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Indonesians without bank accounts would be willing to use e-money due to its convenience and lack of monthly fees that banks often impose. Only 11 percent of e-money app users are typical daily users, though, which is still a small percentage. The most widely used digital payment method in Indonesia is electronic money (e-money) and e-wallet transactions. Nonetheless It is not unexpected that Indonesians use smartphones and the internet so regularly given the high rates of smartphone and internet penetration in the nation. Furthermore, unbanked Indonesians can readily adopt the trend since neither a bank account nor a credit card are required to sign up for these platforms. As a result, more people use e-wallets and e-money than other types of digital payments that don't require a bank account.

Indonesia has enormous potential, thus, why is brand recognition, frequency, and adoption low in a market that otherwise appears to be rich with opportunity for e-money brands? First, let’s look at why e-wallets and e-money are mostly preferred in Indonesia.

E-Wallet Vs Bank Account
The average transaction size for an e-Wallet is about Rp 55,000 ($3.50), which is considerably less than the average transaction size for other payment methods like virtual accounts (bank transfers) or credit card payments, which are about Rp 1,8 million and about Rp 500,000, respectively.

Microtransactions in the digital entertainment sector and the buying of low-priced items in eCommerce may be the main drivers of the high adoption of smaller transaction size in e-Wallets. The more conventional payment mechanisms, including credit cards, retail stores, and virtual accounts, processed a more varied and well-balanced range of transaction quantities.

Furthermore, by offering a single integration for numerous payment channels, a simple solution for offline payments, and affordable rates, the introduction of QRIS, which enables interoperability usage of e-Wallets when making payments via a QR code, leveled the playing field for retailers of all sizes.

Government organizations such as Bank Indonesia (BI) and the Financial Service Authority (OJK) provided significant support for eWallets as a payment option, enticing companies to begin accepting eWallet payments. Government organizations do require licenses for companies to run eWallet services, but they assist those that can meet the standards.

Higher value transactions cannot be completed using e-Wallet payments due to regulatory restrictions. While encouraging the use of cashless payments, Bank Indonesia (BI) and the Financial Services Authority are also worried about the security and safety of transactions. Regulators have increased the maximum total balance limit that can be kept in e-Wallet accounts in an effort to reduce risks.

Most users do not utilize e-Wallets as their primary account to hold cash because they have a restricted amount of balances kept. The majority of Indonesian workers receive their paychecks through bank accounts, necessitating an additional step of topping up their e-Wallet accounts to utilize them for transactions. As a result, only a few industries and low value transactions are able to employ e-Wallet payments.

Company owners must evaluate their industry sector and business model to see whether permitting e-Wallet payments alone would be adequate to increase sales and conversion.

It's crucial for companies selling a variety of goods at various price points to have payment choices like virtual accounts that can handle larger transaction amounts.

Looking at the consumer side, it appears that digital payment methods are mostly preferred for online shopping, ordering food and other services. Digital payment methods began gaining momentum when the Otoritas Jasa Keuangan (OJK), the financial services authority of Indonesia, proposed a framework that governs neo-banking services provided by banks and non-banking players. The objective is aimed at capitalizing the increasing usage of the internet and growth in fintech solutions.

These neo-banking solutions are provided by banks or collaborative relationships like banks and non-financial/ financial services organizations. This enabled Indonesian citizens to use banking services using their mobile phones. As a result, neo-banking services began to grow.

Rise in Neo-Banking Services
After the regulatory framework around neo-banking was imposed, DBS Bank, UOB and Bank Tabungan Pensiunan Nasional (BTPN) began providing Digibank, TMRW and Jenius among other fintech services and solutions.

Additionally, prominent tech companies like Goejk and Lippo group, which are already providing e-wallet services, are consistently introducing innovative banking services to contribute to their market share.

Since customer usage growth is phenomenal in the area, every neo-bank in Indonesia began exemplifying the customer experience through UI/UX design, creating lucrative and gaming tools, added with a mobile-first approach. Mostly AI and ML tools often stood at the disposal of neobanks helping create customer spend and analytics. For instance, TMRW deploys unique AI algorithms, data analytics tools and gamification, allowing customers to save more and design their cards. Moreover, neobanks offer services all day, send real-time notification alerts and hyper-personalized services. If this wasn’t enough, Digibank and TMRW offer goal setting for spend and save. Besides, neobanks even offer virtual debit and credit cards. This is due to the fact that most neobanks in Indonesia are tied up with network providers such as Mastercard, Visa, GPN, ATM Bersama, Prima and Plus offering vibrant payment services to customers. In this case, neobanks’ partnerships are focused on technology providers such as Finastra, Kasito and BNI Tapcash for AI technology, digital banking, and digital solutions and digital transformations.

Cashless Future
The rise in digital payment transactions reflects Indonesia's populace's increasing digital financial literacy. It also demonstrates how frequently e-commerce and finance services are used across the country. According to Statista, Indonesia will continue to see a rise in the use of digital payments, with e-commerce and mobile payments expected to grow by over 45 percent and 18 percent, respectively, in 2027.

Payment digitization and cross-border payments have risen to the top of the agenda in conjunction with Indonesia's G20 Presidency in 2022 and the National Noncash Movement (GNNT). To speed up retail payments in real time, the archipelago has unveiled BI-FAST, its first national digital payments infrastructure. Indonesia wants to have tighter financial control and move toward a cashless society in the next few years, therefore it is speeding the development of its digital payment system.