State of pay: The race to become Indonesia’s leading mobile wallet

Two platforms stand out, by far.

Source: Unsplash

Many mobile wallet platforms have sprung up in Indonesia in the past year, and all signs say they’re here to stay.

Analysts seem to agree. A report by research and advisory firm RedSeer suggests mobile wallets are a fast-growing fintech field in Indonesia. In 2018, the market size reached USD 1.5 billion, and that pool is projected to reach USD 25 billion by 2023. And the internet and mobile banking are becoming increasingly commonplace for Indonesians who use financial services, indicating the importance of digital channels for financial institutions, according to McKinsey & Company.

So far, 37 companies hold e-money licenses from Bank Indonesia. The country’s financial authority has noted that there were more than 274 million transactions of a combined value of IDR 5.82 trillion (USD 412 million) that utilized electronic money in January 2019 alone.

Specifically, Go-Jek’s Go-Pay and the Lippo-backed Ovo are racing ahead of the competition, in part fueled by burned cash—these two platforms are arguably more generous in cashback promotions and discounts than their counterparts. Dondi Hananto, a partner at Patamar Capital in Jakarta, thinks that fintech will continue to develop in Indonesia because only less than half of the country’s population has access to banking services. “For payment, I think we can see two big players dominating this category, Go-Pay and Ovo,” he told KrASIA. “Both are very strong and it will be difficult for new players to beat them, even for the big state-owned platform like LinkAja.”

Here’s KrASIA’s breakdown of how these two wallets are leaving the others in the dust.

Ovo: A nose ahead?

Two weeks ago, Ovo made aggressive moves by partnering with lending platforms Teralite and Do-It and added an investment mutual fund feature by collaborating with Bareksa, another payment service backed by Lippo. These strategic actions extend the scope of Ovo’s services beyond payments, answering the need for fast and reliable financing in Indonesia. The company said that the partnership also aims to increase the purchasing power of Indonesians and to provide millions of micro, small, and medium-sized enterprises with better opportunities to obtain capital for their businesses.

A recent poll by Morgan Stanley tells us that Ovo has slightly higher usage numbers than Go-Pay. The survey involved 727 payment fintech users, including middle- and upper-income respondents in several Indonesian cities in October 2018. As many as 86% of respondents knew of both Go-Pay and Ovo, but 73% of respondents use the latter, two percentage points over Go-Pay. Perhaps that slight difference can be explained by Ovo’s entry into lending and investment business, which sets it apart from Go-Pay.

In any case, Ovo seems to be edging ahead to become the largest mobile payment and fintech platform in Indonesia. During the Money20/20 event held this month in Singapore, the company’s CEO Jason Thompson claimed that over 110 million people in 300 Indonesian cities—98% of the country’s adults—are Ovo users.

The payoff has been huge. In its report card, Ovo announced that it had witnessed one billion transactions in 2018 or a 75-fold increase since November 2017. Ovo also claimed that it is available at 90% of malls in 294 cities in Indonesia. Even some hospitals in the country allow patients to pay their medical bills with the app.

Go-Pay: A partner for all

Melina Subastian, vice president of investment at Alpha JWC Ventures in Jakarta, cautions that Ovo’s diversity of services doesn’t automatically give it the upper hand. “The superiority of a platform doesn’t depend on the diversity of services or products but also factors such as the number of customers, number and value of transactions, range region, technology, and others. Both Ovo and GoPay have their respective advantages in these factors,” she said.

So far, Go-Pay has been steadfast in expanding its business in cashless payments. In February, Go-Jek announced that Go-Pay usage transactions reached IDR 87 trillion, or USD 6.3 billion. That figure is equivalent to nearly 70% of Go-Jek’s total transactions, which are—as the company claims—made possible by its two million driver partners, 400,000 merchants, 1.5 million agents and 600,000 service providers.

Earlier this month, Go-Pay collaborated with point-of-sales software developer Pawoon, bringing on board tens of thousands of merchants who were already using Pawoon’s systems. The platform also partnered with supermarket chain FoodHall and retail giant MAP to increase cashless transactions.

Go-Pay has also teamed up with the Indonesian IT Ministry to launch the Go Online” program micro, small, and medium enterprises (MSMEs). The idea is to lift Indonesia’s reliance on cash, and adopt Go-Pay as a means of payments in a slew of business sectors. There’s a good reason for this—by using e-wallets, MSMEs can have clearer records of their cash flows. Following the footsteps of its parent company, Go-Pay is also going overseas. Though Go-Jek’s entry to the Philippines was blocked by local regulators, Go-Pay said it is confident about conquering the Filipino market after its stake in the fintech company coins.ph.

The state of pay

Subastian sees the race between e-wallet platforms becoming tighter—to the benefit of customers. “The competition is very exciting as the platforms are competing to give the best programs for customers. Diverse choices prevent monopolies from one of the providers and there is currently no clear winner, so I’m excited to see what’s going to happen in the next two years,” she said to KrASIA.

Cashless payments have already become essential tools for Indonesians. From roadside shops to five-star restaurants, Ovo and Go-Pay QR codes are impossible to miss. There is no doubt that competition between Ovo and Go-Pay—as well as other fintech platforms—will be heated for months or even years to come.

Editor: Brady Ng