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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
