Indonesia’s Booming Mobile Money Market

Cellphone penetration and e-commerce the perfect marriage for business

By Yvonne Chen
Wednesday, March 12, 2014

Indonesians love their mobile phones, and while talk is cheap, social media, e-commerce and other transactional activities are capturing the imagination of business. The rollout of mobile money services is at the forefront of new developments.

The phenomenal popularity of Facebook and Twitter– Indonesia is a world leader in both – was only made possible with the progressive liberalization of the telecommunications sector, which began in the 1990s.

Since the 1990s, the information and communication technologies (ICT) sector has accomplished many things:

  • Indonesia is the largest spender on IT in Southeast Asia, and the 19th largest in the world
  • Internet users per 100 people increased from 0.03 in 1995 to 15.36 in 2012
  • Growth in Indonesia’s internet sector is projected to accelerate and surpass 30 percent per annum in the next five years
  • The Internet reaches 57 percent of the population each month, overtaking both newspaper and radio to become the second most widely viewed medium in 2012, behind television at 97 percent
  • The number of Internet users is forecasted to reach 125 million in 2015
  • In 2012, the ratio of people to mobile subscriptions was 115.2 per 100 people, or roughly more than one phone per Indonesian.

Expanding mobile market opportunities

Indonesia is now the fourth largest mobile market in the world, with growth expected to reach 130 percent penetration by 2015. The mobile market is also relatively sophisticated, offering a suite of services for mobile money.

Seven mobile network operators (MNOs) control the telecommunications infrastructure in Indonesia, and with that, the mobile market. Around 80 percent of market share is held by three major MNOs: Telkomsel (44 percent), Indosat (20 percent) and XL Axiata (15 percent). 

The mobile market is dominated by pre-paid users (98 percent) and 2G or 2.5G phones (75 percent), using operating systems such as Opera Mini to access online messaging, information and entertainment services. Smart phones (3G) make up about 15 percent of all handsets, and are expected to grow to 40 percent by 2015.

Mobile payments are an increasingly feasible way for e-commerce to grow in Indonesia. MNOs are seeing the importance of e-commerce to complement and grow their existing portfolios. E-commerce in Indonesia was worth up to $1.2 billion in 2012 and industry estimates suggest it was expected to triple or even quadruple in 2013 and projected to hit $10 billion by 2016. In 2010, Forrester Research said Indonesia’s e-commerce market had the potential globally to reach $172.9 billion.

One popular e-commerce solution that is going mobile is the e-wallet. MNOs see the “bottom of the pyramid” as a large and untapped consumer market and e-wallets as the platform for e-commerce.

Indonesia’s vast archipelago is seen as ideal for the development of the mobile money market, with much of its rural population having limited physical access to banks and other financial institutions.

Telkomsel launched a mobile money service called TCash in 2007, which reached over 8 million users in 2013. Indosat followed suit with Dompektu in 2008 and XL launched XL Tunai in 2012. Today all the MNOs have at least one e-wallet initiative and consumers expect the service.

Some estimates project the number of mobile money users will reach 52 million by 2017 (Indonesia’s current population is 240 million). These users are projected to conduct transaction volumes of $42 billion and generate service revenues of almost $2 billion.

MNOs are able to become “mobile money interoperable” with e-wallets. This means that mobile users can use the money in their e-wallet to pay a bill, buy airtime, transfer money to another customer in their network, and to send money directly to an account, or m-wallet, in a mobile money scheme on another provider’s network.

Moreover, the enabling environment is also improving for mobile payments. In June 2011, the government launched the National Strategy for Financial Inclusion with the goal of including the 125 million Indonesians who remain unbanked.

From the perspective of the government, e-wallets are seen as a way to promote financial services to previously unbanked Indonesians. Bank Indonesia (BI) recently made regulatory advancements to permit non-bank financial institutions to issue e-money for payment purposes, which means mobile financial services in Indonesia can now be bank-led, or a hybrid of both MNO and bank services, not just MNO-led.

Banks such as Bank Rakyat Indonesia, Bank Mandiri, Bank Tabungan Pensiun Nasional, Bank CIMB Niaga and Bank Sinar Harapan Bali launched branchless banking trials in 2013. Moreover, MNOs such as Axis are starting partnerships with banks such as Bank Sinar to provide bank services.

A number of barriers still lie in the way of true mobile banking. BI has yet to issue regulations that allow agents in a bank’s network to make physical payouts to subscribers. Consumer trust is also a barrier: awareness of mobile money remains low in Indonesia (11 percent of respondents) and the fear of sending money to the wrong number is the largest barrier to adoption, according to a recent survey by Visa.

Table: Access to ICT:  Basic Indicators, 1990, 1995, 2000, 2005 and 2012

Indicator Name






Population, total






Mobile cellular subscriptions






Mobile cellular subscriptions (per 100 people)






Telephone lines






Telephone lines (per 100 people)






Fixed broadband Internet subscribers






Fixed broadband Internet subscribers (per 100 people)






Internet users (per 100 people)






Source: World Bank World Development Indicators, 2013


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Comments (4)

  • Guest (Steve)

    I've heard three (UK mobile company) are looking to expand into new markets, would you say competition in Indonesia is too much or is it ripe for harvest?

  • Guest (Tedy)

    In reply to: Steve

    I would say so much competition, but no one has got it right (business model, etc) to even grow the fruits, hence there's still a lot of opportunity. The one who finally gets it right will be the winner. Don't be fooled by the number of subscribers. Ask them how many revenue-generating transactions they actually make on MFS.

    So, why MFS is not being embraced fast enough in Indonesia? This is my opinion:

    1. Indonesia is a developing country, but Indonesia is not Kenya.
    2. Indonesia has lots of interoperable ATMs widely available nationwide.
    3. ATMs in Indonesia are programmed with perhaps the most comprehensive transaction menu in the world.
    4. Bank Rakyat Indonesia (BRI) has 6,400+ offices all over the country; at least one office in every district.
    5. We have 1,700 rural banks, and 50,000+ microfinance institutions
    6. Traditional financial services are available in many places, including manual payment pickup and delivery at our door steps.
    7. m-wallet, virtual saving accounts, remittance, and bill payments are not strong enough cases.

    You need to have much stronger case why Indonesians should user MFS. Yes, once you have that case, you'll be a big winner! So far, none is close to winning.

  • Guest (Micheal Jordan)

    Thanks for the information

  • I am very to hear this like Indonesia small country growing this much of faster way. Nowadays everybody carrying mobile not the money if they want anything they will use their money for buying the products.

    from India

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