JAKARTA (TheInsiderStories) – The Government has promoted non-cash payment to Small, Medium Enterprises (SMEs) by setting up a synergy between Bank Indonesia (BI), the Financial Service Authority, Deposit Insurance Corporation, and the Ministry of State-Owned Enterprises, all facilitated by financial technology companies.

Many non-cash payment products, including state-owned telecommunication operator PT Telekom Indonesia’s (IDX: TLKM) T-cash, other telecommunication provider PT Indosat Ooreedo’s e-wallet, state-owned lender PT Bankr Rakyat Indonesia Tbk’s (BBRI) brizzi, PT Bank Negara Indonesia Tbk’s (IDX: BBNI) tap-cash, PT Bank Mandiri Tbk’s (IDX: BMRI) e-money and popular Go-Jek’s gopay have all been used by SMEs to increase productivity and augment their financial well-being.

Gatot Trihargo, Deputy of Financial Industry at Ministry of State Owned Enterprises, estimates that about ten percent of a total of 60 million SMEs rely on prepaid e-money. The Ministry has developed more than 141 ‘creative houses’, spread across Indonesia and has empowered more than 500 SMEs, as well as linking them to markets through market place belanja.com as well as social media (Instagram).

All of these SME transactions have employed such non-cash payment protocols provided by state-owned lenders, including brizzi, e-money and tapcash.

“Other than that, we also create working spaces as incubators for start-ups in several cities in Indonesia. For example, Mandiri working space in Jakarta and BRI working space in Jogjakarta,” he told TheInsiderStories.

To make it more convenient, all top-up fees for state-owned lender company cashless payment products BBNI, Bank Mandiri, PT Bank Tabungan Negara Tbk (IDX: BBTN), BBRI are free. Meanwhile for cashless payment top up fee between non-state owned lenders, like retail, payment will be through B2B schemes.

“We will impose zero inter-operate fees between four state-owned lenders. Top up on us, free. The most important thing is to give consumers more convenience when they top-up through mobile, EDC as well as ATM machines. We have prepared four state-owned lenders as ‘big-banks’ for cashless and we should immediately install top up availability, regarding rising demand for cashless payments, including e-tolls. For the bank itself, it’s a less pricier fee,” he said.

In addition, the ministry also promote cashless payment for government social public service obligation programs through Ministry of Social Affairs. The Ministry of SOE is able to print 800,000 to 1 million cards a day to support the government target to supply 15 million government social subsidy program cashless cards.

Meanwhile, Ahmad Baiquni, CEO of Bank Negara Indonesia, opines that we need mapping of business players before deciding on a business model to run an electronic money business. If there is a clear role, the regulation can follow the business to stay user-friendly and offer an attractive business model.

In the past, an e-money business model was run by a revenue-generating orientation. Thus, every stakeholder demands profitability. It should be seen as a cost efficiency. “It is normal if the business player to expect revenue because they have spent big money on e-money business. But, if there is operational cost efficiency, they should not demand more,” he said.

Regulators should make e-money ecosystems more mature on core principles. For example, they should not regulate details thing like fees when card issuer want to enter any merchant. Currently e-money is being issued by banks, non-bank financial institutions as well as telecommunication operators.

BNI was the biggest e-money issuer after Bank Mandiri, with total costumer reach 1.6 million. In the last two years, the company innovate and develop more cashless payment infrastructure including co-operate with financial technology company.

“I think the infrastructure is no longer an issue. Instead of infrastructure, regulation should adopt with innovation on the digital economy. The central bank already make good move by regulate maximum level (of top up fee) so if the e-money issuer or operator will make free top up its very open. Because as you know, banks had already borne the investment costs to develop and maintain e-money infrastructure, and so should not be burdened again with top-up costs,” he said.

One of the innovation that should be focused, is near field communications (NFC) for mobile payment adoption. More than half of BNI tapcash customer has already use NFC technology. SO instead use the card, customer can use their mobile to pay things.

Meanwhile, the Indonesian Consumer Institutions chairman Tulus Abadi said over the weekend that the emergence of non-cash transactions was a good thing and would make transactions more efficient and secure.

“A cashless society is in line with the emergence of the digital economy. But if BI requires consumers to shoulder the top-up costs, it will be counterproductive,” he stated.

Abadi explained, the banking sector would benefit from the emergence of e-money because they already received money from consumers before transactions. Therefore, he argues that banks should be responsible for the top-up costs.

“It is not fair for the consumers if they face disincentives in the form of paying the top-up costs,” he added.

According to a survey done by Indonesian Internet Service Provider Association and Telecommunication Society on 2016, a bank transfer via ATMs is the most commonly used method by online shoppers in Indonesia, followed by Cash-On-Delivery, internet banking, credit card, SMS banking, and e-money.

Bank transfer via internet and SMS banking are also commonly used. Internet banking is used by 7.5 percent customers and SMS banking is used by 1.6 percent customers. This form of payment is filled by large Indonesian banks such as Mandiri ClickPay by Bank Mandiri, KlikBCA by PT Bank Central Asia Tbk (IDX: BBCA), CIMB Clicks by PT Bank CIMB Niaga Tbk (IDX: CIMB), and e-pay BRI by BRI. The direct debit feature is relatively easier than manual internet banking and SMS banking.

Writing by Yosi Winosa, Email: yosi.winosa@theinsiderstories.com