The sleeping giant resonates to localized e-payment schemes and mobile content in their local vernacular more than anything else.

When reading about e-commerce in South-east Asia, we often see the vibrant markets in Singapore and Manila being mentioned, but not Indonesia, which is often left off the list of the region’s digital powerhouses.

Businesses are missing out if they omit this big market: last year alone, Indonesia’s digital economy grew by 11% to a value of US$44 billion, with its payment sector thriving in response to restrictions arising from the COVID-19 pandemic.

In May 2021, ride-hailing and payments giant Gojek and marketplace Tokopedia — two of Indonesia’s largest startups — merged to form payments and e-commerce giant GoTo. With more than 100 million active users, the new entity is opening up Indonesia’s and South-east Asia’s e-commerce space to new users, demographics and markets.

Indonesians’ preferred ways to pay

Almost 150 million Indonesians with Internet connections are using e-wallets and 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 payment methods in the country is the local bank-transfer app Jenius, which reportedly has 3.3m active users, up from 1.6m 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%.

Even the Indonesian credit-card market has a local twist. Research by PPRO found that just 34% of cards used for online transactions are 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 e-commerce sector would miss out if they only supported the usual card payment methods found in developed markets.

So, how should merchants and the service providers that support them, tap into Indonesia’s booming e-commerce and online-payments markets?

The key is localization, said Kelvin Phua, Head of Global Market Development, PPRO.

Kelvin Phua, Head, Global Market Development, PPRO

Navigating Javanese e-commerce

The most obvious way merchants and others entering the Indonesian market need to adapt is by optimizing for mobile, according to Phua, because according to the International Telecoms Union (ITU), just 4% of Indonesians have a fixed-broadband subscription, while while 89% have a mobile-broadband subscription.

Localizing e-commerce content for Indonesians is also important. According to PPRO, 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,” Phua said.

The most important strategy is probably 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 need to work with a partner that understands local payment culture, preferences and e-commerce conditions,” Phua advised.