No Cash? No Problem

Jakarta is leading the way toward a cashless society

By Karmila Bain and Tellisa Ramadhani
Friday, October 28, 2016

Whether we like it or not, banknotes and coins will eventually disappear in Indonesia. With advances in technology and the greater use of credit cards, debit cards and various other types of e-cards we are gradually abandoning cash transactions

People no longer need to carry large amounts of cash when traveling or queue in the supermarket waiting for change. Many routine transactions can now be done electronically, as with the use of stored value cards by companies like Starbucks and BCA’s Flazz Card. A major move in this direction came in August 2014 with Bank Indonesia backing the National Movement of Non-Cash program through Bank Indonesia Regulation (PBI) No. 14/2/PBI/2012 on Payment Instrument Activities using cards, and PBI No. 16/8/PBI/2014 on Electronic Money.

The regulations aim to improve public awareness of the advantages of non-cash transactions, such as convenience, personal security and speedier transactions. Moreover, e-payments save the state money on cash management, provide a better system of monetary control, reduce cash-based (and untraceable) crimes such as corruption and bribery and encourage the distribution of social assistance to the right targets.

As part of the government’s initiative toward a cashless society, President Joko Widodo launched three cards: the Prosperous Family Card, the Smart Indonesia Card and the Healthy Indonesia Card. Targeting 100 cities by the end of the year, the Social Services Department assisted the Ministry of Social Affairs for the E-Warung program as an expansion of the Prosperous Family Card program.

Enhancing digital financial management, E-Warung is seen as a key tool to reduce poverty in Indonesia. The program, led by the Directorate General of the Ministry of Social Affairs, is supported by selected banks who issue the card, which is then activated in the form of an e-voucher. This is one of the government’s methods to distribute non-cash social assistance, which is seen as more effective in ensuring the assistance is actually used on the goods and services for which it is intended.

Jakarta is a cashless pioneer, with Governor Basuki Tjahaja Purnama, also known as Ahok, creating the Jakarta One Card, which citizens will be able to use for city services.

“We are now paving the way towards a cashless society or less-cash society, for a start,” said Setiaji, Head of Jakarta Smart City. “We will need technology to support this kind of payment with one multifunctional card. We want to make it into a subsidized project by the city council.”

The most visible existing cashless product is Ahok’s Smart Jakarta Card, used by low-income families with the aim of increasing education quality in Jakarta. The card has extended its program to cover college fees and university-related daily needs as each student will receive 18 million ($1,352) per year.

Other examples include public transport in Jakarta, such as Transjakarta and the Commuter Line train, which now require the use of top-up cards that are issued by a number of banks and can also be used to shop at supermarkets, mini markets and for parking fees. There is also an e-toll card issued by Bank Mandiri — and the number of automatic gates on Jakarta’s toll roads is gradually increasing.

The authorities aren’t the only backers of e-payments in Indonesia, with telecommunications and technology companies doing their part. One example is near field communication (NFC) technology – a communication protocol to help you to make any transaction electronically by just tapping your smartphone to other devices. Through this technology, Telkomsel’s TCASH and Indosat Ooredoo Dompetku can be used for transactions such as paying bills, shopping, and transferring money.

According to McKinsey’s Asia Pacific Payments Map, between 2010-2015 cashless transactions in Indonesia saw 23 percent growth, making the nation one of the fastest growing for cashless transactions in Asia.

Despite the development of such payment gateways, credit and debit card penetration in Indonesia is still very low. Reuters reported that credit card transaction values dropped 4 percent in April 2016 from the previous year, largely due to the government tax crackdown, using credit card records to track taxpayers’ potential income.


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