the food delivery app has an existing consumer base that is ready to try various kinds of innovative menus and flavours.
Meanwhile, the food solutions company supports the acceleration of expansion to support the growth of the digital economy in Indonesia. Their mission is to support culinary entrepreneurs to grow in the digital era by providing managed expansion solutions through cloud kitchens.
In the cooperation agreement, three things cover the vision and mission of both. First, cloud kitchen expansion, in which the companies work together to expand the cloud kitchen network and help culinary businesses reach new locations and cities, and quickly increase the scale of their business.
Second, merchant partners will have access to the food delivery app’s features such as ‘order at once’ where customers can order from multiple merchants in one order, and benefit from a wider range of sales opportunities.
Lastly, both companies plan to work with culinary entrepreneurs to create new concepts, test them on the platform, and develop them in the cloud kitchen network. This approach allows culinary entrepreneurs to take a data-driven approach to experiment and test new concepts firsthand, at minimal costs.
Users located in at least 7 cities in Indonesia, such as Jabodetabek, Bandung, Malang, Makassar, Bali, Medan, and Surabaya will benefit from the programme.
The companies also said the steps they would take this year would further facilitate the digital development of merchants and MSMEs in the country.
Furthermore, reports say that Indonesia has a huge potential market for cloud-based systems. The cloud market is still at its nascent stage in the country. However, it is quickly gaining popularity among Indonesian firms.
Local companies are quickly embracing cloud technology to cut their cost of operations. The Indonesian government is at the forefront of the development of cloud data centres and virtualisation technology in the country. They aim to deploy consolidated, distributed data infrastructure with strong disaster recovery capabilities.
Previously, companies hosted all the data in their data centre. However, operating the data centres incurred huge costs. Private data centres required annual maintenance, software updates, and a large amount of power to maintain the enterprise data centre. By migrating to the cloud firms can save the costs associated with operating private data centres.
In terms of segments, the manufacturing sector has contributed the most to the cloud market. Various SMBs and large business concerns operating in the country have also adopted cloud computing to cut their operational costs.
Also, sensing the rising demand for cloud technology among organisations in Indonesia, several local and foreign IT companies have started offering cloud computing solutions to business concerns in the country.
People in Indonesia are turning to digital services during the COVID-19 pandemic, one of which is non-cash payments. Financial technology (fintech) payments companies saw a 267% increase in the number of users.
Growth marketing experts of these companies said the number of users in Indonesia was more than 10 million per month during the fourth quarter of 2020. Companies recorded an increase in the number of users. According to them, there is a substantial addition of new users throughout 2020.
In total, the application for a specific fintech service is already used on 115 million devices. They believed that the number of users increased because people switched to digital services during the pandemic. They also recorded an increase in the number of partner merchants by 95% on an annual basis (year on year/YOY) last year.
As digital payment platforms, these fintech companies encourage MSME players to digitise, especially adopting digital payment methods. They said that their companies saw that there was a great potential for MSME players to enter the digital realm.
These companies also revealed that the efforts they made are in line with the targets of the Ministry of Cooperatives and SMEs. The Ministry is targeting 30 million MSMEs to enter the digital market by 2023.
Accordingly, an Indonesian bank’s research team conducted a survey involving more than 500 respondents in Java, including Jakarta and several small regions outside Java, entitled “Indonesia Consumption Basket”. The survey found that the number of e-commerce customers in Indonesia rose to 66% after the COVID-19 pandemic hit the country as a direct impact of the Large-scale Social Restrictions (PSBB). On top of that, since 2019, 90% of internet users in Indonesia have made purchases via e-commerce platforms, making Indonesia the country with the highest rate of e-commerce use in Southeast Asia.
The survey also revealed that online shopping increased by about 14% while conventional shopping fell significantly by 24% since the pandemic. Before the pandemic, 72% of respondents chose conventional shopping over online shopping. According to a report, Indonesia’s e-commerce Gross Marketing Value (GMV) increased to US$10 billion in the second quarter of 2020 as people switched to online platforms to buy daily needs such as health and beauty products, groceries, and fast-moving consumer goods (FMCG). This has also caused activities in traditional markets to plunge to 30% from 52%.
The high interest in online shopping has not only benefited large companies that sell their products via e-commerce platforms but has also supported the growth of MSMEs. By purchasing MSME products online, people meet their daily needs while maintaining economic sustainability as well as social distancing during the pandemic.
Although the number of e-commerce shoppers rose sharply during the pandemic, Indonesia’s e-commerce has evolved and stood out in Southeast Asia even before the COVID-19 pandemic and served as one of the most prominent driving forces of national economic growth. The Gross Market Value (GMV) of Indonesia’s e-commerce stood at US$21 billion in 2019 and is expected to hit the US$40 billion mark by 2022.
Furthermore, to support the growth of e-commerce in Indonesia, the government has strengthened internet networks in all regions across the country. Minister of National Planning and Development Bambang Brodjenegoro said in the annual Organisation for Economic Co-Operation and Development (OECD) Ministerial Meeting that the Indonesian government continued to improve communication and information technology services for internet users in Indonesia to increase economic productivity and open new job opportunities.
Smartphone sales in Indonesia grew throughout the year and topped in the fourth quarter of 2020, with 20% sold online, said a report, which was analysing shipment data. After a decline in the first two quarters, sales rebounded later in the year, recording 23% year-on-year (YoY) growth in the final three months.
The International Data Corporation (IDC) Indonesia also noticed a sharp drop of 18% YoY in the first half. Smartphone shipments bounced back strongly with 19% YoY growth between July and December, reaching 11.7 million units in Q4. Overall, 36.8 million phones were sold in 2020, a 1% YoY growth from 2019.
They added that the new International Mobile Equipment Identity (IMEI) regulation, which was launched last year, helped minimise the circulation of illegal phones sold on the black market. This played a role in the recovery of the smartphone market in 2021. IDC estimates the Indonesian market to grow around 20% this year.
According to the IDC’s Quarterly Mobile Phone Tracker, pent-up demand due to the supply shortage and retail shutdown in the second quarter of the year plus the increased utility of smartphones to support various stay-at-home activities led to a swift recovery of smartphone sales throughout the second half of the year. Lower consumer spending power and the need for a decent smartphone drove the growth of the low-end (US$100<US$200) segment to reach 65% market share, up from 45% in 2019.
Indonesia’s smartphone market was resilient amidst the COVID-19 pandemic, which changed how people interact. The need for a smartphone soared, be it to support Work-from-Home, Home-based-Learning, streaming entertainment services, or simply communicating virtually, says IDC Market Analyst for client devices, IDC Indonesia.
Accordingly, as reported by OpenGov Asia, online shopping using smartphones, laptops, and desktops are still the people’s primary choice during the COVID-19 pandemic. Moreover, this business model is one of the main ways businesses have been able to survive during the crisis.
This year online sales recorded record increases and set new benchmarks. Data from the Ministry of Communication and Information Technology shows that sales of products on social media and e-commerce portals in 2020 amounted to IDR 446.75 trillion (US$ 31.65 billion). This value represents an increase of over 400% compared to 2017 which amounted to IDR 124.9 trillion (US$ 8.88 billion).
The Minister of Trade went on to explain the four strategies to survive and increase sales in the current pandemic conditions. First, by going digital to reach a wider market. Second, implementing multimedia marketing through various platforms such as websites, digital applications, including print and electronic media, whose purpose is to provide information to consumers. Third, provide product guarantees to build consumer trust. Fourth, promote empathy in marketing communications.
During the COVID-19 pandemic, Indonesia’s trade balance has shown good performance. Cumulatively, the trade balance for January-October 2020 reached USD 17.07 billion and is the highest achievement in the last five years. This achievement is partly supported by the increase in Indonesia’s export performance.
The export value in October 2020 reached USD 14.39 billion, an increase of 3.09 % compared to the previous month. Meanwhile, imports reached USD 10.78 billion or decreased by 6.79% compared to the previous month.
The Minister of Trade was encouraged that during this season, micro, small and medium enterprises (MSMEs) have begun marketing their products in a hybrid, namely online and offline. That way, the contribution of the sector to the national economy will be maintained.
Meanwhile, the ministry confirmed that the synergy between agencies encourages the recovery of the export market for creative products. The Minister of Trade emphasised that the cooperation of various parties is needed in encouraging the recovery of the export market for Indonesian creative economy products, especially during the pandemic. To that end, the Ministry of Trade will continue to improve synergy with related agencies and institutions.
The Ministry of Communication and Information Technology (Kominfo) is keen to accelerate digital connectivity in the country. The provision and distribution of information and communication technology (ICT) infrastructure throughout Indonesia is the main focus of the ministry.
Apart from this, the development of human resources in the communication and informatics sector is another key focus of the Ministry of Communication and Information in creating digital talents who are expected to master the latest technology ecosystem.
Digital connectivity played an important role during the pandemic in breaking the chain of the spread of COVID-19. It also played a significant role in restoring the national economy. These were comments made by the Secretary-General of the Ministry of Communication and Information, Mira Tayyiba, while speaking at the virtual Public Relations Communication Forum: Utilising Internet Access and 4G Networks in the 3T Region.
While the pandemic has accelerated the roll-out of connectivity plans, the Ministry of Communication and Information has also prepared the development of ICT infrastructure in all corners of the country as early 2014.
The Secretary-General revealed that the Ministry of Communication and Information built 1,682 4G Base Transceiver Stations (BTS) in 1,682 villages and wards over the last year as part of their digital connectivity strategy.
This was done through the Telecommunication and Information Accessibility Agency (BAKTI) throughout 2020. The internet access program, which previously targeted 9,400 locations in 2020, actually increased significantly to 11,817 locations.
The internet access program and 4G network in the 3T region have been utilised well. While the health and education sector benefited the most, other areas also thrived because of the excellent connectivity.
Secretary-General Mira explained, in the education sector, internet access and 4G networks were used for online learning training, provision of online English licenses, provision of licenses for learning Islam, implementing coding training activities for the community and ICT training for people with disabilities.
Meanwhile, in the health sector, training on the application of pregnant mother health records for midwives at health centres in the 3T area has been held online.
Apart from the education and health sector, other sectors also took advantage of the internet access program and 4G network in the 3T area, include the MSME, maritime and agricultural sectors, disaster, tourism and e-Government and non-government sectors.
Many other infrastructure developments have been set for initiation while several have been targeted for completion this year. In 2021 now, the Ministry of Communication and Information is planing deployment of large-scale ICT infrastructure development, including adding 4G BTS in 4,200 villages, internet access to 7,764 location points, increasing satellite capacity to 30Gbps and utilisation of Palapa Ring for the West Zone, Middle or East.
Secretary-General Mira wholeheartedly invited forum participants to work together to realise the nation’s digital transformation through strategic programmes and policies of the Ministry of Communication and Information.
“As I said earlier, Kominfo will continue to build infrastructure in Indonesia. Our passion and the big dream are to make Indonesia connected, Indonesia to be more digital, and Indonesia to be better. This will not work without cooperation between all elements of the nation, ” she stressed.
Director-General of Information Applications of the Ministry of Communication and Information, Semuel Abrijani Pangerapan, has encouraged all parties and stakeholders to participate in improving the digital literacy of the wider community. He is especially keen to create more awareness around the protection of personal data and misinformation during the current pandemic. “Participation can be in the form of cross-party collaboration through various initiatives and innovations,” he said at the National Seminar on Maintaining Privacy and Against COVID-19 Hoaxes.
Citing a survey conducted by the Directorate General of Aptika and Katadata in 2020, Indonesia is at 3.47 on a scale of 4. These results indicate that Indonesia’s digital literacy rate is still below a “good level” said the director. This status must be addressed together considering that Indonesia is accelerating its digital transformation activities.
Currently, the Ministry of Communication and Information is discussing the Personal Data Protection Bill with the Indonesian Parliament. With the bill, Indonesia will have a more comprehensive legal umbrella for protecting personal data. However, regulation alone is not enough without the awareness and skills of the digital community, he was quick to point out. “Therefore, let’s maintain the spirit of optimism in enhancing a digital ecosystem that is safe, healthy, cultured, ethical and beneficial while adhering to health protocols,” he explained.
Dr M. Fajri Adda’i said it was important to increase the digital literacy of the community around the health sector through social media. Personally, he routinely has to provide correct information regarding COVID-19 which often is a hoax. More recently, misinformation and fake news have been circulating about vaccines. There must be a central point or someone who provides the right information to offset the hoax.
According to him, everyone can be involved digitally in uncomplicated and easy to understand language. It is enough for us to convey it simply and use digital media that is easily accessible to the general public.
Meanwhile, a senior executive of a digital messaging platform in Indonesia acknowledged that it had done a lot to protect the personal data of its users. Because it was being used so comprehensively, it was important to ensure that both the personal data of users was safe as well as the platform itself. “We have been using end-to-end encryption security as a default. This means that only we and the people we send messages to can read it,” he confirmed.
The Ministry of Communication and Informatics is targeting digital literacy to reach all districts and cities in Indonesia by 2024. the Directorate General of Informatics Applications of the Ministry of Communication and Information is working with related partners.
“By 2024, the ministry and its partners will carry out digital literacy in all 514 districts/cities in Indonesia,” explained Plt. Director of Informatics Empowerment of the Ministry of Communication and Information, Mariam Fatimah Barata in the Digital Literacy Webinar Towards Indonesia Digital Nation.
Mariam acknowledged that the use of the internet is currently so massive that it cannot be separated from everyday life. Therefore, digital literacy plays an important role in the journey towards the Indonesia Digital Nation. In terms of the number, the goal is to have 50 million literate Indonesians. Going in a phase-wise manner, they plan to reach the first 12.5 million people by 2021.
According to him, this should be an introspection for the Indonesian nation to be able to continue to improve digital literacy skills. Digital technology must also have added value for the Indonesian people. Technology is not only for fun or safety but should also be an incentive to be productive.
Indonesia plans to roll out new regulations that offer tax breaks for hybrid EVs, in the latest effort to promote the development of electric vehicles in the country. In a meeting with Parliament, Indonesian Finance Minister Sri Mulyani said that investors who build electric cars in Indonesia feel that the current framework is unfair as there is no difference in the tax rates between hybrid and fully electric cars.
While battery-powered EVs continue to be exempted from the luxury tax, the plug-in hybrid EV will see an increase to 5% from 0%. Full and mild hybrid types will be taxed at a rate of 6% to 12%, from a previous range of 2% to 12%. Also, the government will provide tax holiday incentives for up to 10 years if EV manufacturers make at least an IDR 5 trillion (USD 346.2 million) investment in the country.
The new tax scheme reflects the government’s efforts in boosting investment for battery-powered EVs, said researchers from a tax consulting firm. More investment will make Indonesia a centre of manufacturing and it will have a multiplier effect on the economy, with the creation of employment, the emergence of new industries in the EV ecosystem, and expansion of the tax base. It also encourages adoption among consumers, nudging them from hybrids to EVs.
President Joko Widodo has expressed his interest in making Indonesia a top player in the global electric car market, especially given that the country is the world’s largest producer of nickel, an essential component to produce lithium-ion (Li-ion) batteries that power electric vehicles. Indonesia aims to be a regional EV hub in 2030 and it has been rolling out various initiatives to boost its production in the country.
Tech companies have also expressed their commitment to the initiative. An international ride-hailing giant put over 5,000 electric cars, motorcycles, bicycles, and scooters across Indonesia. Meanwhile, another tech unicorn is planning to test electric motorcycles this year and is working with the state-owned gas and oil company for the commercial pilot in Greater Jakarta.
However, it won’t be easy to make consumers switch on a large scale due to its high price, said the association of Indonesian automotive industries. Most consumers are buying cars at prices between IDR 150 million and IDR 250 million (USD 10,386 to USD 17,310), while electric cars are currently selling for about IDR 500 million (USD 34,620). According to the Association, there is a huge potential for electric cars, but prices must be lowered significantly so they will be more affordable for the wider communities.
Another challenge is the supporting infrastructure like charging stations. The state electricity company PLN currently only runs 37 stations across the country, although it targets to have 2,400 by 2025. Addressing these two major problems will get consumers more interested.
Accordingly, as reported by OpenGov Asia, to enhance the convenience and experience of electric vehicle users as well as to encourage their wider adoption in the country, Perusahaan Listrik Negara (PLN) added 4 General Electric Vehicle Charger points (Stasiun Pengisian Kendaraan Listrik Umum – (SPKLU). An electric energy charging station (SPKLU) is an infrastructure that facilitates the charging of electric vehicles, including electric cars, electric motorbikes, and the like.
PLN has collaborated with Jasa Marga to add these stations on the Surabaya – Jakarta toll road. With the launch of the 4 new SPKLUs on the Trans Java toll road, it will make it easier for people to travel long distances using electric cars.
These latest SPKLU additions are part of PLN’s commitment to supporting the implementation of Presidential Decree No. 55 of 2019 concerning the Acceleration of the Battery-Based Electric Motor Vehicle Program for Road Transportation.